Economic Impact of Peak Oil Part 3: What's Ahead?

This is the third article in a 3-part series. (Here's a link to Part 1 and Part 2.)

We cannot know exactly what is ahead. In this part, we look at one possible future scenario. When we think of economic impacts, we usually think of the impacts that the squeeze of higher oil prices will bring--such as energy price inflation, food price inflation, and the need for more mass transit.

While these "squeeze" impacts are expected to occur, the real problem may be the discontinuities that occur, because of pressure on monetary systems and pressure on political systems. These pressures can cause unexpected results such as:

• Hyperinflation or deflation that indirectly results in a major decline in imports of all kinds (not just oil),

• Major changes in governments, and

• Fast declines in oil production in some oil exporting countries.

1. What impacts do you expect peak oil to have in the future?

There are three types of impacts that may occur. In the scenario that is presented here, we will assume that they all occur.

Squeeze impacts These are the impacts caused by gradually higher prices and slowly reducing world supply. This type of impact is already squeezing some of the poorer countries out of the world oil market. While this type of impact can be expected to increase over time, in this scenario, it is of far less importance than discontinuities.

Discontinuities for oil exporters In these countries, there is the possibility of social unrest and overthrow of governments once oil production begins to fall. This may happen because government revenues begin to decline, resulting in a cutback in governmental services and imports. The impact is likely to be a faster decline in oil production.

Discontinuities for oil importers Once real growth falters, the combination of increasing debt and decreasing real incomes may overwhelm monetary systems for oil importers. The infinite growth paradigm will come to an abrupt halt. Depending on the type of governmental intervention, the resulting discontinuity could either take the form of hyperinflation or rapid deflation. My analysis suggests either of these may result in a decline in the amount of oil and other goods a country is able to import, because of debt and monetary problems.

2. How soon might such discontinuities occur?

Discontinuities could start very soon, and continue in different countries over many years.

With respect to oil exporters, Mexico, with its declining oil production, is already at risk for social unrest and overthrow of the government. Saudi Arabia has a high risk of government overthrow, once its oil production starts clearly declining. Because of this type of discontinuity, world oil production may begin to decline considerably faster than models based on "business as usual" would suggest.

With respect to oil importers, we indicated in Part 2 that the debt situation in the United States is already in a precarious situation. A little more squeeze in oil availability, or a sharp drop in the value of the dollar, or even widespread knowledge of the likelihood of peak oil and its effects could further destabilize the debt market. Faith in the ability of long-term borrowers to repay their debt could evaporate. Depending on how the government deals with this situation, the result could be either hyperinflation or deflation.

If there are discontinuities, the timing is likely to vary from country to country, depending on the situation in that particular country. Once there is a discontinuity in a major country such as the United States, the impact may to spread to some other countries as well. Some countries may be able minimize discontinuity effects by finding a group of lesser-affected countries and sharing resources within the group.

3. If there is hyperinflation in the United States, what kinds of effects might there be? How about massive deflation?

With peak oil, there are likely to be many debt defaults, ultimately caused by the squeeze of higher oil prices. (This squeeze of higher oil prices may actually cause problems before the peak arrives. See Part 2, Question 12.) If the response of the government is to guarantee payment of debt, so as to prevent business failures, the money supply may expand greatly and hyperinflation may occur. If there are many defaults and the government does not intervene, or its intervention is unsuccessful, the money supply may contract, and deflation may occur.

Hyperinflation. If there is hyperinflation, people and businesses will find that money in their bank accounts and fixed income retirement funds will purchase very little. Incomes of people with jobs are not likely to rise as fast as the price of goods, so they will find it necessary to reduce their purchases. Demand for many optional goods and services will drop.

After a short time, the government will find that its revenue is very low compared to the huge amount of debt that it has guaranteed. Buyers for government bonds are likely to disappear, and the monetary system will collapse.

Whether or not the monetary system fails, foreign governments holding US debt will be very unhappy. Even if there is not a default, the bonds will be redeemed with dollars that are worth much less than when the bonds were purchased. Either way, foreign governments will feel cheated.

Massive Deflation With massive deflation, there will be many business failures --banks, money market funds, hedge funds, insurance companies, and ultimately businesses of many kinds. FDIC insurance will cover some of the bank losses, but this would soon be depleted. Many people will find their life savings wiped out.

Governmental revenue will decline in such a scenario, making it difficult for the US government to repay its debt. Exceedingly high interest rates might be needed to attract buyers for US debt--higher than could be afforded with the decline in revenue. If the problems were to become severe enough, the whole monetary system could collapse.

4. If the monetary system fails, what are the options for replacing it?

In a scenario where the monetary system fails, there will be big problems. In such a scenario, it seems like there is a significant chance that the government may also be replaced, because the existing government will have no money and there will be a huge number of people who are very angry about the situation. Waiting up to four years for a new president, and up to six years for new senators, may seem unacceptable. Open revolt seems possible.

Once we are talking about replacing the government, we are really speculating. One question is whether the new government would cover the same 50 states as it does today, or a smaller area. When the Soviet Union collapsed in 1991, the governments of its constituent states remained, and these took over.

If the analogous situation happened here, we would fall back on the 50 individual state governments. This would be the easiest new government to implement. It is theoretically possible that the 50 state governments could each set up its own fiat monetary system. It seems to me that this may be the most likely outcome.

5. What kind of new monetary system would work?

If we are talking about 50 state governments issuing currency, I would expect that the level of planning that would go into each of the new systems would be limited. Each state would issue some type of money, good only in that state. A governor might choose to increase the amount of money available whenever he or she found it politically expedient to do so.

With this system, money would still act as a means for facilitating the transfer of goods. No one would reasonably expect money to be a store of value because the amount of money in circulation in the future may be quite a bit greater than today, and the amount of goods available for purchase would likely be decreasing.

In a scenario where a new 50-state monetary system is created, the monetary system would still not act as a store of value. The inflation rate would likely to be very high, and interest rates would not be sufficient to offset the inflation. This result is expected because the amount of goods available to society will be decreasing over time because of peak oil and decreasing imports. Unless someone figures out a way to keep contracting the money supply on a regular basis (ask for 5% back from everyone?), the decrease in available goods would almost certainly result in persistent inflation.

If it is necessary to create a new 50-state government, the length of time it takes to put all of the pieces in place--a new government, a new monetary system, and probably a new banking system--could be a problem. If a new democratically elected government were to be formed, it would seem like the process could take up to three years. We would most likely be without any monetary system at all during this time. If some type of dictatorship took over, the timeframe might be much shorter, but there would be different issues.

6. What kind of financial system would work with a fiat monetary system, long-term inflation, and a declining economy?

In such a scenario, people would expect to spend money pretty much as soon as they earned it. Banks would be primarily for convenience, rather than as a place to store money for the future.

Insurance products with a very short time horizon could be sold - for example, term life insurance, health coverage, auto coverage, homeowners coverage, fire insurance for buildings, and cargo coverage for shipping.

Loans with very short time frames might be offered--for example, short-term financing of goods for resale. Long term business and personal loans would generally not be available, because of the uncertainty of the value of the currency in the future, and also because of the declining economy. (If the only problem were the variable inflation rate, variable interest rate loans might work.)

Because of the uncertain nature of money, it is possible that longer-term loans could be made to individuals that would be paid back in services rather than money. For example, a city might pay a person's tuition for medical school in return for his/her agreeing to work for that city for a set number of years to repay the loan. (Does this sound a little like being an indentured servant?)

Financing of large projects by businesses or individuals would be very difficult, because of the lack of long-term loans. Because of this, large projects would most likely need to be undertaken by governments, and financed by tax dollars.

A country with an economy of the type described would likely be very poor. It would theoretically be possible for the country to have a social security-type retirement program financed by a tax on workers. Because of the poverty of the country, such an arrangement seems unlikely, however. Instead, I would expect most people to work as long as they are able, and live with children in later life.

7. I learned that money is always a store of value. Isn't that what economics teaches?

Economics may teach that money is a store of value, but unfortunately this cannot be true when an economy is in a period of long-term contraction. Economists have developed their theories looking at an atypical period in the world's history--one where growth was the norm. They have never stopped to realize that our world is finite, so infinite growth is not possible. Their theories may hold for a specific time period, but aren't true in general.

In some ways, their assumptions are similar to the assumptions of people who once thought the world was flat. At some time in the not too distant future, people will come to realize that the most important word in the phrase "economic theory" is the word theory. Economic theory is really just an untested hypothesis, developed in period of long-tern economic growth. Once this growth stops, there is no particular reason to believe that economic theory will hold.

8. What will future trade look like in scenarios such as you are discussing?

If we are looking at 50 state governments, each with its own type of money, future trade is likely to be pretty limited. There will be some trade across state lines, but long-distance transport of people and goods is likely to decrease significantly. It may be possible to import some goods from overseas, but I would expect that an equal-value export would need to be traded at the same time with the same country.

If we are looking at a unified United States, prospects for trade are better. Trade within the United States will most likely continue unhindered. Overseas trade may still be a problem. For one thing, foreign countries will be unhappy about the default on US debt (or its payment in inflated dollars), and will want to retaliate. At a minimum, they will be unwilling to extend credit, unless it is clearly earned. I expect that countries will develop a close set of allies whose credit can be trusted, and trade mostly with those allies.

In either scenario, I expect that the total amount of foreign trade will drop sharply. As an upper bound, I would expect imports from overseas to equal about 56% of our current imports. (See Part 2, Question 8.) This kind of drop would be needed to eliminate our current balance of payments deficit. Even this level of imports is almost certainly unreasonably high, if our ability to produce goods for export decreases, or if there are barriers to trade. Also, some of our trading partners (like Japan) are likely to have economic problems as well. A better guess might be that overseas imports will equal 10% of current imports.

The decline in trade is a key issue. In a scenario where the US monetary system collapses, there will be oil somewhere in the world, but we won't be able to buy it. The inability to buy the oil will cause the problems, not the lack of oil itself. We also will find ourselves unable to buy most of the other goods we currently import.

9. What will happen to large companies?

In scenarios such as this, I expect that most large companies will either cease to exist, or will break into pieces that fit within a single country. There are several issues:

• If a US company has assets in overseas locations, there is a significant possibility that foreign governments will find an excuse to confiscate those assets, as partial payment for the US default on debt.

• Business airline travel is likely to disappear very quickly, because of the squeeze effect of declining oil supply. It will be very difficult to manage overseas locations using boats as the primary means of travel.

• Financial system problems may be a huge issue. It will be difficult to expand operations without the availability of long-term debt. Stock values are likely to be very low if the economy is in long-term decline, so raising funds from the issuance of stock will not work well either. If there are 50 states with non-interchangeable currencies, business operations across state lines may be very difficult.

• The decline in imports is likely to be a real problem. Local replacements will need to be found for raw materials and parts that were imported from abroad--even replacement parts, to keep machinery operating. Fuel for transportation of products will be very limited. Customers will have difficulty visiting stores, because of limited fuel supplies.

10. What kind of economy can continue, without large companies, with very few imports, and with a finance system as you described?

In such a scenario, I expect that the economy that can exist long-term would be a very simple system, with most people either growing their own food or manufacturing some type of product using local materials. Such a system might be similar to an economy from 1900 or earlier.

If this scenario should happen now, the new economy would not work as well as the economy in 1900 in many ways, because the country would be lacking some of the things available in 1900 -- for example, draft animals for labor and farm tools that do not require fuel. People now are also lacking the required skills to live as people lived then - knowledge of farming, food processing and woodworking, for example.

For the first several years, I expect we would be able to carry over some of our current lifestyle. People would continue to live in houses that were built prior to the discontinuity--perhaps two or three families in a single house, if the house is conveniently located. Clothing and other manufactured goods would be used as long as possible. I expect that there would be considerable trade in used household goods.

Electricity would continue to be available as long as the grid can be maintained and power plants can be operated. I expect that if new power plants are built, they would use local materials for generation-- wood pieces where there are forests and oil where oil is produced. The availability of electricity is likely to vary by the part of the country. Grids are likely to be difficult to maintain, so eventually electricity is likely to be generated close to where it is used. Many homeowners are likely to be without electricity.

11. Will there be rationing of gasoline and diesel fuel?

In this scenario, it is possible that there would be rationing of fuel for a few years, but I expect the whole transportation system would collapse pretty quickly, so that the need for gasoline and diesel would decline. The reason I see a problem is the fact that our vehicles -- cars, semi-trucks, fire engines, ambulances, farm equipment, and airplanes--have many parts that need to be replaced regularly:

• Batteries
• Oil filters
• Tires
• Brake linings
• Head lights
• Fluids such as anti-freeze, transmission fluid, and motor oil

In addition, roads and bridges that the cars and trucks use need regular maintenance. If we are very much restricted in terms of imports, we will not be able to import the parts and raw materials that we are accustomed to. Because of this, it will be difficult to keep the cars and trucks running and the roads repaired. Even if we have plenty of gasoline and diesel fuel, the system will come to a stop.

Boats and trains may be better, in terms of needing fewer replacement parts. Electric trains would seem to be OK as long as the grid is running. Once the grid stops, electric trains will stop.

12. How much new infrastructure would we be able to build, after the discontinuity?

Very little. There are a lot of things we would like to use our resources for, including:

• Building factories to manufacture all of the things we used to import from overseas, but can no longer import.

• Maintaining roads and bridges.

• Maintaining the grid.

• Transporting raw materials from one end of the country to the other.

• Building new battery powered cars.

There would simply not be enough resources to go around, since the resources we will have will be those within the country itself, plus a few imports. Financing is also likely to be a problem, because of the lack of long-term loans. Most of the infrastructure development would need to be undertaken by governments, because of financing issues.

13. If we need to use more manual labor to grow our food, how will that work? Right now it seems like there are a lot of huge farms.

I can think of two approaches that might be used to make the transition from large mechanized farms to farms using more manual labor. One approach is for the government to print lots of extra money, and use the extra money to buy up the large farms. The extra money will add to inflation. The government will then divide the large farms into small tracts, and assign families to the tracts.

A second approach would be to keep the farms intact, and assign people to work on the farms, much like serfs. The farm owner would assign people to tasks and keep a portion of the crops as his share.

Regardless of which approach is used, a large amount of housing will be needed in areas where farms are located. If existing houses are located in the area, they can be subdivided and used. If not, there will be a need for houses that can be built at low cost with local materials. I would expect homes would be built of local materials such as straw, sod, logs, or adobe. These new homes would lack amenities such as electricity, heat, and running water.

14. Which countries are likely to fare best in the transition to a scenario such as you describe?

The countries that are likely to do best in the transition are the ones whose economies are at a fairly low level currently, so that the people have the skills and the tools needed to grow local crops, and make clothing. It would be helpful for the countries to have fertile soil, adequate rain, and a relatively low population for the area available. It would be best for most people to already be living in the countryside or small towns, because it is doubtful that economies will be able to support large cities after the discontinuity.

Finally, it would be helpful for the countries not to be too affected by climate change. If climate change kills the native crops, there will be a huge problem.

15. What might a country do to prepare for life after the discontinuity?

If a scenario such as the one we have discussed takes place, the world will look much like it did before the industrial revolution in not too many years. Most products will be grown or produced locally. Foreign trade will play a minor role. The array of goods available will be much smaller than today. Finance will play a smaller role than today.

If a country is to prepare for a scenario such as this, one major thing that needs to be done now is to train people for life in a low energy world--teaching the many skills required. It would be helpful to collect open-pollinated seeds for grains, legumes, and vegetables suitable for each area. It may also be helpful to manufacture some tools and easy-to repair machinery for use in the future. A country may even want to re-build some older technology like grain mills powered by waterfalls and cotton gins, since these can be built to be fairly sustainable in the future.

If a scenario such as we are discussing happens in the next few years, spending time and money on attempts to extend our current lifestyle would be counterproductive. The decline would be so significant that we would not be able to maintain our new technologies in the years ahead.

Hopefully, a scenario such as what I have described will never happen. Thinking about it, and why it might or might not happen, can perhaps give us better insight as to how we should prepare for the years ahead.

Thank you for the very good Essays Gail.

I guess the scary thing is your essays come right at the time we are seeing some of the effects of Peak Oil Production in the Real world. As someone who looks for the writings on the wall, being a Science Fiction writer mostly, I have seen the changes and have been tracking them in a loose sort of way for a while now. Your points should shake up the thinking of most people and hopefully help guide the folks that control the purse strings of our world into doing actions that help rather than hinder our future.

I have written about what could be a glorious future, and some about what could be a terrible future, lets hope for something that we can live with rather than something they will use to scare kids around the campfires in the future's camping trips. I hope those campfires aren't all that is left of the world we now live in.

Charles E. Owens Jr.

Our failures of leadership are comprehensive, including leadership in my nominal sector, journalism. For two weeks in a row, the price of oil on the futures markets has closed above $80-a-barrel, and for these two weeks The New York Times Sunday Business Section has failed to run one story on the consequences of oil rising into this uncharted territory of high price. Are the Times editors on crack? Surely $80-plus oil will thunder through the American economy.

-- we are past the point of "painless" return. We have so consistently and drastically overshot our sustainable consumption and population levels that returning to sustainable levels will necessarily involve significant lifestyle disruptions -- living standard degradation, population level reduction, and the possible loss of sovereignty; there can be no "soft landing."

Sewall said climate change is inevitable, even if no more greenhouses gases were added to the atmosphere.

“The average person should start thinking seriously about where their water comes from now, what they're doing with it, and where the water will come from in 10 to 20 years,” he said.

Barnett, the Scripps researcher, said the West's drought, no matter what its cause, has not received enough attention.

“I don't know why people don't take it more seriously,” he said. “We're not going to have enough water for what we're doing. Nobody's facing up to it.”

Arkansaw of Samuel L Clemens

It is hard for people to deal with all of these issues. It is easier to talk about the latest entertainment, the latest scandal, or the presidential candidates.




Arkansaw of Samuel L Clemens

Gail, thank you for the work you put into this.

IMO while no one knows what exactly will happen and how it plays out, it is not too difficult to see that it will develop in quite unique ways in the US because there are stresses and fault lines that are not present collectively to the same degree and with the same attitude anywhere else.
It will also vary from place to place within the US.

As long as everyone has their personal or ideological horse in the race no one wants to hear tactical truths so to quite some extent everyone has to solve their own problems.

I think that despite the fault lines the national leadership will try very hard to hold the nation together, while it will be best for individual groups to control their own regions.

If it gets bad enough slow enough you might see something resembling Kosovo or Iraq.

The future is the whole point. I suspect the reality is that oil and its alternatives will continue fill the needs and the market pricing will determine the speed of change if a sudden long term run up can be avoided.

I think Gail is right that the attention needs given to the import issue and the credit market problems ahead of "peak oil" idea.

I suspect that the credit marketers and the bankers will get into trouble and that they will look to the government to bail them out. It seems the Federal Reserve is doing that already and if it gets to congress we will be paying to save those skins for decades. See the review of this article on Oct 1 for more details. I bet we can't cleanly close up those creditors and get on with normal business and life.

Thanks for linking to your review of this article. It is titled Fun with Doom and Gloom.

I don't know why other folks aren't thinking through where all this could lead. We have gotten so used to imports and globalization, that we just assume they will continue in their current form forever.

The credit market has mushroomed to include all kinds of derivatives and securitized sliced and diced debt. It seems like the whole system needs to shrink to a small fraction of its current size.

Thanks for your article, Gail. I tend to see this as a motivator to get on with the future of more and better conserved oil and whatever alternatives can come and to get ready for the crash of the credit marketers without the citizens getting creamed by saving their skins. I think the economy could handle the credit crash or an enormous oil price spike independently but together they would be a world catastrophe, much as the article makes clear.

You are exactly right that the credit markets gone mushroom, a lot like an atom bombs cloud. It needs returned to reality and decent behavior, hopefully a sensible congress would address it but the twin risks of the lobbyists making things even worse or a regulatory framework that comes loaded against the consumer keep me from looking that way.

Let's just bankrupt them like anybody else. Then the survivors would learn something.

I don't know how useful it is, but I see the problem in two parts. There is a failure to reach the intellectual level, and there is a failure to reach the emotional level. We see these failures as CRABS, and the UNDEAD.

CRABS, the Classic Retarded American Blank Stare that you receive when you try to address these issues with those unfamiliar. The issues are complex, wide, and deep, and most people can't even begin to put what we try to convey into any personally relevant context.

And the UNDEAD, the Universally Neglected and Deceived, Empty of the American Dream. These people largely don't care about the serious issues because they are largely unable to care. After X number of years of being sold false promises and exaggerated claims about a bill of goods that included suburbia, upward mobility, and a prosperous future, or having been continually pushed down, ignored, and lied to on their attempts at climbing Mount Capitalism, they are now perpetually discouraged and unfeeling. These people would agree with George Carlin's observation, "It's called the American Dream, 'cause you have to be asleep to believe it."

Why aren't other people thinking things through thoroughly? The issues are extremely complex and people don't take the time, or they have scant energy left to care about anything except getting through today.

And I think the way to address this problem is counter-intuitive.

How do you get people who don't care, to care? How do you get people who don't think enough, to think enough? By addressing their weak spots, the counter-intuitive part. The person who doesn't care has weak spots in how they think that can be addressed. The person who doesn't think enough has weak spots in how they care that also can be addressed.

I don't know what to do about someone who appears to neither think about the problem, nor care about it.

Nice. How to do "it"?

See Mandela, Gandhi, MLK for details.

And wait until the Empire suffers a defeat
to implement.

And expect to get shot for your efforts.

It's no accident that MLK was shot in Memphis
organizing the garbage workers.

It is beyond my ability or purpose here to describe a world where a true market system could have developed without such state intervention. A world in which peasants had held onto their land and property was widely distributed, capital was freely available to laborers through mutual banks, productive technology was freely available in every country without patents, and every people was free to develop locally without colonial robbery, is beyond our imagination. But it would have been a world of decentralized, small-scale production for local use, owned and controlled by those who did the work--as different from our world as day from night, or freedom from slavery.


Accordingly, the single biggest subsidy to modern corporate capitalism is the subsidy of history, by which capital was originally accumulated in a few hands, and labor was deprived of access to the means of production and forced to sell itself on the buyer's terms. The current system of concentrated capital ownership and large-scale corporate organization is the direct beneficiary of that original structure of power and property ownership, which has perpetuated itself over the centuries.

Arkansaw of Samuel L Clemens

Gail, Here's a couple of articles to tell you what the RICH are doing about it. No not a Rainwater moving to a small town thing. They are getting out while the getting is good.

So rich he wants to start his own country

....Bill Moyers show on PBS. The first guest was John Bogle, founder of Vanguard Mutual Fund Group. Vanguard is one of the few (the only?) employee-owned fund groups, one of the few places you can be assured of not getting screwed as a small investor.

I've never heard any US business leader give a bleaker assessment of the US and US business practices. He calls the US the new Rome -- bread and circuses, companies being run for the benefit of the top half a dozen executives at the expense of the stockholders, private investment companies buying hospitals and nursing homes, which drop care so far that residents die, and having complete immunity from lawsuits, since their corporate structure is so complicated that nobody can find out who owns the facility.

I knew all this stuff already, but I've never heard any high business figure talk about it. They're all whistling past the graveyard, hoping that the peons don't rise up and revolt like they did in the French Revolution. Bogle said as much, that revolution of some sort couldn't be ruled out, especially as millions of people find that they can't pay their bills, after being fleeced by financial capitalism.


...Last week I was working with Swiss Public Television doing a documentary on "Joe Bageant's Winchester." During the process I ran into a man from one of the wealthy local families who works in global finance abroad, has some murky US State Department connection with his work, and owns a brokerage in New York. We yakked bit, he agreed that there is a worldwide financial collapse coming,...

.... "Well when they find out what has been done to them and that it can never be fixed I don't want to be in this country."

.... But it got worse. He has an escape plan. The guy is so rich he wants to START HIS OWN F'in COUNTRY.

and this one from Doug Casey

The Greater Depression - UPDATE
by Doug Casey

....But we're at the end of a 25-year boom. It's gone on more than a full generation now. And I'll tell you how it's going to end: It's going to end with a depression, and not just a depression; not just another Great Depression; it's going to be the Greater Depression.


And let me give you a tip, okay? Forget about Europe, it's going to become a petting zoo. It's like Disneyland with real stones instead of paper Mache stones. I mean, Europe is on the slippery slope. I wouldn't touch Europe with a ten-foot pole. If this war with Islam gets out of control, Europe is going to be an epicenter. It's going to be a disaster. I'll tell you where you ought to look. Argentina
is the place to be. It's the cheapest country in the world.


....But let me tell you something. It's turning around I think. And what's going to happen is driven by the fact that everything in Argentina costs between 10% to 30% of what it costs in North America. That's correct. It's that cheap. It's free. It's free. It's free for us as North Americans. But the Europeans really think it's free with that strong Euro. So you're getting a massive immigration from rich Europeans that can see the handwriting on the wall and like it down there. And I really like it down there. It's just a great society, great society, great place to hang out, prices are right. I mean this can solve most of your investment problems right there, just by transplanting yourself, if you've got some capital.

Furthermore, Argentina is going to be insolated from WWIII to a good extent.

The landed rich can't leave the

We're all in this together.

And about farming.

Gail is describing the landowner as a sharecropper.

Sharecroppers were little more than indentured slaves.

The wheat fields will be burned (before harvest)
before that happens.

Arkansaw of Samuel L Clemens

Perhaps someone can come up with a more favorable scenario wtih respect to how land is treated. I could think of less favorable ones as well - just taking the land without compensation; or trumping up charges to jail the landowner. We take property rights for granted. I hope we can continue to do so in the future.

We take property rights for granted. I hope we can continue to do so in the future.

You are spot on here, Gail. Most of us forget just how fundamental property rights are to our modern way of life. Indeed, it was property rights that were at the center of the foundation of the modern day nation states.

The maintenance of property rights is entirely dependent on the existence of a legitimate authority to enforce them.

I must confess, however, that I am not as big a fan of property rights as they currently exist as you are. I would like to see a collapse in the belief in private property and the rise of communal rights of appropriate use without ownership.

Defining property and property rights will be fundamental to the shape of the world we create post oil.

"We take property rights for granted. I hope we can continue to do so in the future."

There's just this huge disconnect.

I just conversed with my family who were out watching
a six row cotton picker traversing a field.

Imagine going back to hand picking cotton to feel the disconnect.

IMHO Government will not be buying farmland.

And it seems you're implying the Soviet Collective
as well as Stalin making war on the Kulaks over

There are so many variables here.

Think electric submersible wells-

"We have 12-inch wells with pumps set 80 to 100 feet deep and pump 1,200 gallons per minute."

W/O AC these wells are useless.

How cities react to this year's lack of wheat
and the fight over eliminating US Farm Subsidies
this Winter will go a long way in foretelling.

The International Grains Council reduced its forecasts for global and Australian wheat production substantially on Thurday. The ICG cut its global wheat production forecast from from 607m tonnes to just 601m tonnes and slashed its estimate for Australian output to 13.5m tons. This is 2m tonnes below the most recent forecast from the Australian government and 9m tonnes lower than last month’s estimate by the ICG.

Wheat stocks for the five largest global exporters are forecast to fall to a 34-year low of 25m tonnes.

In other words lowest ever.

In terms of actual wheat on hand and per capita.

Sincerely yours,


Arkansaw of Samuel L Clemens

Pumps are not difficult to keep operating. Diesel engines can be replaced by electric motors. Stationary devices are generally easier to keep working than mobile devices because you can run electric wires to stationary devices.

We in the United States expect the rule of the law to be in effect. Yes, even with the poison from the disloyal Christian Right spreading through the system at high levels we groundlings still have some deeply ingrained expectations.

Reading and responding here is about changing one's expectations and I often see people arguing one point or another, yet holding many other implicit assumptions steady. This is the first time I've seen the long term viability of the rule of the law called into question. I think this going out from under us is going to be as big a change as the end to our expectation of cheap energy. A quarter of the population, those with that authoritarian personality, will simply go along with whatever new system evolves (heh, evolution), but the rest ... we are the descendants of those who wouldn't put up with it, now aren't we?

The possibility of descent into feudalism pops up here and there in conversations, but the mechanics of that are that a landed elite provides a measure of security and stability in a given geographic area. Those who are the financial elite today may have some of the tools in today's terms to set up such a thing, but if they don't have the foresight to do it now don't imagine they'll rise to the top after an implosion. The skills needed to move funny money around to one's advantage don't translate into those needed for ruling a fiefdom from horseback.

Ask this question of those here who dwell in rural areas now - "What structure will your government have when the federal level collapses and the state is constrained by expensive fuel and low revenues?"

Very good.

"The skills needed to move funny money around to one's advantage don't translate into those needed for ruling a fiefdom from horseback.

Ask this question of those here who dwell in rural areas now - "What structure will your government have when the federal level collapses and the state is constrained by expensive fuel and low revenuues."

Exactly what I've been studying
since '78.

I've got stories of "coupons" issued to the Mercantile.

Panic of '07, Going to Memphis, scavenging Trolley car change
to complete land deals.

Whoever can get the crops grown and out to the mills
will be take over.

Arkansaw of Samuel L Clemens

What structure? Martial "law". Blackwater. Petraeus' divided communities. Travel restrictions. Probably all sorts of stuff done under misnomer of "public health emergency".

Blackwater is playing games in Iraq compared to what
they'll have to do with my state.

AAMOF, I expect to be meeting/hearing about BW Spec Ops
from my state of AR.

All of a sudden BW mercs will be defending instead of

Completely different scenario.

Arkansaw of Samuel L Clemens

It does seem like Iraq is a good picture of one future possibility for the USA. Lots of angry people with guns just shooting each other without much discernable structure to the mayhem. Worst of all the government!

This is the first time I've seen the long term viability of the rule of the law called into question.

No, its been questioned before. One poster (who never came back) was asking for e-mails so s/he would have a list of names to start a revolution, and the occasional 'I'm gonna go into the woods, forage for food and you all will die' posters.

I have no doubt there will be rule of law - I just doubt what the law will BE. Oh, and how much short brown sticky end of the stick will I be grabb'n.

Sacred: The rule of law usually applies in the USA, but not always. During Katrina, a group of Canadian tourists were staying at an upscale hotel. The hotel hired a bus to transport them out of harm's way. The bus was stopped by local police (at gunpoint) and the tourists were forced off the bus (they didn't know what the local police did with the bus). They huddled together on a street in New Orleans overnight-can't remember what happened to them after that but IMHO this was a preview of what parts of the USA will be like when TSHF.

Perhaps someone can come up with a more favorable scenario wtih respect to how land is treated. I could think of less favorable ones as well - just taking the land without compensation; or trumping up charges to jail the landowner. We take property rights for granted. I hope we can continue to do so in the future.

One problem is that we have become accustomed to thinking of land with a mortgage as 'our' land, and I imagine that most land, both residential and farm, has some kind of lien against it. This
story in the NY Times gives some chilling stories about how lenders can jerk you around and not only take 'your' land but destroy your livelihood.

Even if you own your land free of lender liens, there are always property taxes. At least there is the possibility here of taxpayers joining together and using the ballot box to keep the taxes from going too outrageous.

Get out of debt.

Keep after it like a mantra, until you are.

It's the 80/20 Principle writ large.

Arkansaw of Samuel L Clemens

I don't want to sound insensitive, and I certainly have no love for the giant mortgage corporations, but the people in the article have no one to blame but themselves.

Jane bought her house for $298k in 1998. In 2006 her principal was up to $442k!!! By this time she had an interest rate of 11% with payments of $5200/month. No wonder she couldn't afford the house! Accrued interest and penalties add up really quickly at 11%! Is it Countrywide's fault she didn't pay?

Zena lost her job and had to take a new one paying 50% less. Yet it's Countrywide's fault that she refinanced to an interest only loan at 10.9% and now has only $600/month after she makes her mortgage payment?

The moral: Live within your means.



I just wanted to point out that on an individual level, you are right, but on a national level you are not. This is a broad observation, not a personal attack against you. I just hear moral recommendations bandied about all the time as if they are a solution. One of my good friends from college used to say "If everyone just behaved like me there wouldn't be any problem." True, so true it isn't even worth mentioning.

It's Jane's problem to the extent that she is going to lose her house and her credit rating.

It's Countrywide's problem to the extent that they aren't getting paid.

Both Jane and the bank should have made better choices. As far a Jane and the bank are concerned the moral: Live within your means. makes a lot of sense.

But, multiply that by millions:

It's the nation's problem to the extent that there are bankrupt people and a collapsed financial system.

Now it is no longer a moral question of individual actions. It is a society wide question of systems and organization.

As an example: Kids in inner city schools.

Growing up on the low end of the financial spectrum in an underfunded inner city school means that little Johnny has to work extra hard to get good grades to get a scholarship in order to afford college. Little Johnny has been told this several times. If he goes to jail in a decade for dealing drugs, it will be because he made a poor choice.

But, the state has to have a prison to put him in. It has to be built before he gets arrested, so the state sends someone to the inner city school. He takes a look around. He makes notes about the average income, quality of education, social cohesion, etc. And he tells the state how many prisons they are going to need in ten years.

The state planner makes this recommendation based on very accurate statistical model (called a bell curve) and it work something like this: Most people are average, some are above and some are below.

Given the circumstances here at this inner city school he expects very little to come of the average person, he expects the below average ones to go to jail and the above average ones to escape to something else.

Little Johnny is going to be average. His children are going to go to the same school he did. One of Johnny's friends is going to Penn State and one of them is going to the state pen.

This pattern will persist as long as the average income, social cohesion, quality of education, etc. remain the same. You can lecture the inner city school kids about morality 'till you are blue in the face and the statistical outcome will remain unchanged. If, however, you change the system, then you can expect different results.

On an individual level it is appropriate to talk about morality and common sense because individuals make specific decisions. On a society wide level it is appropriate to talk about systems and structures because groups have a distribution of outcomes based on incentives and circumstances.


Edit: changed fault to problem, bank to Countrywide, added summary, and made one paragraph into two.

I blame the teachers. They should drill basic concepts into their students heads, like, "don't sign contracts you don't understand", "There ain't no such thing as a free lunch", and "sometimes advertising is misleading". The last one was specifically taught in my early '80s grade 6 home economics class. I suppose it was an echo of the '70's oil crunch.

If home economics--basic budgeting, simple cooking skills, nutrition, comparison shopping--were taught properly, the US would be much better off. Exactly right, ggg71-- live within your means.

Unfortunately, many of us were taught by teachers who grew up when energy was free and there were still opportunities; those teachers never needed to know about thrift, and never taught it.

Property will depend on where you are. Property will be worthless in the cities and large towns. Even small towns may see many die, hence those empty houses and lots can be used by those who remain.

Those in rural areas will have to work on farms, or in garbage dumps reclaiming plastics and metals.

Money would be worthless for some time, until people start to have some faith in it. Problem with money is people with some technology available to them would be able to print it in their basements, and there would be little in the way of knowing what is "real" or fake. Hence there would be little trust of paper money.

London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

Gail (and others)
I think you will appreciate my forthcoming "post-oil" novel, "World Made By Hand," which is pretty consistent with Gail's view here.

Jim Kunstler
Saratoga Springs, NY

I look forward to reading your forthcoming novel. I enjoyed (if that is the right word) "The Long Emergency".

Jim- My eyes were opened big time by The Long Emergency. Took a while to get over the shock but I've been busy ever since...made lots of changes. Thanks for the warning.

My reading of The Long Emergency was my swallowing of the Red Pill. My life hasn't been the same. While reading another 10 books on the topic and reading the peak oil websites, we first stocked up on supplies. We paid off our mortgage and all debts. Started a large garden and planted 20 fruit trees. Learned how to can and dry food. Became even more commited to homeschooling our two sons. Volunteered on a start-up 800 acre organic farm not far from where we live. And just bought our own little farm of 13 acres of black dirt (Orange County, NY) with a small barn and well. This winter we'll be studying up on how to farm it. So, yes. We too have made a lot of changes in two years. We've tried to talk to family/friends about it but no one really wants to look at it. It requires too much work to face it.

The Geography to Nowhere and Cities and the Wealth of Nations
by Jane Jacobs. These two books brought my love of geography
and what really is eco-nomics together for me.

I lost the G to N book. But I still remember the
"widened road/tractor trailer turn arounds" pics.



Arkansaw of Samuel L Clemens

I see Geography of Nowhere: The Rise and Decline of America's Landscape by James Kuntsler is still available on Amazon.


Arkansaw of Samuel L Clemens

Gail is describing the landowner as a sharecropper.

Sharecroppers were little more than indentured slaves.

The wheat fields will be burned (before harvest)
before that happens.

Well, my dad was a sharecropper until he was about 42 years old. I was about seven when he, with the help of the bank, finally bought his own 45 acre farm. We were not indentured slaves. Many of my neighbors and friends wera also sharecroppers. They were not slaves either.

People will not commit suicide by burning their only source of food, even if they are slaves. The idea of people getting so pissed off that they will riot and burn their only source of food is not creditable.

I argued with people on another list who said people riot and bring down the grid. Absurd! People do not deliberately commit suicide. If the grid goes down, there will be no power for water plants so no running water.

During riots people loot and burn someone else's property. But they do not burn their own properity nor do they destroy their only sources of food and water.

People may indeed become sharecroppers. You would be surprised as to what people may do before they would die of starvation. The day may come when sharecroppers are the lucky ones. And they will be very glad to be so fortunate.

Ron Patterson

Sharecroppers would be in a good place to get the food that is available. If the person in charge know what he was doing, there might even be a possibility that there would be some thought that went into getting seeds, getting fresh water, crop rotation, and all of the details that most of us don't know anything about.

I expect the sharecroppers would be a lot better off than people living in the city, waiting for someone to send them surplus food that was grown in the country.

I commented at length below, but one thing that I do see missing in your analysis is the rise in income and wealth inequality, which, combined with a need for people to work the land in a more labor intensive manner, points toward a "new feudal order" or the "refeudalization" of society. While we could imagine a "democratic nation of farmers".... old New England democratic ideals of yeomen farmers... at present the U.S. seems happy to allow great accumulations of wealth that would seem more likely to produce a system dominated by American feudal lords and ladies at the top and sharecropping or peasant farmers tied to the land and dependent on local military/police systems for protection.

"The Middle Class" is, quite possibly, an epiphenomenon of the oil age, and the rising slope of energy consumption. Whether there are any other energic economies that can sustain a broad middle class remains an open question for history to determine and illustrate. I have my doubts.

The wealthy upper class is wealthy on paper, and in holdings of land that are a bit of a booby prize. You don't see too many ranches of the super rich in Ohio or Indiana, and a ranch in Wyoming is going to lose its value pretty quickly.

Your absolutely right Ron.(Darwinian)

Those who were not born and raised in the country as just full of it!!!

I have stated many times that I was raised by my grandparents who lived and farmed 100 acres,lots of it woodland. And they raised 14 children.

When I lived with them up til I was 11 yrs old we drank raw cows milk(one of the most healthful foods known), ate homegrown vegetables and farm slaughtered meat(mostly pork) and lots of eggs...

All the above is supposed to be unhealthy..but truth is that its not and at 68 yrs of age I am extremely healthy,,never hospitalized and take no medicine.

Farmers are not going to give up their land, not peacefully, yet they will welcome those who wish to 'work it' , IF they are capable..and people will have to evolve to doing manual labor once more..and living more simple lives....

Back the way it was in my childhood,,,we bartered work(help me get in hay, I help you set tobacco)as well as most of what we got from town(flour , salt and sugar was about it).

There is a huge amount of disinformation and opinion being pasted here just because most of them have not had those experiences...they just don't understand...

And if they think the 'Religious Right' is their enemy ..then they won't hardly get started out here where the community church is where the core leadership exists in small communities..or at least where much of what happens in discussed.

Yep its all coming down...we are now starting to see the happenings..a pity for this country had such promise...where and who did us in?

We will all be hoping to be able to get a small piece of land and actually own it. The only thing I see likely is many 'sqatting' on land where the owners have perished and no one is defending it. I see the rebirth of local law via posse's and other means.

Get caught thieving someone stock and you get hanged from the nearest white oak limb.

Airdale-I could be wrong,I have been wrong before

... a pity for this country had such promise...where and who did us in?

That would be Alexander Hamilton and friends.

I agree with airdale re: the theorizing that goes on here about what will happen in rural areas. There are often sweeping statements about what federal policy will do ... but the federal government isn't going to get much traction with the states when the currency is wrecked and oil is dear ... like many other things receding to 1940 levels federal involvement in our lives will do the same.

As I read here the picture becomes more clear - a destabilized Mexico sloshes over into the American southwest and perhaps we have a racially charged civil war there. The culturally different south, northeast, and west go their separate ways. Hawaii and Alaska come apart without cheap oil to support their populations. The United States breaks down, not into constituent states, but into geographic regions with shared culture.

This came to pass in the Soviet Union with much less of an insult than the three that are going to connect with the United States in very short order. I do not think our tradition of unity will stand, and the unsustainability of the southwest coupled with racial tensions there will be the catalyst for the breakup.

And the posse thing can not come soon enough out here. When I was a child people would leave their keys in their cars overnight ... and I just returned from visiting my uncle, who is piecing his truck back together from junkyard parts after it was stolen and stripped. Hanging those behind the methamphetamine traffic would do wonders for rural America.

Here's a guy from Arkansas that I just discovered

(looking for sharecropper info).

The Iron Fist Behind the Invisible Hand
Corporate Capitalism as a State-Guaranteed System of Privilege

by Kevin A. Carson


Manorialism, commonly, is recognized to have been founded by robbery and usurpation; a ruling class established itself by force, and then compelled the peasantry to work for the profit of their lords. But no system of exploitation,including capitalism, has ever been created by the action of a free market. Capitalism was founded on an act of robbery as massive as feudalism. It has been sustained to the present by continual state intervention to protect its system of privilege, without which its survival is unimaginable.

The current structure of capital ownership and organization of production in our so-called "market" economy, reflects coercive state intervention prior to and extraneous to the market. From the outset of the industrial revolution, what is nostalgically called "laissez-faire" was in fact a system of continuing state intervention to subsidize accumulation, guarantee privilege, and maintain work discipline.

Most such intervention is tacitly assumed by mainstream right-libertarians as part of a "market" system. Although a few intellectually honest ones like Rothbard and Hess were willing to look into the role of coercion in creating capitalism, the Chicago school and Randoids take existing property relations and class power as a given. Their ideal "free market" is merely the current system minus the progressive regulatory and welfare state--i.e., nineteenth century robber baron capitalism.


Agriculture was the worst mistake humans made.

And it was only made possible by the Holocene.

The Holocene is coming to a close.

By 2100, forget Mars, we'll be lucky to have colonies
on Earth.

Arkansaw of Samuel L Clemens

I previously tried to edit my post above to indicate that
the 100 acre farm was being sharecropped by my grandparents..
they never did own their own land....and I will note that when sharecropping having several(in this case 7 boys and 7 girls) children makes barter work more worthwhile...if its just a man and his mate...then you got a much harder 'pull' fact it could be dammed having children in this situation is indeed a blesssing..and if you don't? Then who will take care of you as you become unable to do the manual labor?


Farmers are not going to give up their land, not peacefully, yet they will welcome those who wish to 'work it' , IF they are capable..and people will have to evolve to doing manual labor

So long as you look to be the right kinda people eh?

Airdale-I have been wrong before


deleted double post

My grandmother and grandfather were share croppers untill the early 1920s when they bought their own farm with a mortgage. There was never a tractor on their farm, but a team of mules. It was a very hard life but they ate well even during the depression. Butter, eggs, and vegetables sold in town on street corners paid the mortgage during the depression...Even when the five kids and parents wore rags. Only one of the kids finished HS, the rest went 6-8 years and then were working full time to help pay off the mortgage untill WW2 came along. The only 'oil' used on the farm was one gallon of kerosene per month, ten cents, to fuel the kerosene lanterns. Lard was used to grease the spindles on the wagon that hauled vegetables to market and the family to church. Travel, recreation, (except for the after church baseball game among the members) college education, retirement, were unknown and only took place in 'the movies' by rich people. Watch the movies of the 1930s. They were moments when the poor could escape from reality and live in a fantasy for a short time...If they had a nickle to get in. My fathers brother and then my grandfather died during the same week in the winter of 1931 of Pneumonia because they could not afford any medical attention or medicine. I worked on that farm some during my HS years and believe me, it was no walk in the park compared to any job in an industrial society. When Henry Ford advertised that he was paying five dollars per day for men that would work hard, half the south moved to Detroit, Chicago and other industrial cities to escape the grinding farm work that paid bed and board. If America returns to the 1920s era farm life style few people are going to survive it. The work is too hard for those not raised doing it. Few people are going to step out of an 8-5 office job and make it on a farm with a team of mules and little else. The learning curve for the skills needed is too steep, the labor is too hard, and the working hours are too long. Can you mend a harness? Stay on the business end of a post hole digger all day when its pushing 100 degrees? Know when a stream can be forded and when the water is too high and too swift (bridges, what bridges?)? Deliver a calf when your best cow is having a hard time...while knowing if that cow dies there goes the butter money and no more milk for the youngsters? Can you build a chicken coop? Can you do any of the thousand and one other chores that go with running a farm? And, what would the 'new farm workers' have to look forward to? More of the same year after year, hoping for decent weather for the crops, hoping that no disease hits the stock, hoping for a decent price for the cash crop...And something always goes wrong. It is not a life that I would want to return to.

Interesting. I have heard some stories like this from my parents and grandparents, but I think they were from the relatively well-off, so escaped the worst of it.

My grandparents have similar memories of farm life from the 1930s to the 50s.

To contrast those memories with a modern picture, I spent a couple weeks of my vacation time working on a organic farm in northern BC two-consecutive springs a few years ago. The couple that owned it left work in a nearby town seven years before I first set foot there. They were both in their mid thirties when they bought their farm. They used three draft horses for cultivation of, and adding fertility (three draft horses create an amazing amount of manure) to, the five acres of their property that they cropped. They had a Bobcat for moving appropriate materials around, but I only saw it used one afternoon of the two weeks I was there. (In fact, I was the one that used it.) There household was heated with wood and their farm provided about one-hundred house-holds with weekly deliveries of fresh produce for about seven months of the year. Their take-home pay was about $30k per annum.

I would not call their work-day grueling. Work it was, but not back-breaking work. They generally worked 9-5, with an hour of lunch, and fifteen minutes of early morning and late evening chores. Finances were an issue, as they are in most homes, but they were quite happy with their livelihood and they only planned to move back into town when they were unable to earn enough income from the farm due to age.

If the oil-subsidy were removed, little would change on their farm. The Bobcat would certainly be parked and getting feed for the horses and livestock (chicken & pigs) would be more difficult. Getting their produce to town would be an entirely different matter. It was a half-hour drive down one side of a river-valley and up the other.

I think that modern farming techniques may play a role here. This couple really new their stuff and were able to squeeze an amazing amount of food out of their land in (what they thought) was a sustainable fashion. Certainly, access to free healthcare went a long way.

I was envious of their lifestyle and told them so.

I saw one organic garden near here. While they composted for fertilizer (using spoiled produce from a near-by grocery store), they used a small tractor for some things. They also irrigated the garden.

It has been very dry here (the Atlanta area), in several recent years. We are now under a total watering ban, except for vegetable gardens. If any substantial portion of the population has gardens, it seems unlikely to me that the city water system will be able to provide the water, unless the weather gets less dry and hot.

Irrigation will be a big issue, here and quite a few other places. It is possible to grow a much wider variety of crops and get better yields if it is possible to irrigate.

I think the trend is, and will be, for more and more people to buy small plots of land for farming. Even a few acres which can be handled with not much equipment can produce a tremendous amount of food. And equipment, tractors, discs, harrows and planters can be easily shared. They really only need to be utilized for a few hours per year. Where we just bought some acreage in Orange County, NY the neighbor farmers are very friendly and really willing to help each other out. Farmers (at least on the east coast) are a really good breed of people, independent and yet cooperative. And the new farmers coming in are almost all farming organically and helping the conventional farmers learn new methods. Since working on the farm I feel much more hopeful about the future.

"And equipment, tractors, discs, harrows and planters can be easily shared"

The operable word is "can".

The trouble is everyone needs the same implement or tractor at the same time. That window for baling is often tight, same with prep or seeding. There's enough variables with farming you can't control, adding another can ruin your year. There's a reason each small farm went to their own mules or tractors and implements.

Baxter Land Company-Pickens AR v Sharecroppers

"We prefer the sharecropping system," says Andrew Wargo, of the Baxter Land Company which rents tracts of land either for shares of crops or for monthly payments. "There is no better business arrangement in its truest form. If it is a bumper crop, then the sharecropper and the landowner share. If it's a disaster, it puts less of a burden on the sharecropper."

"In any case, things are a lot better for these ... farmers."

That remains to be seen, Cline says."

"I'm in a hole," he says. "We've had droughts, I have no insurance, the prices on stuff keep going up and the land that I was given is unlevel and it's difficult to farm without irrigation."


"Well, my dad was a sharecropper until he was about 42 years old. I was about seven when he, with the help of the bank, finally bought his own 45 acre farm."

If the "Bank" helped you out, it meant that you were only a
Sharecropper in the most technical sense.

Because your Landlord was The Bank and lender of last resort.

"Your Bank" would only have been able to undercut/buy out
your contract.

And if your Landlord was agreeable to this, then
he wasn't seeing to your needs.

Because, again, one of the main jobs of your Landlord
was to undercut/outbid your bank for your services.

Arkansaw of Samuel L Clemens

First I would like to say that almost all farmers take out loans from LOCAL banks..They have several differing types of loans. One being a NOTE...and its only based on crop proceeds. This means its span is yearly and you pay it when your harvest and sell your crops.

Most do not mortgage the land they own...well perhaps some do but IMO it is slight...yet the local banks that farmers prefer to do business with do not 'sell' those loans and they will bend over backward again and again to help the farmer with his finances.

You have to buy a $125,000 depreciate it for taxes over a long make money with the combine and the bank is happy to finance it..and if you must you can put up some land as collateral. I never did and had an outstanding machinery loan,in fact three of them at one time...and the collateral was the equipment..

It works in a very friendly atmosphere out here and not only that most of the members on the board of the bank are farmers as well and neighbors and friends too.

So its nowhere near the same as a fella buying a house in the suburbs..he can move out real fast...the farmer is not going anywhere and mostly the loans are made depending on the reputation of the farmer.

You can't apply what happens elsewhere to how it works in farm country. Again if a city dude buys a piece of land..well thats a different story to the bank.

Now I will admit that its becoming more and more controlled yet the board members pretty much call the shots.

In my case I wanted to help my son buy a used Jeep Grand Cherokee...we went to a nearby larger town(smallish city) and dickered with the owner..I knew him and my cousin was his parts manager...we agree on a price...but my son's credit was found to be garbage for the loan guy at the I called my bank and spoke to the guy I usually deal with...I told him I would co-sign a loan and he said "Give the phone to the salesman" he talked a bit and then the saleman gave me the keys and said..."you got it and your own your way,no problems"...

That is still how it works for me at least...and I did it for my daughter just the same. I can do it myself becuase they know me and my reputation is very good.

Most farmers use enormous amounts of credit but hey are also dealing in very large sums of money but its highly seasonal and erratic.

Once a farmers 'cashs out' his assets are usually very very big and he will walk away with a lot of money..because he brought his land very cheap way back and the same with well taken care of farming equipment.

My buddy runs a million + dollar farming/trucking operation but he is frequently strapped for ready cash...yet if he cashed out he would easily be a millionaire...Mabye multi-millionaire...

Farmers are cash poor but asset rich. I know one family who never stops buying land...they make more money that they can say 'grace' over..They were smart when they brought and used credit as they own thousands of acres and own their own 18wheelers just to haul the grain.

Now do you think these folks are going to have the paradigm as the city boys? I don't think so.

And the grain markets are running wide open throttle at this time.It not looking like a boutiful harvest this season but the prices are the difference and for the next few years, if the apocalypse is not in progress, then the prices will climb even higher...

Right now the farmers are getting their breaks after a long long long time.

I disagree that your a sharecropper for the banks...
actually its more like the other way around. Land is the best, some say only, collateral. Most banks do not wish to foreclose on farmers...only in the mid 80s was the land very cheap and farmers were in great trouble and held auctions on their own to pay off debts. They usually kept the land but if they were poor managers they lost it. Nobodys fault but their own.

One other point, many farmer inherit land and pass it on to their heirs.

Airdale-who at this point owns his land and buildings free and clear...

Thanks. Your posts are always interesting!

Couple of observations.

Valuations are very different between lenders, and drive sales. Where a national bank or company may give you 2 or more thousand per acre valuation for the land, it's tough to find this with agricultural land. Valuation is dependent on the production history, and what they feel long term outlooks for that commodity will be. So, even a couple years ago, in good times, it's hard to meet that discrepancy between the seller's price and the loan value. IMO, the toughest is the old Federal Land Bank, the Production Credit Association, if they still exist around your area.

Your buddy's example is true to most ag today. First and foremost, a farmer is a trucker. If you don't have the rigs and system to transport that crop, forget it. Used to be a couple 2 ton grain trucks would work, not anymore. Harvest window is short, acreage harvested at least double. Elevators are closed, haul distance is huge. Need a considerable investment in trucking to survive. Hay around here is often trucked 300+ miles to find a decent buyer. That distance, for a crop that'll pay a living, won't happen with 2 or 3 ton loads, about it for small truck and trailer.

This all seems terribly alarmist to me. Will Peak Oil have decidedly negative consequences? Of course. Could those extreme cases of a great(er) depression happen? Certainly. But that could happen independent of Peak Oil through various other forms of fiscal mismanagement.

The Great Depression, to a large extent, was made great because of bad monetary policy management. The Fed was too tight with the money supply, and thus we had deflation and collapse. If they are too loose with the money supply, then we get the opposite, inflation, and if they are way too loose, it can become hyper inflation.

With Peak Oil, we are facing a long term trend towards increasing oil prices with occasional spikes. As prices go up, there will be greater incentives to research other forms of energy, and I think perhaps more critically, energy distribution. This will especially be the case when we hit spikes and it shocks people into action as it did during the 70's.

For perspective, between 1979 and 1985, we actually reduced US demand for oil by 15%. Current average fuel economy is 21 MPG. So if we went from 21 to a mere 24, it'd be an equivalent savings. That's something well within our capability.

My sense of things is that we'll have some tough times during the transition. Technology improvements, infrastructure changes, etc, will take time to happen, and it will be a rough ride until then. We may very well have fiscal policy mishaps that exacerbate the situation. But history has shown that we're relatively adaptable to new situations.

I have to agree Sterno...I believe a great deal of preparation and analysis went into the content of the essay. But in my view, it is very speculative. Extraordinary claims of economic concequences should be supported by extraordinary data, emperical in foundation. To Gail's defense, this topic borders on the speculative realm because I am unaware of any precendents from which to draw an analogue.

Clearly though, as the ravages of diminishing oil production take hold over time, there will be sharp economic reactions. I think what is missing in this diaogue is timelines and the impact of mitigating steps to less the burden.

As a general idea of timelines, the potential crises look to be not far away. All of our debt problems are on borrowed time - the next six months or a year will be interesting. A crisis with the value of the dollar that feeds into the other problems could come almost any time.

I would expect that we could be seeing serious problems of various sorts within the next five years--problems with the currency (hyperinflation or deflation) and problems with imports.

Past five years, I wonder if there won't be other problems that I haven't talked about that play into this, and make it worse. For example, climate change problems causing problems with crops, and severe water shortages in some parts of the country. People will want to migrate, but it will be hard to find a receptive area to move to.

If there are serious problems with imports, we are looking at cascading problems from the lack of imports perhaps in the 2017 to 2020 range.

That's my take on it right now too. The timeline goes: credit crunch, dollar crash, net oil import crisis, Climate Chaos/food/water and global Peak Oil effects simultaneously, followed by Peak Energy. All on a line from now to 2020.

If I had to pin it down, I'd say debt crisis in 2008, dollar troubles in 2009, net import crisis by 2012, climate/food crisis/Peak Oil getting serious by 2015 and Peak Energy in 2020.

Thanks for grasping the nettle, Gail. When I read the article I thought, "I can't believe she actually said it out loud."

Small is good, might want to look at Uruguay which is to Argentina a little like Monaco is to France.

I mean this can solve most of your investment problems right there, just by transplanting yourself, if you've got some capital.

Furthermore, Argentina is going to be insolated from WWIII to a good extent.

This reminds me a bit of the penultimate scene of Butch Cassidy, when he tells the shot-to-hell Sundance "Australia".

I read this article the other day, and thought "hey, Argentina". But then I started remembering the articles about people shooting one another, and the cautionary tales about how peak oil would be a lot like what happened in Argentina. Que? A bit of googling didn't make Argintina sound like a great post-peak destination.

Where is it the Bush family is heading - Paraguay?

And what's the deal with Argentina? Sounds like the guy who wrote the article just has a polo fetish.

All I can say is that of all the weird places I was stationed, never did I live better then in Argentina.

I would go back in a New York minute, I really like the people down there, even more then the Russians. They know how to party.

Gail, thanks for the hard work on these essays. The scenario portion of a work like this is the most prone to pitfalls, in part because its difficult to know what to emphasize in a description. But you have clearly tried to capture as many different possibilities as you could. I would like to highlight two passages that I have concern about and on which I would like to see more discussion.

1. On hyperinflation it appears that the biggest concern is that "foreign governments will feel cheated." I find this a little odd, but wonder what others feel. Of course the biggest problem with hyperinflation is that I might spend my entire paycheck on a cup of coffee. The flip side is that I pay off my entire mortgage with a 1 oz gold coin.

2. "The countries that are likely to do best in the transition are the ones whose economies are at a fairly low level currently." I see this sort of comment fairly frequently, but believe it to be a fallacy. It fails to take into consideration the interconnectedness of the modern world economy. So while a small village in some out of the way place may have the advantage of not being dependent on electricity or of having some local wood and metal workers, it is unlikely that they currently produce all their own food and clothing. And since this is a "remote" village, the collapse of transportation will impact their ability reestablish these functions locally. (And if this "remote" village happens to be close geographically to a large third world city - all bets are off when the refugees start arriving.)

Regarding hyperinflation, I suppose I should have talked more about the expected impact. While we may still have dollars in our bank accounts and money market accounts, they will purchase very little. This problem will affect individuals, businesses, and governments.

I included the point about the impact of hyperinflation on other countries to emphasize the fact that they are going to be unhappy, just like the citizens of this country are unhappy about the situation. Other countries may be in a position to retaliate, in one way or another (grab assets of American citizens, refuse to do future trade without better security.)

I had a longer write-up about hyperinflation in an earlier version of this article. It was omitted because the post was getting long and cumbersome when I tried to talk about the details of both hyperinflation and deflation.

Regarding your Point 2, I am not certain that any country will do very well in the transition, because of all of our dependence on oil and on imports of various kinds. The reason I thought countries at a relatively low level might do better is because these countries at least have people with the skills to grow crops without many fossil fuel inputs. They may also remember alternate methods of producing clothing and such.

Globalization has had a very far reach. If (or when) are faced with having to undo it, we will all be hurting very badly.

Thanks for the clarifications, Gail. And I think you are right about globalization. Few of us recognize just how deeply we have been integrated into this single system.

This was an interesting series of posts. It looked at a worst case scenario where the replacement of current energy sources is minimal and the economy goes into long-term decline. The consequences considered in the case of the US are frightening, but I should point out that the US Federation was created before the Industrial Revolution and its fall should not be taken as granted.

In my view alternative energy sources will, to some extent, avoid the complete reverse of our Society to pre XX century levels. Above all the problem is that these alternatives are late to avoid a crisis.

In economic terms I believe the likely result of the Hubbert Peak is to transit the Economy from long-term growth to steady-state. Being that the case the monetary system will also have to undergo some kind of transformation from debt based to something else.

BTW, a correction is due to the text:

In some ways, their assumptions are similar to the assumptions of the people in Columbus' day, who thought the world was flat.

This is completely wrong; people did not think the world was flat in the XV century.

LOL. Perhaps Columbus wasn't looking for India after all, he wanted to fall off the edge!

In some ways, their assumptions are similar to the assumptions of the people in Columbus' day, who thought the world was flat.

I second that! It is profoundly irritating to see that this myth continues to be spread around. It seems particularly popular in the US, which makes me wonder: do they teach you at school that people in the XV century thought the world was flat?!

Remember that when Columbus was looking to finance his expedition to find India by traveling westwards, the reason he was turned down by the Portuguese king was not because people thought the earth was flat. Quite on the contrary: the king knew very well that the earth was (approximately) spherical, and they even had a good estimation of its size. For this reason, they knew that Columbus expedition was doomed to fail: India was simply too far away!

Columbus, however, assumed the earth was much smaller than what it really is (apparently he misinterpreted calculations done by the ancient Greeks), and pressed on with his idea. It is only by sheer dumb luck (there was an entire new continent between Europe and Asia!) that his expedition didn't perish. In short: Columbus was dumb but got lucky in the end.

Actually, the Greeks measured the Earth very accurately. The experiment was done more then once I guess. One dude who measured it in alexandria with a well and at the Tropic of Cancer. But Columbus went with some other dudes calculation. The smaller planet calcualtion. And here we are. Dude!

One "dude" that did that was ">Claudius Ptolemy.

If you ask me, I don't even believe that Cristóbal Colón (as he signed his name) thought that the Earth was smaller, he was just waiting to find land much closer to the Azores.

Right, Colon went through the Marco Polo diaries and thought China was further east than it really is. Which means you can sail west and get there. Before the invention of a decent clock in the eighteenth century, they had no way of measuring longitude.

Everybody since Erastotenes of Alexandria knew the world was round and has 40K km circumference.


I haven't escaped from reality. I have a daypass.

Alternative souces, though need to be pursude for the sake of those who remain after the crash, cannot be scaled up to meet the current demand. Case in point. Biofuels are driving up the cost of food as it competes for the same land. And that is a very tiny percent of the fuel we need to replace oil. Thus there is no way that these alternatives can be scaled up to meet the current demand.

And the current demand is what keeps this society going. Reduce the demand (either by government enforced rationing, or production declines) will kill the economy as Gail explained.

London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

I certainly agree that there is room for other possible scenarios - many of which I would hope are more optimistic than this one.

Regarding alternatives, I see a couple of issues. One is that in the scenario I am looking at, it is not really the lack of fossil fuels that is the problem. It is the high cost of fuels, together with the decline in imports of all kinds (not just fuel). These issues aren't necessarily solved by alternatives, unless they are very cheap and plentiful alternatives. The US may have more of a problem with imports than Europe, so it may be easier to keep things together in Europe.

The other issue with alternatives is that most have huge fossil fuel dependencies. I cannot see how ethanol production can continue without lots of inputs--diesel fuel, repair parts for machinery, cars for workers. Wind turbines would seem to be even more difficult to keep operational. I expect that Liebig's Law of the Minimum will come into play somewhere along the line on many alternatives--perhaps at different times, in different countries.

I hope you are right about the US Federation sticking together. We have stuck it out through a lot so far. It wasn't until I started writing this that I realized that a lot of other countries have governments that are much easier to change than that of the US. In a lot of countries, a new election can be called, and new representatives can be elected in fairly short order. Here it takes years and years, and there is only partial turn-over at any one election.

Regarding the people of Columbus's day thinking that the world was flat, it is quite likely a myth, but this is what all the schools were teaching when I grew up--US schools may still be teaching this today, for all I know.

"In economic terms I believe the likely result of the Hubbert Peak is to transit the Economy from long-term growth to steady-state."

Now that's exactly right.

The problem is what to do with the "excess" human
population, once we move from growth to the new Steady State.

I don't think anyone wants to think of themselves as excess.

Arkansaw of Samuel L Clemens

I agree that the Fiat dollar will disappear, however, I suggest that the pre-1965 silver coins will return to use as will the gold and silver investment coins currently being struck. The weight and purity guarantees from the old US government will be like knowing which Roman coins from various emperors have which gold content.

We as a species have used some form of abstract currency through history and going back to the use of precious metals would seem logical. I suspect there will be lots of local ingenuity when it comes to business and trade. Governments will probably be behind the power curve (as usual).

I agree that the Fiat dollar will disappear, however, I suggest that the pre-1965 silver coins will return to use as will the gold


We keep hearing that "sound logic" noise here, people --as if the noise itself makes it evil.

There is nothing wrong with fiat money -in other words a token that the government declares by fiat to represent the commonly accepted medium of exchange.

The problem lies not with the fiatness (if there is such a word) of the money but rather with the way the books are hidden and cooked.

We have no system of open checks and balances to keep track of how many dollars the US government prints of how many counterfeits are in circulation, etc. And therefore we have diminishing confidence in the value of such money. They want us to trust but not verify. That is the problem. Same with Peak Oil; the Yerginites of our society want us to trust but not verify. Don't look behind that curtain. The Oz is great and powerful.

Gold and silver won't solve the problem. Money and cash (currency) are not the same thing. Please don't confuse them.

The problem lies not with the fiatness (if there is such a word) of the money but rather with the way the books are hidden and cooked.

And how does one propose to solve this problem?

When someone figures it out, I suppose they will be deserving of a Nobel prize.

Maybe some sort of digital certificate to back up every bill of currency and every bank cashier's check.

Perhaps we need to backpeddle on our belief that money is a store of value.

backpeddle on our belief that money is a store of value

Money is a "promise"
... coupled with the willingness and ability
of society to make good on that promise.

When your boss pays you with "money", he does not say I will give your daily bread, your shoes, your ...


He says, Go out into society and "they" (it) will give you that which you want.

The day that society can longer (or is unwilling) to deliver on the promise is the day that the "money" becomes a worthless token.


I agree that folks will quickly learn which coins contain what; for that reason I believe that the current cupronickel US coinage will continue to circulate for a long time post collapse. Of course first it will disappear from general circulation (Gresham's Law: bad money drives out good money). Already a pre '82 Lincoln cent contains 2.5 cent's worth of Cu and a Jefferson nickel contains 6.8 cent's worth of Cu and Ni.

So rather than individual state currencies, I believe that even after Americans refuse paper money, revalued coins ("specie", as specified by the Constitution : ) will be happily and widely accepted in trade.

Also to throw in my pre '82 Lincoln penny's worth: I'm not to worried about rural property rights. Even prior to 1776, the local "well regulated militia" enforced locally agreed-upon property claims.

Errol in Miami

Excellent. I read that you could date the strength and weakness of the Roman Empire by when it debased it's currency-
coins smaller/lesser metals-
and when it put out total precious metal coins.

Ex. I bet a one dollar 1oz. US Gold Eagle
would get you $750 paper USDollars today.

Arkansaw of Samuel L Clemens

Even prior to 1776, the local "well regulated militia" enforced locally agreed-upon property claims.

But that won't necessarily work in your favor. What if the rest of the locals agree that you forfeit your property?


To quote Milton Friedman (*), Inflation is a monetary phenomenon.

Why should there be any reason at all between oil and inflation? I am sorry to say, but it looks to me you don't understand the concept of monetary finance.

For the rest it is a nice article, if you are into this kind of thing.

(*) and many like him


Simply look at the time period 1973 to 1979 and you will have the answer to your question.

The definition of inflation is the increase in the monetary price of goods and services.

Shortage causes price increases, and hence inflation.

Inflation is not just a monetary phenomenon, the monetary element, known as debasement or the expansion of the money supply relative to the supply of goods, is one cause of inflation but it is not the only cause.


Well, the idea is that how you explain inflation is not true.


I don't understand your comment. While there are some people who do not accept that inflation is a monetary phenomenon, I don't see any evidence of that in Gail's article.

I think she is saying that as oil prices rise, the economy will slow. The government (really, the Fed, which is not technically a part of the governemnt) will react by printing new money to keep the economy expanding. This new money will cause (hyper-)inflation. "Helicopter Ben" Bernanke didn't get his soubriquet for nothing. He may be the most inflationary head of a central bank in history.


In the second paragraph, Gail explains that the coming oil shortages will cause hyper inflation:

These pressures can cause unexpected results such as:

• Hyperinflation or deflation that indirectly results in a major decline in imports of all kinds (not just oil) ...

I have to say that after I read this paragraph, my concentration slipped a bit. (*)

I know it is bon-ton in the Peak Oil world to advise everybody to run for the hills - we are all going down in flames right? - and everybody knows that Mad Max is only a few years from now, but that does not make this sound advice.

The FED has two objectives: reduce unemployment and keep inflation low. It's in their charter.

Why would they suddenly not be able to do this?

(*) the fact that you can't even tell which one it is going to be: inflation or deflation, should give you a small clue.

The Fed will certainly try. The question is whether it will be successful.

One of their problems is that we are part of a world economy. If the Fed lowers interest rates, the dollar falls further.

Another problem is the huge amount of derivatives, and the problems that will occur if/when the whole system comes unwound. The derivatives sold are only as good as the financial standing of the backers.

Another problem is all of the securitized debt that is not properly valued. It seems like the whole system of securitized debt needs to be replaced, because it is so prone to fraud and "feel good" model evaluations.

And these are not all of the problems. The Fed's tool kit has worked in the past, but it is not clear that it can work now.


The Fed will certainly try. The question is whether it will be successful

Why should we doubt that?

Inflation is a monetary phenomenon. If you agree with this, then the fed should be perfectly able to keep inflation in check.

PO will cause an economic problem, especially once the average joe sixpack (Otto Normalverbraucher) figures it out. But that recession will also go away. Society will have to adjust to using less oil.

The question is: How much growth can we have with less oil?

The fact that the future of a complex system cannot be arbitrarily predicted has to do with feedback, theory of complexity, sensitivity of initial conditions, and lack of accurate measurement.

Why would the FED suddenly not be able to reduce unemployment and keep inflation low? Because money isn't the goods and services that people need. Goods and services are the goods and services people need, and there won't be enough goods and services to go around as we progress farther past the peak.

The fact that you aren't following the argument should give you a small clue as well.

Good comment. When you put your thoughts together with our dependence on imports, and our current inability to pay for what we are buying, it looks like we have problems ahead.

Well, the idea is that inflation is a monetary problem. That means it is caused because the fed prints too much money. This is the one and only reason.

It also means that it doesn't matter if the economy is booming or bursting, we have peak oil, peak ng or peak beer for that matter.

If the economy is growing you can avoid inflation by pumping in more money (by buying treasury bonds), if the economy is shrinking, you can avoid deflation by reducing the amount of money floating around (by selling treasury bonds)

You do have to have buyers for the bonds, however. And it helps to have income to pay the interest on the treasury bonds.

Inflation or deflation describes changes in the relation of the monetary supply to the underlying goods and services which the money supply represents.

"Inflation is a monetary phenomenon" is a nearly content-free statement when taken out of context, as inflation is an increase in the money supply relative to the underlying goods and services.

If the money supply increases, and the underlying goods and services also increase, then this is also an example of inflation by your definition that inflation is a monetary phenomenon. This is incorrect.

Inflation or deflation are relative to the underlying goods and services. It is not a purely monetary issue.

It looks to this former actuary and finance MBA that it isn't Gail that misunderstands.

Within most of these US directed scenarios these seems to be a common blind spot regarding rationing.

Currently prices are being allowed to rise across the board with no thought of the impact on farming or commerce. There comes a point, before everything falls apart, where the government steps in and says "no, everything is not a market" and implements rationing that controls prices to key groups and disallows certain discretionary and semi-discretionary usages.

Putting a cap on domestic usage (say 200 gallons per year per driver) would substantially reduce the overall usage of transportation fuel, long before the events described above. It's much more acceptable to do this than to allow everything to go to hell and people to stave.

Any scenario that doesn't include the impact of rationing and its consequences needs be looked at again - its a definite stage in the evolutionary process of a declining oil supply.

I think rationing may be a partial solution to some of our problems. I am just afraid that it doesn't get us as far as we would like.

We currently import 60% of our petroleum products. If there is a big drop in imports (because of monetary and balance of payment issues), it is possible that the total amount of fuel (diesel and gasoline) available to the US could drop by half. We would need to make some very big cuts.

Besides rationing of gasoline for drivers, we would also need to ration fuel for many others:

• Farmers
• Truck drivers
• Those manufacturing all of the parts that are needed to keep the vehicles going
• Energy and materials to keep the roads maintained
• Police
• Military
• Biofuels manufacturing
• Electric grid maintenance

In addition to rationing for the above, we would need to set aside fuel for manufacturing. if there are problems with importing parts (for existing vehicles and for manufacturing needs), we may need to set up our own manufacturing plants to make the missing spare parts. This would take more oil, and lots of time.

I expect rationing would go part of our way to solving our problems, but I am afraid it would not solve the whole problem.

Here is the US usage of petroleum for transport by type.

Now replacing all imports would be a touch difficult. However if you set an initial target at, say, 3Mbpd - then you could achieve that by hitting the car and light truck usage (currently circa 8Mbpd). It would require substantial adaption in the usage patterns (no more long commutes, etc.), but it is more credible and possible than TEOTWAWKI.

Think of it as akin to exportland but within a country. The amount of fuel available to domestic users declines faster than the supply rate with the aim being to ensure continued supply for essential purposes. Everyone else is only being able to buy a rationed amount at high prices. Strangely enough, this story then turns up, referencing a defined UK action plan (from 5 years ago) to implement such an approach when needed.

Thanks, garyp,

This is interesting. As would be similar analysis for different sectors. It seems like there are some not-entirely-too-difficult-to-implement policies that could encourage the changes in any particular sector. It's a matter of seeing the primary necessity, perhaps (and getting over the initial shock?)

I don't have references for things I've heard, such as: "40% of trade is corporations trading goods amongst themselves" but I could have misheard this. Also, the number of countries who ship similar agricultural products to each other, rather than consuming them in country. (What proportion of agricultural shipments fall in this category?) As examples of changes in patterns and organization, which may or may not be the same as increasing "efficiencies".

Can somebody believe in peak oil and not believe the world as we know it is coming to an end? Unless the American way of life is defined as two SUVs in every garage. There will be changes. Just like civilization ended in Y2K. Am I the only one?


I haven't escaped from reality. I have a daypass.

I agree. This baseless speculation. The US disintegrating into 50 states?? A revolt??

Hyper-inflation with all the deflationary pressures of reduced consumption and undoubted economic recession?

Despite a rapidly rising oil price, oil exporter revenues falling?

I don't buy it.

I see it playing out in two stages.

1) A surge in the price of oil, followed by rapid inflation of commodity prices and much higher interest rates. This crashes the world’s property markets and sends the entire world into a deep recession. Now deflation would be a threat but energy would still be inflationary.
2) Now comes the government response, substitution from oil based electricity generation, massive expansion of the mass transit system, a move to expand nuclear, coal and renewables plus transport fuel substitution with coal/gas to liquids. All of this would be financed by deficit spending, which will be inflationary, energy will most likely still be inflationary but consumption (or lack thereof) would be deflationary. Therefore, I don’t see either hyper-inflation occurring (due to the deflationary effect of lower consumption) or deflation (due to government deficit spending and the huge capital expenditure to mitigate the affects of peak oil).

More points to consider are conservation, the expansion of tertiary recovery (the recent THAI development is very interesting), the electrification of the transport system. I am betting we are in for a very bumpy time, the standard of living of the vast majority of people will be reduced (as financial and property assets will take real beating) but I just don’t see the apocalyptic break down of the world economy you propose.

I hope you are wrong, because the path you are projecting is far less comforting than a political collapse.

The worst possible response to the first economic convulsions connected to peak oil, would be an effort to "right the ship," to make everything like it was before (albeit somewhat poorer).

Peak oil is the symptom, not the illness.

I welcome growth and all the advancements the industrial revolution has bought about, don't you?

What I don't welcome is burning fossil fuels to fuel it, esspecially now we have so many alternatives.

If Peak Oil doesn't kill us it gives us a real chance to build a completely sustainable system. Better now or soon than 2030.

In paragraph one you believe in growth.
In paragraph three you want a sustainable system.
So, care to explain the contradiction?

No, I do not welcome growth of the material sort that drives our growth economy. No, I do not believe the "advancements" of the industrial revolution have been good for us at all. Have their been developments of the last two hundred years that I'd like to keep? Sure, the highest among them being improvements in knowledge about hygiene (with sulfa drugs being a good second choice). But do I believe that my life has been improved because I can fill a house full of plasti-crap, escape the drudgeries of my wage slavery by zoning out in front of the idiot box every night, and can buy all the artery clogging, anti-biotic loaded, chemical preservative marinaded fast food I want without leaving the confines of car? Not on your life.

You have a deluded view of the quality of life most people had 200 years ago.

The benefits include a rise in education and literacy, increased longevity, better urban environments, availability of heating and electricity, a vast increase in the quality of medical care and diet. Generally speaking, far more comfort and less pain.

If you ask the new Chinese and Indian middle class if they welcome their economic growth, I am sure 100% would say yes.

Hey, if you don't like it, move to Bangladesh or Niger. Then tell me you don't like your western lifestyle.

Growth and sustainability not compatible? I suggest you read Limits to Growth. It reached the conclusion growth and a reasonable standard of living for all the projected 9 billion people is possible but change is required in many areas of the economy and society.

And you have a deluded view of the quality of life today.

(Actually, you make the assumption that the rejection of the industrial revolution means that I'm using 1800 as the baseline - and you know what they say about making assumptions)

Rise in education and literacy? - read Ivan Illich's "Deschooling Society" and then we'll talk.

Increased longevity? - what you really mean is decreased infant mortality, not something we owe to the industrial revolution.

better urban environments? - Better than what? This is a joke, right?

quality of medical care? - if you can afford it? Frankly, though, I don't trust today's "medical care" as far as I can throw it. Medical care should be about health, not illness.

diet? - compared to what? More is not always better. And maybe should learn a little more about your food supply.

far more comfort and less pain? - If you truly believe that, have at it. But then maybe you can explain levels of alcoholism, drug abuse and suicide that have never been matched before in the history of humanity.

And to keep the measure honest - why don't you ask the Chinese and Indian poor (who far outnumber the middle class) what they think - and note that there is a strong argument that their plight is worse do to your "growth economics."

I first read "Limits to Growth" in 1975. In 1979 I was working with a small team running Jay Forrestor's World Dynamics program doing scenarios of our own. And if you really think that "Limits to Growth" (got that - limits! - to growth!) argues that growth can be made sustainable, I respectfully suggest that you try reading it again.

And let us not forget the quality of life had by the Native Americans before the encroachment of the Europeans. No electricity, virtually no written language, excellent diets, longer life spans than commonly known, and meaningful, integrated lives with cradle-to-grave security and support.

And quite a few Europeans in the early colonies chose to abandon the "civilized" lifestyle in favor of the lifestyle enjoyed by the "savages".

Growth is by definition not sustainable. "Sustainable growth" is an oxymoron meant to pacify. There is no such thing as sustainable growth. Nothing, absolutely nothing in the physical world grows without bound. All growth has limits. Humanity is not exempt.

I suggest that instead of quoting a single book that supports your foregone conclusion, you take a broader view that would include key elements from physics, chemistry, biology, ecology, mathematics, history, sociology, psychology, and systems theory.

There is no such thing as a sustainable economy, not with population increasing either naturally or through immigration.

London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

You are not the only one. I acknowledge that given the right set of circumstances, the consequences of peak oil could be as dire as many here predict. However, I think there is a much greater probability that while things will be very different in the future, they won't be terrible. Clearly there will not be two SUV's in the garage of the future. I can live with that.

The problem is peak oil, as noted in these 3 articles, will reverse economic growth, and it's economic growth that keeps this party going. Dwindling oil will mean tens of millions unemployed, possibly losing their homes. In the winter with not enough heating fuel millions will freeze. With less oil there will be less ability to grow crops, process them, and get them into the stores. Millions will starve.

In a sense, you are right, the world will not come to an end, but in 100 years society will be attempting to emerge from one hellova crash.

London, Ont.
No one is ahead of their time, just the rest of humanity is slow to catch on.

Your initial link to "part 1" isn't a link, it is just text.
(Your "part 2" link is a link; it is OK.)

~live sustainably~

Thanks. I fixed it a while ago.


Tackling a topic with the radical intentions that you have here is both admirable and dangerous. While it is good to ponder the subject of replacing governments and economic systems, it is not light dinner conversation material.

For one thing, none of that can or will come about without heavy fighting and much bloodshed, because the people who have the power now will do anything they can to hold on to it, and have their hands on the weapons. Any suggestion of some smooth transition process is unrealistic. But that element of potential violence, or a police state if you will, is missing here.

All in all, a bit on the light side. Though I commend for the courage to try, I can't for the way you do it. Dealing with all this takes a bit, make that a lot, more preparation.

And you have some funny assumptions:

Trade within the United States will most likely continue unhindered.


One of the effects of local currencies will be to keep business activity local. It will be much harder to export external costs and import distant resources. That will certainly "hinder" trade. And way past time, if you ask me, to restrict capital flows to same locality as labor and resources. The footprint.

If we get to the point where the Commerce Clause and corporate personhood are trashed and currency is local - the current foundations of the empire are trashed. Maybe the US will continue to exist, but not as it does now. The states will be far more powerful relative to the feds. The feds won't be able to force states to export resources where the states want them for themselves. The one-size fits all of the feds and the centralized hierarchy is going to be too energy consumptive to last.

cfm in Gray, ME

We have all been brainwashed into believing that the Union is "indivisible" short of a total apocalypse. This is not true. The US Constitution has always contained provisions in Article V for not just its amendment, but also for its replacement or dissolution.

First, a little history lesson:

The US Constitution is not the only constitution we've ever had; there was a predecessor, the Articles of Confederation.

The articles didn't work well, so what ended up evolving into a constitutional convention was held, ostensibly for the purpose of drafting proposed amendments. The "amendments" that they ended up drafting and submitting to the 13 states amounted to a wholesale replacement of the Articles with a completely new constitution.

Now, did it ever occur to you why the people at that convention included Article V, and wrote it the way they did? The answer is: because they wanted to make sure that in the future the option was open to do the same thing again.

THAT is why there is a provision in Article V for 2/3 of the states to call a constitutional convention on their own initiative, without needing the permission of congress, or the President, or the Supreme Court. THAT is why there is a provision in Article V for the amendments proposed by said constitutional convention to be submitted directly to the states for ratification, again without needing the permission of congress, or the President, or the Supreme Court. THAT is why Article V does not define what constitutes an "amendment", thus leaving open the possibility that the proposed "amendment" could completely replace the present constitution or simply abolish it. And THAT is why any such move, were it ever to happen, would be completely bulletproof legally; the only precedent that the Supreme Court would have to go by is the one set by the constitutional convention itself in replacing the Articles of Confederation.

The only reason this route was not taken in 1860 is that people in what became the Confederacy were too impatient to avail themselves of the legal mechanism that was open to them. The fact that they failed to do so has not changed the legal status of Article V; it remains the law of the land. The only reason it has never been employed at any other time is because most of the states have perceived the federal government as being valuable enough to be worth maintaining.

Were that to change, were enough of the states to consider the federal government to have become a counterproductive dead weight, you might be surprised to see how fast it could be dispensed with - all perfectly legally and probably bloodlessly.

WNC Observer,

What you fail to mention about Article V is that it takes 3/4ths of the State Legislatures to pass on whatever changes may be offered from a Constitutional convention. Hence the legality bar is actually higher than the 2/3rds mentioned.

I otherwise agree that should enough such states decide that the Federal Govt. in its present incarnation is not worth maintaining things could change but it still requires quite a sea change of political sentiment across the whole U.S.

On the other hand, should a handful of states come to a point where there was enough regional state popular sentiment or other compelling reasons to force the issue of getting out from under the Federal yoke, any state or collection of them could skip this whole burdensome Constitutional Amendment process, and use Article X of the Bill of Rights: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States, respectively, or to the people."

Because there is nothing in the Constitution about succession or such a prospect, there is no legal reason under the Constitution why any state couldn't think to do so. But actually doing so is a whole other matter.

IMHO, by the time any such event does happen it may well not matter what the Constitution says.

Worth mentioning here too is that it is only within Article X of the Bill of Rights that the whole kernel of We The People sovereignty over government is given acknowledgement in our Constitution. For all the celebrating we do about the Declaration of Independance and what that document says about the supreme power of the people over governments, the U.S. Constitution is a framework to thwart the will of We The People.

In most rural counties there is one sheriff of that county. He has a very large degree of power.

If the Federal LE(law enforcement) fails and the State LE fails(all due to lack of funds,transportation means,no tax money,no way to communicate and many other reasons) then the closest LE agency is the local county sheriff..

In Kentucky the county sheriff collects the property taxes..he does not keep them but just collects them...when law and order fail to prevail due to reasons stated above then it comes down to the sheriff...This is how it has been for a long time(our form of local government)...other states may vary but of the several states that I have resided in this has usually been the case..

Therefore I believe that if any law at all shall prevail it will of necessity be at the lowest level..

Just how is the Feds going to be able to address the citizenry after TSHTF? They are not going to be able to if the media is unable to function and that depends totally upon the grid.

When the federal tax money quits flowing to the IRS then the Federal government becomes de-facto defunct.Ditto the State taxes.

The local sheriff might be the last man standing and he has to power to deputize citizens who can lawfully, whether 'by the book or not' enforce it with sucessful this will be is uncertain in my mind but it may be the only law we will have and that will then devolve upon what the citizens of that county decide.

I don't see the states having the means of communications either. In the county I can see it being possible. Folks can just travel to the county seat and petition that entity. The sheriff does not have jurisdiction in other counties...

In my state this appears to work quite well..and its about 400 square miles in size.BTW the sheriff is elected by the county residents as is the county judge and magistrates. Also the commonwealth attorney and judicial judges and I am pretty sure the county attorney.

If the federal government falls. If the state government falls. The county will be left...if that falls then we be lawless and ............

You could say ..well martial law is declared...I am not certain that this will be viable. I don't think Merkuns will just be herded around and pushed here and there under force of arms. I don't think the military will turn on its own for Blackwater? without money I doubt they will exist. And money?...there is none and what there is will be worthless.

Airdale-as always IMO..
........its ALL just opinion anyway


''I don't think Merkuns will just be herded around and pushed here and there under force of arms. I don't think the military will turn on its own citizens..''

Very interesting postings btw Gail..

Americans will be one of the hardest peoples to push around because of gun ownership, and your military is not a caste but made up of citizens who have families living in American society and will be impacted by foreclosure, food and fuel inflation etc. (See storming of Winter Palace, Bastille, Fall of Caucesu, collapse of the Hohenzollerns etc)

Controlling a population can be tricky... Burmah looked dodgy for a while as far as the junta was concerned, but without small arms, peaceful monks are fairly easy to supress. Had the Burmese population the right, and wealth to buy and bear arms, then the junta may now be hanging from lamp posts.

...Interesting, your tricky little ammendment to bear arms, As a European, half of me recoils in horror, the other half looks on in jealous admiration.

The way control will happen is fear. Fear of de-housing, fear of loss of status, job, security and perks. Fear of bankruptcy.

Its the fear that keeps most Americans noses to the grind stone. And the fear of being seen as a 'looser', or traitor or un-American.

That and Wealth Extraction...

First, the rate of inflation stops counting the things that matter.
Second, Wage increases start being based on this false inflation rate
Third, Individuals are trapped: Either move down the status scale as wages fall behind or, live on credit - until bankrupted.
Fourth, key goods increase in price, but the CPI does not reflect this truth.

Nobody likes to look like a looser - especially in a society that worships material success. Especially the middle classes.

And what are they for , these middle classes? Educated, Argumentative, Awkward, know their rights, vote, blog.

Squeezing the middle classes is just wealth extraction of a very vocal and difficult bunch. An awkward squad who flourished in times of high energy and industrialisation.

It wasnt the peasants that won the French or Russian Revolution, The year of 1848 was not fomented by Polish farm labourers or such like. These were achieved by middle classes who could read, agitate and foment. The elite really dont like us. Get used to it, they really, really dont like us. We get in the way of feudalism and the natural order of an agrarian society.

'' You keep them dumb and I will keep them poor'' Said the Politician to the Priest....

I think you are right on target about Sheriffs being the last line of local law enforcement. Once TSHTF everyone will see how deep in this mess we are. US Govt and banks will be on the short end of the stick. No one in their right mind would try to evict armed citizens once the percentage of people being evicted for not paying mortgage or taxes reaches some large number like 30%. I think we all grossly underestimate the power of squatter's rights. Some states like Texas have useful homestead exemption's, or they used to before the recent overhaul of bankruptcy Law's. Let them repossess your Cadillac Escalade, large screen TVs, and toys BUT you get to occupy the land and house. I suspect a similar change in perspective once PO sinks in and widespread bankrupcy occurs. One of the first things I plan to do when it is evident that TSHTF, I will get loud and involved in our local government to persuade others to stop all evictions and make sure the Sheriff is working for local law, not federal or the banks and creditors. To hell with corporations and banks. IMHO people have rights, corporations do not, they are not citizens, and their rights should be inferior to those of citizens. Take care of your neighbors and local intersts and let Citybank, Barklays, Wells Fargo, etc., rot.

The only reason this route was not taken in 1860 is that people in what became the Confederacy were too impatient to avail themselves of the legal mechanism that was open to them.

That, and they didn't have enough votes.

The comment "Trade within the United States will most likely continue unhindered." was made in the context of comparing a scenario in which the US stays together with one in which it comes apart. I had just said that trade would be more difficult as 50 separate states. I don't see anything funny about the assumption that "Trade within the United States will most likely continue unhindered." if the US stays together. This statement says nothing about the availabiltity of fuel; only that political issues would not be a hindrance to trade.

Thanks GtA, for your work.

Another scenario: The wealthy and powerful seek to "solve" the peak oil problem by making oil available to fewer people. This could happen in an organic way in which government is seen as being irrelevant when it can be purchased by private security firms.

For example, look at this article: Security: Power To The People. As much as it sounds unrealistic, I can imagine the super-wealthy cutting deals and making arrangements to maintain a reasonably pleasant Green Zone existence.

My thinking here comes from combining what Naomi Klein describes as "disaster capitalism" in conjunction with the onset of declining oil supplies. See The Shock Doctrine: The Rise of Disaster Capitalism. Also, for a quicker read, she condenses some her work at The Gaurdian and at Harper's (subscription rqrd).

Your "security" link has it 100% right.

The reason it may well play out this way is that current politics do not allow for preemptive mitigation.

Hi musashi,

re: "...current politics do not allow for preemptive mitigation."

Are you really sure about this? If so, could you explain further?

Just a guess. I think musashi means "preemptive mitigation" of the effects of PO by conservation, etc. That is what our current politics will not allow for. That would tend to push the upper class to take matters into their own hands to preserve their power.

Hi musahsi,

Sadly, Klein gives cases where it already is happening where a wealthy neighborhood in the Atlanta area withdrew from it county and formed its own county. They did not like their money going to "those" people. They then hired CH2M Hill,a large engineering firm and provider of governmental services in Iraq, to provide an out-of-the-box county government.

In the event of a severe recession, this practice could spread rapidly. A nice step towards the portable Green Zone. Just add some walls and "security", and there you are.

Some countries may be able minimize discontinuity effects by finding a group of lesser-affected countries and sharing resources within the group.

Um... That's code for "Invade Canada", right?


LOL. I was thinking more of voluntary sharing.

Excellent stuff, most of which confirmed what I already expected and knew. However, Gail does miss a few things.

1) with whole sale defaults occuring, the public will not stand for millions thrown into the streets by banks reposessing their homes. Government will be forced to pass moritorium laws to keep people in their homes.

2) mass unemployement and starvation. Rioting would abound. "The public is 3 meals away from anarchy" applies.

3) resource wars. With China's growth at 10% a year, in 14 years will consume more oil than the US does then. Unsustainable. China will start to throw it's military might around securing more oil. With the US in economic freefall, and military people required to keep the peace, and/or defending their own families, the Chinese will have little opposition.

All of these will make the future much more chaotic, hence more unpredicable. All one can predict is that in 100 years the human population will be a tiny fraction of today (less than a billion?), and we will be etching out an existance similar to the Dark Ages, with some benifits of this Oil Era we can preserve.

If anyone is interested, I'm writing a fictional scenario of a possible future due to PO and PNG. You can view the first 2 chapters at

London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

Rationing would be a horrible mistake that would likely compound existing problems. Fraud and the black market would grow exponentially. This would rapidly lead to famine and civil war.

The only way to manage these sorts of crises well is to allow the market to work. Unfortunately, the scourge of central planning has made this more difficult.

ELP will *never happen* unless the meddling of the government is curtailed or eliminated. They would prefer to enforce their unsustainable regime.

Although some people claim that peak oil is merely a problem of geology, in reality it is a problem created by the toleration of government interference in the market. ELP would have already happened decades ago if it were not for the fascist-style central planning of American transportation, and its continued subsidy. Yes, the highways would likely never had been built if it were not for central planning - and it would have been a very GOOD thing.

I would argue as well that the massive subsidies pumped into agriculture have created the population bubble that has lead to our current environmental problems. This malinvestment created by whiz-kid central planners will be corrected, in quite a tragic fashion.

The greatest problem I see is that central planning, like gangrene, can infect the entire corpus of the economy if it exists even in small part - and more troubling, can be imported from other countries infected with the same disease.

I worry that the government and the people at large will make the same devil's bargain as they did during the 30s and 40s, and call for their lives and livelihoods to be seized and directed by the central government.

Hi 3,

These are interesting points, and ones I've wondered about. Any good libertarian would have been opposed to roads, yes?

The question I have now, though: Okay, so highways and ag subsidies...maybe some part good, mostly not. Still, is it possible to make the changes we need to make - (my short list: renewable distributed and grid energy, electrified rail - always have to say that, conversion to organic farming, building retrofits, TOD design, etc.)- without some kind of central planning in some form?

For example, subsidies to help research solar and put it in place. Or, at least tax incentives.

My other question is: What is the difference between "central government" planning and corporate planning?

If anything, much of the "outsourcing" in the US has been brought about by corporations, some/most/all without any real ties to the US, as they move around to both find least expensive sources of labor and to avoid taxation?

I wonder about China and all of its central planning. At some point, they are going to hit a wall. I understand they are among the worlds biggest users of modern agriculture - fertilizer, pesticides, herbicides, irrigation. They really need all of these chemicals, plus need to have ideal weather, to continue. It doesn't seem like it will be many years before they will start running into problems, and won't be able to import the food they need to make up the shortfall.

China has already hit the wall. The Chinese themselves are predicting 150 MILLION environmental refugees in the next 10 years. That's just 15% of their population, but 45% of US population. Their rivers are so polluted that most of them are now useless. Within 15 years their demand for oil will be more than the US but on a per person basis still way down below US. Their communist government can't keep up with the caplitalism spreading rapidly. It's a recipe for major changes coming.

London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

China does not stand alone - without consumer markets, like the United States, they have grim problems that will boil over very quickly.

We will have strategic opponents as things change but no one is going to be happy about the cover coming off our Ponzi scheme housing market, and I would nominate the Chinese for the role of being Most Unhappy(tm).

Eke, not etch.

In such a scenario, I expect that the economy that can exist long-term would be a very simple system, with most people either growing their own food or manufacturing some type of product using local materials. Such a system might be similar to an economy from 1900 or earlier.

I do not know why you choose 1900 as a separation date between modern and traditional economics. The industrial revolution and debt financed economic expansion was well underway long before 1900. Henry George in Progress and Poverty tells about how during the California gold rush loans carrying interest rates higher than 20% were a common place thing. These huge interest rates were supported by high rates of productivity increase due to increasing human population and the influx of machinery from the east. What we are faced with here is not so much going backward in terms of technology as going forwards in terms of political and social organization as the era of exponential growth comes to an end. Because of the second law of thermodynamics all societies need to make continual infrastructure investments in order to keep functioning. Even if the infrastructure we can afford to maintain in a post fossil fuel world is less elaborate than the one we have now (I certainly think so) we still have to create and maintain that infrastructure through continuous investment of some sort. Even assuming a worst case scenario in which all imports of oil come to an end, the United States is still the third leading oil producer in the world. We have the largest coal reserves in the world. Twenty-three percent of our electricity comes from nuclear energy and hydroelectric power. If we cannot afford infrastructure investments right now, when do you think we will be able to afford them?

The issue is not whether we will be able to afford investments, but whether we can create the necessary social organization to bring about the necessary investments. Of course our society is in debt up to the eyebrows, and as long as the people to whom those debts are owed insist on repayment, we will be paralyzed after a monetary collapse. If, however, we declare collective bankruptcy, then labor and other resources will be freed up to start creating the necessary new infrastructure. I think you are right to doubt that the current United States government will be an effective organizational structure for creating a new economic system. But even at a regional or local level infrastructure investment will be necessary. Obviously in a post growth world such investments cannot be financed by private investors seeking to increase their net worth. Some form of government and/or community investment will be necessary. Initially unemployment will be massive as all of the people currently doing essentially worthless work (financial game players, advertising people, manufacturers and sellers of toys for adults and children, etc) will be sitting on their hands. Of course these people will not have the right skills (construction, agriculture, clothes making) that will be needed in the post fossil fuel world, but that does not mean that they cannot learn. If communications networks survive then our ability to relearn the right skills may be faster than some people realize as we will be able to utilize a wider knowledge base than exists locally.

Larger groups of people living together in currently existing homes makes initial sense, but many of these homes are not well designed with respect to energy efficiency and most are dependent on natural gas for space heating. In the long run passive solar homes with highly efficient masonry fireplaces for heating seem like the right solution. Of course new homes of this sort will be less elaborate than current houses and most families will not be able to finance such building. However, community building groups could exist in which people help each other to build homes appropriate to the new conditions we will be facing. If we have less access to materials from overseas will have to learn to make due with more local materials. In many cases will be able to salvage materials from current buildings which will become essentially useless.

It has always been inevitable that the era of exponential growth would come to an end and that the human race would have to find some way to live in dynamic equilibrium with a finite world and finite ecosystem of which we are codependent members and not the god like masters. We need to start thinking about the coming transformation as positive embracement of intelligent principles of living rather in the negative sense of ‘giving up’ the incredibly wasteful and destructive lifestyles to which we have become accustomed.

The reason 1900 was chosen was because it was a time-period with the use of some fossil fuels, but not a lot. It was not chosen with any intent of being a dividing line between modern and traditional economics. When I talked about the Industrial Revolution in Parts 1 and 2, I used 1800 as roughly the beginning point. So 1900 is sort of a half-way back time-period.

Stimulating article (and comments). Almost all of it is plausible, though I'm having difficulty connecting the breakup of the USSR with a possible breakup of the US; the countries composing the USSR had been countries before, while the 50 states have not (for over 225, anyway).

The FedGov may just cut entitlement programs to the bone to support very basic operations. Might some states attempt to secede? Perhaps.

The electrical grid is one of the most important critical infrastructure for maintaining a semblance of civilization (as we know it). Expect this to receive a high degree of attention, at least in a majority of the control areas.

The Federal highway system maintenance budget will likely be cut dramatically; after all, how much interstate traffic do we expect? Raw materials will be sought out close to population centers where ever possible and substitutes sought for those raw materials in short supply in a given area. The majority of the population will eventually fully shift over to riding bikes. Those that look ahead will acquire velomobiles before the crash.

Factories will be set up to produce garden hand tools and horse-drawn implements, with junkyards as primary material suppliers. Other 'factories' will follow for other necessities, though don't be surprised if they simply reuse abandoned big box retail buildings.

Agriculture could turn out to be farms full of indentured servants; many in suburbs will first attempt to grow as much of their food as possible, though inexperience, insufficient land, and theft will frustrate even the bravest.

In short, anyone caught unprepared will likely find themselves hawking their services for a subsistence lifestyle; life before the crash will seem like Disneyworld. How will we explain air travel and rush hours twenty years from now to someone born today?

I agree with most of what you say. I would hope we can keep the electrical grid going for a long time. It certainly should be a high priority.

I think today's autos will provide the materials for many tools and implements. We may also use things from our junk yards.

Oh, you can rest assured that the junk yards will be used - they already are in other parts of the world;

Regarding the disintegration of the 50 states as a plausible outcome:

The 50 states did not come together spontaneously, so I highly doubt that if an event were to occur they would break apart in the same fashion. Many of the states were added on to a growing machine that needed land and resources. Some are much better endowed with resources natural(oil, coal, arable land) or manmade(transportation, healthcare, trading centers). I think a state like Arizona is going to have a hard time maintaining its independent nature in the face of declining water and imported energy compared to California or Texas (I'm simplifying Arizona's resource base here, please contradict if this doesn't describe it well).

Maybe we'll see just a more rapid continuation of the current trend. Many of the people I converse with don't really believe the federal government does anything useful anymore that wasn't already in place more than 20 years ago. Perhaps states-rights will re-emerge as an election focus. Perhaps trade incentives will encourage regions like the northwest or northeast to form their own trade coalitions.

All I know is that, given uncertainty at the higher levels, I'm going to focus on strengthening ties locally, perhaps running for local office after I graduate and have an income stream. Find a city that you like and become a part of it (to echo people who've said this much earlier than me).

I'm in AZ right now, and I can almost assure you that the day water treaties can not be enforced AZ, NV and probably CA are history.

AZ and CA are also extremely vulnerable to problems in Mexico.

"Hopefully, a scenario such as what I have described will never happen."

Why? I mean, what is the alternative?

I guess the "alternative" is some variation of the "technology will save us" myth or the "Fed will save us," or "the resilience of the economy will save us."

Or I suppose there's the darker, less spoken of alternative solution - that Dear Leader will lead our troops to a glorious victory over the evil Islamic-Fascists so that happy times can continue at home while the rest of the world burns.

I doubt these ideas are viable, but it's nearly certain that they will be tried.

It's fascinating that the military hasn't been mentioned, either in the article or the discussion. I personally think this is a huge blind spot in most, if not all of the speculation I've seen of this sort.

If the wealthy countries of the world suffer some sort of discontinuity of the kind described here then there is little doubt in my mind that the military will be deployed against the civilian population in an attempt to ensure the safety of the largest stakeholders and, by extension, to ensure the continuation of the central government which is the largest stakeholder of all.

At the very least critical food, water and energy infrastructure will be appropriated for the continued survival of the military itself, at the expense of civilian populations, and most likely under the guise of "Homeland Security".

Take just a moment to consider two real world examples of discontinuities we have witnessed in our time, both directly related to energy scarcity. Cuba and North Korea both had oil supplies drastically reduced after the fall of the Soviet Union. In the case of the former a largely socialist response centered on agricultural reforms that re-localized food production. It wasn't pretty, but it has more or less worked to the benefit of the populace. In the case of the latter a totalitarian police state forced the population out of the cities and into slave labor as replacements for the tractors on the industrial scale farms. Famine and death on an unspeakable scale continues to this day.

Now ask yourself this: is there anything about America today that even remotely resembles a socialist state? I can't think of anything, in fact just the opposite, the New Deal has been vigorously dismantled for the last 25 years. Now, how many things in America today distinctly resemble a fascist police state? I can think of several, the "Patriot Act" as one example comes immediately to mind, and it seems like there are more examples every day.

Don't fool yourselves folks, the United States being allowed to peacefully break up into 50 independent governments is absolutely the least likely outcome of peak-oil. I personally believe the most likely outcome is what I've seen described as "Fortress World" where the wealthy elite hole up in heavily fortified compounds and the rest of the population is either left to fend for itself or is incarcerated by the military, possibly to be forced into hard labor if food production demands it. The most realistic depiction of this scenario I've ever seen is the recent movie 'Children of Men'. I highly recommend it if you really want to see what our future will most probably look like.


There are definitely the possibility of military use. This post was becoming alarming, even without considering this issue. I was trying to think of ways things could work out without too much violence.

Rationing would require force. I don't see how it is responsible to advocate more central planning in the economy when those policies are clearly sending us hurtling into a brick wall.

In a very broad sense, 'rations' are already being directed to the sectors you mentioned earlier in the form of direct and indirect subsidies. The longer that these subsidies continue, the worse the problem gets and the greater the coercion necessary to keep it going.

Eliminating these economically distorting subsidies is the only way to minimize the amount of strife during the "Long Emergency." Turning to the government for solutions will only lengthen it and create conditions that will make the collapse even worse.

Unfortunately, in our version of 'free' markets the only applicable rule is 'might makes right.' The might is supplied by large corporate or corporate type (read Mafia or local warlord) entities. While I agree that the government in general sucks in terms of enforcement of equitable laws, I don't see getting rid of government regulation as necessarily a positive move.

Ah! If that's the case then I absolutely agree, all possible scenarios should be put on the table. How else can we intelligently choose which ones we prefer?

It was my impression that your article was presenting one scenario as the most likely, and it was that assertion that I felt compelled to counter.

Scenario planning is a fascinating subject, one that I dearly wish we, as in the world, were more actively engaged in. Unfortunately the first, and I think the best attempt at it so far was published as the book 'Limits To Growth' which, as we all know, was promptly shot down from all sides as being too "Malthusian".

Now, here we are, face to face with the worst case scenarios. Isn't it doing your readers a dis-service by hiding from them? Just a thought.


Any article starts somewhere. This article is alarming as it is. It is also on the long side for most readers to read while they are at work (which is where a lot of reading is done). I prefer to have articles of about 2,000 words, but I couldn't figure out how to shorten this one to that length.

The two big issues that are not addressed in this scenario are military involvement and population issues. Maybe they can be addressed later, or by someone else in another scenario. I am not sure I would be very good at addressing military involvement--it is not an area I focus on much. Jeff Vail has written a little about this issue in his article Mexico: A Nation-State Dissolves?


No need to worry too much, looking into a crystal ball and trying to see the future is notoriously difficult. It's not as if one can just choose to extrapolate from here to there along some kind of unbroken timeline. There are just so many unknowns, variables and tricks fate plays on us!

Lots of people regard 1984 as a propetic novel about the future. George Orwell wrote it in 1948. It lots of ways the novel resembles Britain in 1948, as it was meant to. Then throw in his dislike of Stalin's Russia and European Fascism, and we have something more akin to a contemporary satire, rather than a prophetic work of science fiction.
Orwell didn't forsee the great post war consumer society, because he wasn't particularly interested in the future, but twisted the present, holding up a cracked, grubby, mirror instead.

The reason so many people mention Orwell in a contemporary context isn't because he was especially gifted as a seer into the future, but because his ability to describe the fundamental nature of all totalitarian states was so accurate. So, as we have become more militeristic, less democratic and more overtly totalitarian, the more we come to resemble the historic totalitarianism Orwell was so concerned about and parodied so brilliantly.

In contrast to Orwell's bleak world-view, there's Aldous Huxley's 'Brave New World' which in many ways is far more 'prophetic' and recognizable as 'our world' than 1984. Here there's sex, drugs and dance muzak galore! As Huxley loved the life in California he wrote a novel that simply reeks of California. There's comfort, luxury, depravity, debauchery and... a kind of emptyness of the soul.

The lesson is, it's difficult, if not impossible to write much that makes sense about the future. It's a hit and miss affair, mostly miss, unfortnately. Life would be so much easier if we could see into the future with accuracy and plan ahead, only we really can't. However, that doesn't mean one shouldn't try, one might get lucky! Problem is, we're so rooted in the present as individuals. Do we really understand the present? That's debatable, and we're actually there living in the present! What about the past? That should be easier because it's already happened, but do we really understand the past, what really happened?
If the past and the present are such challanges to our understanding, how on earth can we hope to 'understand' the future?

Writing about the future probably requires humility more than intelligence or knowledge. The further out one goes into the future the less likely one is to be right, the more likely one is to appear foolish. So one needs a sense of humour too!

"I was trying to think of ways things could work out without too much violence."

If history is any lession that will not be the case. History shows us clearly that military action is the norm when societies get squeezed or threatened.

It is very likely that the military would be used to crush riots and attempt to restore order. But that has limits. We have seen in Europe when the military went into demonstrations and joined in the defiance of the government, supporting the cause. This could very well happen in some cases in a collapse of the US money system.

Having millions of people turfed from their homes demonstrating in the streets is quite likely to win the hearts of soldiers who's families may well be in the crowds.

Or there could be wide spread defections of military personel who go home to defend their families from roaving gangs.

Bottom line is with scarse oil, especially if Saudi Arabia collapses into radical islam cutting the US off, the US military will be greatly weakened. Since they are currently the defacto police of the globe, it begs the question as to which countries will take advantage of that.

With China expected to have 150 MILLION environmental refugees in the next 10-15 years, unable to feed their own people, poluting their environment to the point that their major rivers are unusable, it makes this sleeping giant something to watch very carefully.

London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

Dear Jerry,

What about the US military itself as something that resembles a socialist state? It depends on how one defines 'socialist' doesn't it? There's National Socialism as one example. There's Fascism, which some would describe a perverted form of socialism. Perhaps the US military is almost uniquely equiped to deal with Peak Oil? I wonder, doesn't it resemble Cuba and North Korea in number of ways? Highly disciplined, well-organized, with a rigid and hierachical 'social structure', led by a uniformed cadre, armed to the teeth.

Of all American institutions isn't the military easily the most lavishly funded, the most popular and the least open to criticism? One could argue that the US military is the most powerful, richest, largest and best organized social construct in human history. It will therefore, probably be the last institution to be effected by the challanges of post peak world for a variety of reasons, many of which remind one of nominally socialist states like Cuba and North Korea.

Now who here really thinks our military is going to stand by the administration that does stuff like this?

We got the D.C. sniper and the Oklahoma City bombing out of our soldiers being in country for a few weeks. Soon we start getting back people who've been there a few years. The Bush administration's treatment of the military is an investment ... and they're not going to like the dividends.

I find it pretty easy to envision a fascist future for the US coming out of literally any crisis that strikes, whether it is the collapse of the dollar, peak oil, or just another terrorist attack, possibly orchestrated by the government. Look what happenned after 9/11! The US population was rallied in a very orderly fashion to support an attack of any country the propaganda machine pointed a finger at! If we are being priced out of oil we are likely to justify it to ourselves and go get it. "The American way of life is non-negotiable" - Dick Cheney

I don't think a Democratic administration would change this - at least not any Democratic administration that the power elite would allow. I don't know how to stop this from happenning

Those troops getting put back into the meat grinder over and over are an investment the Republicans never want to cash in ... fascism here? Perhaps ... but one where the first order of business will be neocon heads on stakes out front of 1600 Pennsylvania Avenue? That seems more likely to me than any more foolishness lead by President Cheney and Sock Puppet Bush.

It isn't about Republicans and Democrats today, its about corporate interests vs citizens, and all four are dwarfed by the forces in motion. If we make stupid choices we're going to get stupid results, and they'll come sooner rather than later. See those statements about the oil peak being ... 2012? or 2030? Trying to push it off ... but physics and geology are not running for election in 2008 :-)

Reading most of the comments here is so drepressing.

What is the alternative? Well there are lot's of alternatives.

For example I've followed these folks for a couple of years now. I really like their vision, design and the multitude of projects they have already completed. I could point to hundreds and hundreds of other example of people around the world who have been quietly doing the things that are necessary to transition into a non oil based economy.

Then again I guess a lot of lemmings will be trampling each other in order to be the first in line to jump over the cliff.

Me I think I will be going kayak fishing or sailing more often.

Hmm, now I wonder what can be done with all those empty shopping malls we are going to have? Maybe we can get people to knock them down sortta like the Berlin wall and re plant them with crops or natural vegetation. I guess we can start recycling all those 5000lb Stupid Useless Vehicles as well.
What you don't like driving a lightweight aerodynamic 1000cc diesel electric hybrid that gets 80mpg? Think of how many of those we could have made instead, ah well...

Isn't plastic made from oil? there's an awful lot of that in our landfills and attics.

1. What impacts do you expect peak oil to have in the future?

Today I read half of 700 page official report outlining the effect of climate change based mostly on IPCC scenarios with calculations of costs and benefits in the 2010 to 2100 timeframe. It suggests what investments needs to be started ASAP, how we need to change building code and so on to minimize the cost during the life lenght of ordinary infrastructure and buildings, that is up to 2100. It also has an outline for how to share responsibilities between insurance companies, municipialities, regional government and state government and a suggestion for reorganizing authorities to hande preparations for and reactons to climate change efficiently.

I expect the practical parts to evaluated and most will become legislation togeather with a reasonable budget to actually do things about the problems. There is a large risk that IPCC is too optimistic and the chages will be faster but then we at least will have the organization for a reasonbale coordinated response to the problem.

This is adaption to the change, there is also a serious program but not yet a crash program for limiting our addition to the greenhouse gas emissions. This is running in parallell with replacing oil with biofuels, etc. All constructive things started by the previous more socialistic government with its focus on getting rid of the oil dependancy is as far as I know running exept for those that anyway get done by market changes or has inefficincies that smell of slight corruption.

Now is the focus of getting commericial investments done to hande all these changes gracefully. There is close to a frenzy of investments in car and lorry technology, district heating, district cooling, all leves of the grid, energy savings, biofuels, nuclear powerplant upratings and even some wind power. Suggestions for investments in new hydro power and nuclear power are better recieved for each quarter and I hope we can be sure to have plenty of electricity, enough for anything and some exports. We dont invest enough in railways and lack some roads but we have hit a limit in the available workforce.

I expect Sweden during the climate change and peak oil downslope will continue to be a nice place to live in and a large exporter of energy intensive goods that most of the world needs. I expect gradual changes in our lifestyles with a continuation of the rural traditions of forestry, hunting, horseback riding and so on while urbanization continues and most of the year is spent in nice cities and towns connected to a high speed railway network completed in the 2030:s.

I dont think a productive economy will have any major problems with maintaining a healthy currency. And our closest neighbours are run at least as good as Sweden, we have things to learn from them, not the other way around.

Nice article Gail. Isn't it funny how history repeats itself, but few of us ever learn from it. While they did not suffer an energy decent, Spain went through this monetary situation in the 17th century. Silver from the new world was their cheap oil. In fact, it is remarkable how similar their situation was to ours now, (lots of debt, imports of everything, little made locally, cheap labor from elsewhere, etc.) One lesson from this is that these experiences occur over time, not instantaneously. Thus, modeling the progression may be useful.

A powerful influence on the possible events you outline is the idea of scarcity. Economically speaking, scarcity is what drives price up. In it's conventional expectations, higher price will cause two effects. Some people choose not to buy, and substitutions will be offered. Peak Oil breaks this paradigm. One, there are no adequate substitutions, and second we are so dependent on this resource, that we will pay any price for it and simply reduce other spending, while squeeze out other world users who can't pay. At least, for a while. This in itself will have drastic effects on the consumer economy. The real trouble starts when real shortages occur. Without substitution, not everyone gets all they need. Gas lines and rationing will result. The big question is how large are the shortages. It will take a long time for the general populace to really understand the big picture. I expect them to sit in lines for months before they change their expectations. How long before they choose to bicycle instead of SUV to work? Even if people want to conserve, choices will be limited. As gas lines become the norm, what happens to the availability of hybrids for example? How fast can this demand be filled? Will it make enough of a difference? Will the manufacturers even have the resources available to fill the demand if they wanted to? Wouldn’t they be constrained by the same shortages? Will people have the financial resources to even purchase one. After all, the full size pickup truck in the driveway that they still owe money to the bank on will be an oversize paperweight that nobody else wants. The bank is not going to want it either.

Governments will likely intervene. They will have to give preferential treatment to some kinds of government services such as fire trucks, police and ambulances. Governments are unlikely to have the financial resource to replace this infrastructure with higher efficiency even if they wanted to, so they will make due with what they have for as long as they can still buy fuel, so they will mandate haves and have nots. Furthermore, you can't carpool your big-rig full of groceries. I don't know how much more efficient you can make these vehicle anyway. Mass is mass. So the only real leverage we have in dealing with a declining energy availability is in private transport. New public transportation projects are not quick to build, and governments won't have the funds to build them with. I expect one of the first effects we might see after rationing is mandated car pooling.

Still, I expect people will still use all they can. It is very unlikely that energy savings will outstrip energy production, so a continuous shortage will ensue, even as people try to conserve and cope year after year. Based on EIA figures, about 40% of liquid fuels are used in the US for private transport, so this is what we would subtract from first as the decline hits. I estimate that a 4% worldwide oil export decline will result in an 8% yearly decline rate here in the US for private transport. Looked at another way, it is possible that we will see the ultimate demise of private transport as we know it in just a couple of decades past peak regardless of other economic considerations.

What we need are some good examples of what a society that still uses electricity would look like that aims to use 20% of the available energy of today. (I'm assuming 10% substitution overall.) With a view from the end, we can map out how to get to work over the next 20 years making it happen one step at a time. Collapse does not have to happen if we work together. It could be bad, or it could just be different. It’s time to let go to the old life and make a different one.

-forest gardener

That is interesting about Spain in the 17th century. They didn't quite have the problems we have now, I don't think --too much dependence on an unsustainable infrastructure.

It would be nice if we could work toward a lower energy level, but right now, government officials cannot even talk about the problem. Working toward a lower level assumes we are willing to accept the current problem as essentially unsolvable, at least if we expect to keep BAU. It seems like military action to try to take oil is more likely government action.

I would argue that all of this discussion is likely to prove moot in reality.

Anyone who has read Crossing the Rubicon by Mike Ruppert, The Shock Doctrine by Naomi Klein, Catherine Fitts work at http:/ and studied the various executive orders coupled with actions such as the consrution of prisoner camps and the militarization of law enforcement would most probably come to the conclusion that what is headed toward the US is a dictatorship. All that is presently lacking is a pretext to establish it.

Clearly, it won't be truly fascist since labor would be excluded from the deal. Therefore, it will be corporatist and the middle class and it's ideas for the future are headed for the scrap heap.


All of the points in this article are food for thought, but assuming the basic direction is one of "slow boil" and not "system collapse", the primary deep structural change I anticipate is that of the continuing growth of income inequality and wealth inequality.

I think of the likely result of peak oil and declining oil production to be "refeudilization"... the rebirth of feudalism, in which a dominant warrior class controls land, which is the source of food and wealth.

Now in the U.S. we've never really given feudalism a chance. We were heading there in the Gilded Age.... but the rising tide of oil fueled industrialism, followed by the flattening effect of the Great Depression kind of knocked the wind out of the feudalism process.

History however is long, and the land based economics of European and Asian feudal systems provide a good model for the likely future of a low energy economy on this American continent as much as on any other.

Only if we had a genuine commitment to both political and social democracy might such an outcome be averted. Needless to say, we do not have that commitment.

Neo-Feudalism here we come.

One of the good and bad things about the future, is that it's out there in the future waiting for us and we really don't know what it going to be like, though it's interesting and somewhat entertaining to speculate about what it might look like.

Moving backwards in time one can see that most 'prophecies' about the future have been spectacularly wrong! This may or may not be a comfort. It all depends on ones temprament I suppose.

If one is going to attempt to see into the future one needs to narrow ones ambitions to a particlar area and timeframe. The narrow the subject and the closer one is to it in time the more likely it is to be 'accurate'. Also it would appear that one needs an enormous ammount of contemporary knowledge about how the world functions and the ability to understand and identify specific trends or tendencies. Time-lag plays a big part here. Things are happening now which we 'know' will have an affect on the future even if they stopped happening right now, because the future effects are already 'built into the system'. For example, Jay Hansen, among others, has stated on numerous occasions that the greenhouse gases already in the atmosphere are going to effect the climate for probably the next twenty to thirty years, the temperature is going to rise whatever we do, only far less than if we just carry on more or less regardless.

One could say that society is somewhat like a huge super-tanker full of oil, maybe it actually is a super-tanker full or half-full of oil! I don't want to use the Titanic analogy again, so our super-tanker is moving forward and we see a half-submerged oil platform up ahead that was supposedly hit by a huricane in the Gulf of Mexico and sank, now it's popped up again. We turn the wheel and we slow down, but because of the size of our ship and the time-lag between taking remidial action and seeing a concrete result, we hit the rig anyway, we did the right thing, we saw into the future, only too late. And it's this thought that I find rather depressing.

Prophecy is a difficult art... an exercise of the imagination.

However it is probably fundamental to our nature as intelligent apes to inspect current circumstances and try to imagine our own next steps, the steps of others, and the likely situation in which we will have to operate in the future.

If there was no biological reason to have the ability to think about the future then we wouldn't have that capability.

Thinking about the future, however imperfect our speculations, has probably served some apes and humans well in the last 50,000 years in a reproductive fitness sense.

So we probably DO have the ability to engage in limited future imagining... and some of us probably do it slightly better than others.


That said, I don't imagine that the feudalism of the future will be exactly like the feudalism of the past.... but I was struck by the absence of a discussion of the rise of inequality in the peak oil discussion above (otherwise excellent).

I think that if you combine that phenomenon with the likely renewed value of agricultural land for food and energy, and the difficulty of power projection in a lower energy economy, you can imagine the basis for a new form of feudal order.

That's where my limited future seeing ability takes me....

Thanks for the interesting articles Gail, lots of food for thought!

A lot of what you said re. possible scenarios involves a reduction in the complexity of all aspects of society, as described in the works of Tainter, and more recently, Thomas Homer-Dixon in The Upside of Down (an excellent read - highly recommended). There are probably thousands of ways that this transformation could happen, but the main end results are pretty well defined:

1) Reduction in population
2) The end of globalisation as we know it
3) Reduction in current western standard of living

I'm not sure if I'd describe my last year reading posts on TOD as enjoyable !
It has however been very educational. Thankyou.

You may well be interested in this article on the plight of Zimbabwe today
for a glimpse into the reality of quick and poorly planned attempts to
reposition control of a countries resources.,,2181086,00.html


Your article really paints a bleak picture of the situation in Zimbabwe. All kinds of problems, from EU and US sanctions, to electricity shortages interfering with irrigation pumps, to land reform taking land away from white farmers who were good at farming and giving it to those without the requisite skills.

I am afraid there will be a lot of hunger there as a result.

First time poster, though I've been reading TOD articles now for about 3 months. Thank you everyone who's posted, the articles have been very informative, and scary...

Anyhow, I've a question for anyone willing to answer. I'm currently renting a house in Southern California (suburbs) and will likely relocate in the next few years. The question is to where? Do I relocate to ND, where I am originally from? My parents still live there, and own a considerable amount of land to farm and what have you. Or do I stay in CA and relocate closer to a city, perhaps San Diego?

In ND, there's an abundance of land to farm or make a greenhouse or other buildings, a very good water well, and a small community that looks out for one-another. However the extreme weather can obviously be a big factor in survivability. In SoCal, there's great weather, however land is a premium, and my yard certainly isn't too big, it's also unlikely that a yard in a house closer to the city would be any larger, so sustaining one-self with a garden year round would likely be impossible. Fresh water could also be an issue as CA gets it's water supply from the Colorado river (I believe). Also, everyone in CA hates everyone else in CA. I know very few of my neighbors and if/when the going gets rough, I'm not sure that their hospitality/generousity could be depended upon. That being said, San Diego has a fair amount of industry and a trolley that goes most places, so there would be little that's out of reach.

I would vote for North Dakota, especially if there is a good well. People have been able to bundle up and get away from the cold for a long time. In many ways, it is easier to deal with cold than heat, if you don't have electricity.

She's exactly right. Go. Welcome back!

In ND, there's an abundance of land to farm or make a greenhouse or other buildings, a very good water well, and a small community that looks out for one-another.

You've answered your own question; the only other aspect is to identify what the climate changes over the next several decades will mean for you and your descendants. Establishing yourself there before the crash will be infinitely easier than after.

This is just my personal opinion, but I think LA is going to be one of the ugliest places in America to face PO. Either head north or go back home.

If there is a prolonged delay at the pumps I can't see any scenario in LA that doesn't involve rioting, bloodshed, and an every man for himself mentality.

If you go home from the big city we can start a boredom support group. My big excitement here (population 800) is sniping the adolescent barn cats on the back porch with a spray bottle. They've not yet abstracted getting off the porch when the human comes to "We shouldn't be on the porch period".

I've been on Lake Mead in the last few months - its down 85' or so from the last time I was there in the late nineties. Take a long, hard look at the ARM reset schedule and then decide for yourself just how long you can wait:

Thanks for posting this link to the ARM reset schedule. I've been wondering about those dates.

On another topic, I seem to remember you posted your mother is old expert canner. I know everybody wants to use Ball branded canning jars, but are other jars saved okay to use for anything? Surely, people used regular recycled jars successfully in the past. I read TOD regularly so whenever you get an answer, if you are able to, I'll most likely see it.

Also, I'm watching The War by Ken Burns and it is truly wonderful. I fear many Americans may get a rude awakening sooner than later.

First, Thanks Gail. Leave for a day and come back to hundreds of comments. I can see both inflation, immediate, then deflation soon following as few have the credit or money to purchase what will still be a large supply of used goods or property.

Guessing how it all rolls out is beyond me. I've yet to see a plausible approach for dealing with it, other than hoping and hoping for a slow gradual melt. There is half of the oil left, we are slowly becoming, as a culture, aware of the inevitable shortfallls.


The reason to use Ball or Kerr or some other canning jar is quality. Regular jars are not made to withstand canning pressure, they are at best packaging. They may explode, or worse, crack unknown to you in storage, and spoil or allow contamination. Always check that the lid "pops" as it cools from the canner, and never eat from a jar that doesn't "pop" when you open it.


How long was the delay between reset and default for the existing defaults that are panicking the market? I know it takes a couple of months from when you miss a payment until the bank forecloses. So two questions:

1) What does the default curve look like for mortgages that have already defaulted? (i.e. 1% default 6 months after reset, 2.5% 1 year after reset, etc.)

2) What is the minimum time it take to go from good standing to foreclosure?

Given that the economic outlook was better when the first batch defaulted, I think it is safe to assume round two will go under more quickly.

Thanks in advance,

The reset to default rate has thus far been pretty low, but now prices are dropping and the refinancing out is gone, so I don't know how valuable historic data is in that area. I think peak oil and AGW are wildcards - if we get hammered with an oil shock due to war in Iran, or we get a double hammering with another hurricane hitting the oil processing facilities in the gulf coast region, then things get ugly fast. We don't know what normal is any more ...

I think you have to miss three payments before you're in deep trouble, there are procedures to delay foreclosure even if you're pretty much doomed, but again I think we don't know what normal is. The pool of pending failures is big enough that it would be political the week a new president was sworn in ... and it'll be frightfully political as it grinds on from 1/2008 right up to the election.

The phrase "Its the economy, stupid!" is most certainly going to get recycled again.

You were looking for hard facts and I offer conjecture. I watch bonddad pretty closely, but I don't watch the mortgage market technical details, except by having him as a proxy. He has not spoken in detail regarding your questions, at least not that I've seen ...


Nobody knows how this is going to play out. This is ALL speculation. That said, I would go back home, at least for a visit. Talk to the neighbors about peak oil, you don't have to push it on them, just give them the primer. Some of them will dismiss you out right, others will freak out, most will hear you out with some concern then go back to BAU. Get the family farm ready: plant an orchard (it won't be ready until a few years after you plant it) same with trees for lumber or fuel. Plant a variety of heirloom fruit trees, that will hedge against environmental variables and crop failure.

Talk to the family. Can be easy or difficult. My parents understood and agreed that PO was a real concern and coming soon but still refuse to sell the motor home. But, my dad got serious about carpentry. My sister (back home with a newborn because of marital problems) wants to get chickens. Mom, an environmentalist before that word existed, was already growing a large percentage of the family's produce before I learned to talk. Get them ready mentally and they will prepare for it.

I think that the small community and family farm is the best plan because there is a real possibility that there will be a food shortage. If that happens a big city is going to be a bad place to be. Food is paramount! Everything else is hardship, food is survival.

While most of the possibilities are scary, they won't happen overnight. You can stay in CA as long as you can still take a bus home with certainty. Still, given the severity of the problem, I would go home to get ready.


The size of the economic pie has been generally expanding during the energy age. There have been cyclical fluctuations in this expansion, the most notable pause being the depression of the 1930's. The division of the expanding pie has more and more favored those in power at the expense of the average person, but this control by the government for the benefit of the privileged has been mostly accepted because revolt would have been more painful than accepting a rigged share of the expanding pie.

The government management of the economy involved a huge expansion of the money supply through a system of loaning of new money into existence by a privileged banking system. This has both depreciated the value of money and also created a debt drag on each new wave of expansion. If you borrowed to buy a car, then part of your income must go to debt repayment, which repayment reduces the money supply, so in order to keep the shell game going, the banking system must create progressively more new money in each cycle; this system results in transfer of wealth from workers and producers to banks and financial institutions. If you compare the price of something in 1900 with the price today, the destruction in the value of money is quite evident.

The primary reason the real world economic pie expanded was the creative power of energy. The exploitation of stored hydrocarbons allowed for much more production than would have been possible with human and animal labor alone.

So the primary characteristic of the post peak economy will be economic contraction, rather than expansion of the pie as less and less energy is available to drive production. There will be less to be consumed, including less travel, less food, less heating and cooling, less medicine, less of most everything. With each drop in energy production, there will be progressively less to consume. Those in power will place the greater part of this reduction on the average person, as they will use their power to maintain their levels of consumption.

Against this backdrop of contraction, there is the problem of the monetary system and all the debt that was created during the expansion of the money supply during the last 100 years. This debt cannot be repaid, but requires the creation of new debt to keep the financial system from collapsing.

Were it not for the debt based money system, the reduction in the economic pie would result in price increases because of less supply, but the problem of the faulty money system creates uncertainty as to how the financial system will behave. One possibility is that there will be continuous attempts to expand the money supply resulting in even more price increases than would have occurred from less real world production alone; more money chasing fewer goods bids up the price. Another possibility is that the debt system will collapse of its own weight, and that money and financial institutions will be wiped out faster than money can be created. The first case will be called hyperinflation, the second deflation. It is possible that we will have hyperinflation first followed by deflation.

Whatever the mechanics of the financial collapse, the end result will be less for the majority of us. What people think of as wealth, like stocks and bonds, retirement accounts, bank accounts, home values, etc. may well be wiped out as part of the financial collapse from the faulty debt based money system. Remember that wealth is stored resources. If you store resources you have accumulated in something that will not maintain value, you lose. It will be a real guessing game to keep your head above water.

You would think that with less energy to fuel the economy that human employment would be increasing in demand to compensate, but the dislocation caused by financial collapse likely will create large unemployment during the collapse.

In order for most people to have less, there must be some combination of higher prices, less income, unemployment, and loss of wealth to translate the overall economic contraction into your personal life. Given the magnitude of this problem, I find it hard to imagine that civil unrest will be avoided, perhaps even civil war. As government defaults on more and more promises the anger will be palpable. We humans like to blame, and there will be plenty of finger pointing to be done.

I cannot personally imagine how the end of the industrial age will allow for population levels anywhere close to the present world population. If an important part of the industrial system like the electric system fails, as suggested by Richard Duncan, then the population collapse could be quite rapid.

My wild guesses as far as timetable, I think the current boom in common stock and commodity (including gold and silver) prices can last into 2009-2010 (fueled by central bank liquidity infusions in an attempt to keep the shell game going) followed by a big unwinding into 2013-2015. Real estate prices already are experiencing an unwinding which might last for a couple more decades, punctuated with small recoveries. What people thought houses were worth was and still is out of proportion to all reason, and out of proportion to normal growth curves. I suspect that long term interest rates (10 year bond) will hold between 4% and 5% for a few more years before beginning a decade long stair step climb up to the 14% range.

This is one hell of a time to be alive.

Here is one additional thought:

Once the economic pie begins to shrink from lack of energy to fuel the industrial age, resources will be increasingly be committed to basics as a percentage to total production. When we were going up the expansion side of the curve, there was plenty of excess to be invested in new infrastructure. The abandonment of buggy factories in favor of automobile manufacturing plants did not necessitate people giving up basic needs to facilitate the investment in the new plants.

On the way down, when virtually all of the energy will be needed to produce the basics for life, how will it be possible to divert energy and resources into all these "alternatives" that are seen as saving humanity. Put it on a personal level; if you spend all you earn on rent, food, medicine and transportation, being unable to cut back on any of these and still survive, how are you going to buy solar panels, insulation, windmills, hybrid cars, and all the other alternatives? Just extrapolate the lack of excess to the entire economy. Furthermore, maintenance of existing infrastructure, private and public, is the first thing that is deferred when resources become scarce. Eventually, even what we now rely upon, as inefficient as it might be, becomes not longer serviceable as a result of inadequate resources to maintain and replace it.

I doubt that a science fiction writer could have imagined a more diabolical structure for industrial civilization than all the systems that came into existence to support the industrial age. Each system seems to have a built in self destruct mechanism, whether it is the debt based monetary system, the energy based production system, the plunder and control based government system, the artificially supported agriculture system, the system of dumping waste into the air, water, and land, and the drug based sickness system. It seems that we, in our arrogance, cannot get in sync with the rhythms of nature, like a delinquent teen, always testing the limits and defying powers beyond our capacity to tame.

The options seem to be diminishing at a rapid pace.

In an energy scarce future,,It seems logical to believe that petroleum products will be the currency of the future. An individual will need to have the petroleum or a skill that can be traded for petroleum products to live well.

"One possibility is that there will be continuous attempts to expand the money supply resulting in even more price increases than would have occurred from less real world production alone; more money chasing fewer goods bids up the price. Another possibility is that the debt system will collapse of its own weight, and that money and financial institutions will be wiped out faster than money can be created. The first case will be called hyperinflation, the second deflation. It is possible that we will have hyperinflation first followed by deflation."

IMHO-TPTB are using hyperinflation to forestall

Hyperinflation is with us now.

Deflation will win.

Arkansaw of Samuel L Clemens

Gail, Parts I and II of your article both have the quality and benefit of hindsight and facts, Part III is speculation, or an educated guess, at best. Don't try to sketch an imaginary future, for it'll always be wanting, and it brings all the prophets out. You seem too civilized a guy to have an inkling of the utter chaos and desperation, which will ensue in the tailspin of empire collapse.
That is, after the gaping of sagging jaws, and the deep silence of shock and awe, Jim Kunstler describes in his last week's post (9/24), have receded.
The best illustration of probable, future developments, I know of, is Dmitry Orlov's ironic presentation about the 'Fall of the Soviet Union', and the lessons the Western world can learn from it. Apart from its merits of style and humor, it has these great advantages over 'a scenario, which, hopefully, will never happen', the quality and benefit of hindsight and facts.

lagedardent, I think you are right on target with the observation that most of the people on this site (myself included) have grown up American middle class and therefore have a "too civilized" view of the world. Dmitry Orlov observed that when the Soviet Union unravelled, "security" forces and organized crime became a continuum. These experts in violence and control, with varying degrees of government sanction, soon expanded into logistics, warehousing, etc. As the economic pie gets smaller, I expect Americans to come into contact with things we have little experience with: overt corruption, coersion, and violence.

A good example that has existed in the past and present and so requires no crystal ball: "security checkpoints". These are very popular with the local authorities: they force you to open you vehicle trunk to see if it contains any items they might like to acquire.

Americans have enjoyed a long stretch of relative peace and prosperity, sanitized by our thugs coercing resources out of our sight. Soon enough we will be seeing the thugs.

Errol in Miami

The most troubling experience for people who are "too civilized", won't be seeing "the thugs". Actually, it will be becoming a thug yourself to survive, and the inner struggle with cherished convictions, and rationalizations to sustain a token selfrespect.
We'll have to adapt to deteriorating conditions, and after the first exhilaration, in the face of the long emergency, all but a few will trade in their saintly halos for sheer subsistence.

I'm glad someone posted a link to Dmitry Orlov's presentation. I saw him give the presentation in New York last year, and thought it was wonderful.

I didn't try to get across all of the problems. I don't think I could. I also don't think people are really up to thinking about all the problems at once.

One of Dmitry's comments that I thought was helpful was that people who are at high levels, and fall from that level are in many ways hurt to a much greater degree than those who start out at a lower level. If a person was tuned in to nature before, he can continue to be, and nothing much will change.

One thing Dmitry was concerned with was that the US would have many homeless, because of mortgage defaults. I'm not sure that will be a problem. As long as we have elected officials, it seems like they will go out of their way to see that people will have houses to live in.(hyperinfaltion?) Also, what are banks going to do with millions of empty homes, that there are no buyers for?

I have contemplated this a bit ... and the sensible thing is to permit the forces to work at kicking those people out :-(

The house is sunk cost and there is no way to recover but to salvage them, perhaps for fuel. Taking political steps to ensure people hang on to them just leaves us with more energy sinkholes ... but that is what will be politically acceptable. Hopefully some of this will come due to gasoline prices draining exurbs as people cluster either closer to work or move all the way out to rural settings.

Of course this is a peak gas sort of thing rather than peak oil, so we may have to wait through a shock or two before that process sets in with a vengeance.

The American Dream will become the American Nightmare.

Having millions on the streets protesting will trump any "market forces". People will force government to enact moritoriums on foreclosures, but not until it gets out of hand. What you don't want to be is those in the first crosshairs of the banks. The highest debtors, those that would default first as the dominoes start to fall.

With tens of millions of homeless people, with no where to go, there will be rioting and demonstrations. That's something governments will not ignore. Besides, when the next election comes around the people who get voted in will be the ones who claim to want to protect the public against the big bad banks.

Besides, the government itself could be one of these foreclosure victoms.

The other thing is how are the banks actually going to force people from their homes? Gun point? Guarrentee they will be met with the same thing as events unfold. Besides, the sheriff's home may be on the list!!

We are entering new and uncharted waters. Old assumptions won't apply.

London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

Superior work, Gail. Here is a comment from my friend
Hulot, posted at the Archdruid Report in a slightly different form:
From Pillagers to Villagers
In saying we are all about to become villagers, it is not my intent to indicate that we would literally all be living in hamlets. I mean to convey the idea that the future is going to be throwing us a lot closer together, pretty soon now, and our urban-sponsored anonymity is about to go the way of the ICE. Humans do best in village-sized groups; we'll need to recover the sense of trust in community which enables villages to survive and prosper, rather than placing our trust exclusively in money. We'll learn to trade goods and labor. So long as our word is good as gold, it'll be more valuable than gold to us. It is only the estrangement of people in a large city, (and not necessarily the number of ["extra"?] people), that increases the chance of disorder. The experiences of postwar Europe, and for that matter 21st century Buenos Aires, suggest that a people can thrive even in severely reduced economic circumstances, so long as food and a willingness to work together are available. I'd grant that these last might not be there for us.

At present, many need not live near work or friends. Soon we will learn to make friends of those nearest to us, or do without. We need to find work within mass transit, cycling, rowing or walking distance, else gradually we'll find our transport costs are pricing us out of livelihoods. This is essentially living a village life, the practical result of localization. Many neighborhoods in the urban East function basically as villages without local farmland, although evidently NYC did raise half its food during WWII. I am unwilling to write off into the "unavoidable dieoff" column everyone who lives in a city over 60,000 in population. A city of 600,000 can be envisioned as a web of 2000 villages. Without this or a similar vision of community, we'll be lucky if we survive in hamlets.

Remembering New Orleans, your unshaken trust in elected officials is praiseworthy. I learned from several articles that victims of hurricanes, and tornados, who lost their homes, are now living in trailer parks. If not lacking the funds for a rebuild, lots of them couldn't afford the higher insurance premiums.
I also learned, there have been hundreds of thousands of repos already, and what banks are doing with the empty homes is simply selling them as quickly as they can for deflated prices, bringing down price levels of whole neighborhoods in the proces. There's no compassion in banks, especially when they are squeezed by a credit crunch themselves.

It is imperative that people who are thinking along these lines read "The Shock Doctrine" by Naomi Klein. There is a non-zero probability that the official response to NOLA was in many ways a practice run for techniques in leveraging a large crisis for the economic benefit of the corporate classes. The event provided a laboratory for the sort of "disaster capitalism" we will see unfurled world-wide as the global problem set converges.

Sorry if I sound like I'm banging the doomer drum here, but I'm convinced this is one of the more important books for the economically aware Peak Oiler to read at the moment.

Simply reading the Amazon summaries regarding The Shock Doctrine is scary. This sounds like a frightening--but real--book.

To repeat a bit of my post upthread, just get the October Harpers for a quick glimpse into what would be the most useful stuff for your purposes. The one thing I find lacking in your work is to recognize the behavior of Richistan in regards to Peak Oil. Klein should be helpful.

Great post, Gail. Here in New Zealand there has been talk at lower levels in the govt of the need to reintroduce steam locomotives at some time in the future. Modern steam developments have made these easy to build locomotives as clean burning and powerful as a diesel. They can run on a variety of fuels, fast growing eucalpts for example. As globalization winds down this country will be awash in wood, all a potential fuel.

Surely electrification would be more efficient? Most of the North Island main trunk already uses electric locos and it's mainly clean, hydro power. The cost to improve and electrify the rest of the rail network will be small if you have a great depression II scenario with unemployment at 25%.

So I suspect the rest of the rail network will be similarly electrified. The wind down of globalisation will take a long, long time: those logs will be more valuable as exports- you can get a heck of a lot on a ship to Japan, with the cost of fuel barely an issue even if it quadruples in price.

As the pattern becomes more intricate and subtle, being swept along is no longer enough.

I don't see cost of fuel boat transportation to be a problem. I think the problem will be our ability to keep up complex systems. The simpler the system is, and the less it depends on a wide support system, the better. With a wide system, Liebig's Law of the minimum comes into play too quickly.

Electricity is a great idea, if we can keep up the complex systems, but I am afraid there will be more and more frequent breakdowns. I think we should have more local solutions, to the extent we can, like the locomotives that use whatever local fuel is available.

Yes it would but the govt here has a dream that we'll all be running around in EV's powered by wind farms. Factor in 1 million NZers returning home because of peak oil / climate change plus the ever present threat of a volcanic eruption or earthquake which wipes out the grid in the central Noth Island. The govt is wedded to meeting peoples unrealistic expectations - ie life as normal. I don't believe that it can be done.
NZ has a worse current account problem than the US and for a small country - pop 4.2 million - we can't afford a huge infrastructure project. The NZ $ is at historic highs due to a property boom and the inflationary problem of being so far from the rest of the world.


I was on a TV fast for a week, or at least the kids were since I don't watch much. In that week it seems the world changed entirely. There was an add for a car called the Volt that can go for 40 miles without using gas. In the add a number of kids were laying their heads on the hood to hear it hum. Before going on the fast, UAW was calling a strike agaist GM. In one week, the house is clean and GM seems like it wants to be first to market with something useful. I agree with you that things can change fast, but I am starting to look for changes in quite difference directions than you.


It would seem the current urban populations could not be maintained. It would also seem that that few urban dwellers could successfully transition to a rural lifestyle quickly enough to avoid starvation. Open conflict would also seem to be the norm judging from my personal observations in California and along the east coast during the energy shocks of 1973 and 1979. All of this sounds like my mother's descriptions of the Great Depression, only far worse. I also think the subject of "Global Warming" will be at the bottom of everyone's priority list, if it makes the list at all.

Global warming won't be at the bottom of everybody's priority list, if there is widespread crop failure because of Global Warming. We may not be able to do anything about it, except to try to move to better locations, and hope the local population doesn't object to newcomers too much.

The recent melting of the Arctic ice is scary. We are seeing other issues that seem to be related to climate change as well - strange weather in Great Britain this summer, spreading desertification in Australia and China. If scenarios like these spread or get worse, there could be real problems.

Frankly, I think Global Warming is already at the bottom of most people's list of concerns. This conclusion is based on my discussions with dozens of people with all levels of education and life exerience. Some are deeply concerned, but it's a very tiny minority. There are just too many pressing daily concerns in people's lives to get very upset about the prospects of Global Warming. Their personal experience and senses tell them that the media hype is over blown. The feedback I'm getting correlates with age. The older and more experienced the person is, the more unlikely they are to believe that 1) Global Warming is anything to get excited about and 2) people are personally responsible for what little warming there might be. Younger, less experienced people are more likely to believe just the opposite. Going forward, the more people of all ages and backgrounds are pressed economically due to PO, the more likely Global Warming will fade from their worry list. I think Maslow would agree. On a scale of 1 to 10, Peak Oil is an "11", and Global Warming is a "1". Like in the movies "Spinal Tap" and "10", people are going to focus on the "11". More and more I find people just tuning out the Global Warming hype. This will only acclerate as fuel prices climb, regardless of the weather. And, the whole prospect of "Pay a tax, change the weather" is a source of growing anger amoungst people I encounter.

For those of you who have based the primary intake of your dietary calories on corn/wheat based products such as twinkies - contact your attorney and get your shit in order. You're gonna die soon. For the rest of us after the discontinuity we have to remember that we all cared about each other at some point in our lives. Don't shoot someone for picking a tomato off your plant. They will only be trying to survive like you are.

Thanks for you post Gail,
However incredible as it sounds. It syncs with rest of the development around us and above all Peak oil itself will be increible in impact and extent.Unprecedented low grain prodcution, artic ice melting, weather volatility, and so on.
Globalised world has made us all partner in crime when it comes to pay for Peak Oil and GHW.
As with most social sciences,and unlike physical sciences, extrapolation or expectation from current and past history is not explicitly linked to future.So there is still a chance that future may take a different course than any that is predicted/projected here.
Even then, it is nice to have food for thought when it comes to contemplating worst case scenario.

"It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change" : Charles Darwin

Get a grip folks! If our per capita oil consumption declined to that of Brazil we'd be oil exporters. This site is sounding like doomer pornography. We've got some real financial and PO problems but why does it have to be Mad Max time. We are incredibly wasteful. We could cut 50% - to european levels - and not be terribly inconvenienced.

I just got back from Guatemala - they use less than 1/10th what we do, and they get by in a very overpopulated country. They don't have nukes and hardly any hydro. We're blessed with a grid that should weather PO more or less OK. Powering down won't be easy for us but it should be doable. In Guatemala hardly anyone has a private vehicle - everyone takes buses and they get around. It's actually efficient. The capital is spread out like a horrible unplanned giant suburb, but people make it into work.

I think on some level we look forward to the "end times" because everything becomes simpler - it's just simple survival. Anyway, I'm taking the Escalade for a spin while there's still time . . .

"I'm taking the Escalade for a spin while there's still time . . ."
Arrogant ostentation was a characteristic trait of the first class passenger enjoying their drinks and listening to the band playing on the upper decks while water was flooding the flood proof compartments bellow decks on the Titanic. Not all of them made it to the lifeboats either. BTW speaking of Brazil maybe you should upgrade the Escalade to a helicopter, it will make it harder for the angry masses to attack and kidnap you at the traffic lights as they are wont to do in Places like Sao Paulo. Then again you could always hire some of those Blackwater mercenaries, now in Iraq to protect you.

BTW, I'm *NOT* a doomer nor am I looking forward to the "end times" I just happen to dislike arrogance. Maybe it's just an incredible coincidence but lately I've begun to notice an inordinately large number of late model Escalades, Navigators and Humvees at significantly reduced prices at my local used car lots, so their appeal as status symbols may be beginning to fade.

How do you convince 300 million Americans that it's OK to live like a Guatemalan? How do you convince them that they should accept such an outcome in the name of the greater good even while they see a very small number of their compatriots getting even richer?

How do you keep them from cutting down every last tree, fishing every last fish out of the rivers and oceans, shooting and eating every last animal on the denuded landscape rather than accepting a genteel slide into what they perceive as grinding poverty?

Americans and Europeans may come to terms with living like Guatemalans, but it will be out of necessity rather than choice, and not before they inflict as much carnage as possible on Gaia in a vain attempt to forestall that outcome.

And what will have happened to the Guatemalans in the meantime, I wonder?

"How do you convince 300 million Americans that it's OK to live like a Guatemalan?"
Why would that be your goal? How about like a Scandinavian?
Oh you don't like caps on CEO salaries and high taxes?
Then maybe you will.

The USA is merging with Mexico, not Scandinavia. This is happening whether global oil production declines slowly or quickly. The USA will look like Scandinavia when Mexico looks like Scandinavia.

I don't realistically expect either the US or Mexico to look anything like Scandinavia anytime soon. My point was, why not set the bar a bit higher than the Guatemalan living standard?

BTW I personally lived through a military dictatorship, a couple of major currency devaluations, 1000% monthly inflation and the introduction of sugarcane ethanol alternative fuel technology, while living in Brazil. I'm not as terrified of a little change in the status quo as some of the posters here seem to be. Riding the bus, using a bicycle or walking to your destination instead of driving your Stupid Useless Vehicle when you really don't need to, may actually be good for building a little character.

Then again I'm the kind of guy who enjoyed riding the subways when I lived in NYC. No car, no car payment, no car insurance and didn't have to worry about parking and having my car vandalized, I know it's a really horrible thing to have to miss out on all that. Though I did have more disposable income to spend on enjoying the arts and fine dining with my friends.

My comparison to Guatemala was just a bit of hyperbole prompted by the post I was replying to. The point I was trying to make is that it is next to impossible to convince people to voluntarily impoverish themselves.

I think what we'll see is a steady increase in the disparity between rich and poor, both within and between nations. That means that the "average" lifestyle of the USA won't take nearly as much of a hit as, say, South Africa, though the income disparity within the USA will become greater. The rich will become much richer, the poor will become much poorer and the middle class will be squeezed out of existence (i.e. down into the ranks of the poor). I expect this will apply to entire nations as well as individuals.

For a look at how this might work, read Naomi Klein's descriptions of Argentina under the junta or Chile under Pinochet in her recent book "The Shock Doctrine". The problems Gail has so expertly summarized will provide precisely the conditions required for the application of this doctrine on behalf of the "corporate class" worldwide. The book provides an intimate and unflinching look at the political risks the world will face over the next two or three decades. It should be read by everyone who is concerned about the potential collapse of the economy and the rule of law.

What you are missing is that people's livelihood, people's lives, are dependant upon the status quo. It's one thing to have a country in poverty for hundreds of years, it's quite another to have a prosperous country be forced into poverty on mass.

It's the oil that has made our system work, hence it is the reduction of oil that will cause it to collapse. Just look at the current mortgage meltdown, which is having effects all the way to Europe, and not over yet. It's just getting started. Any hickup will cause economic faith to evaporate, which will cause the economy to collapse.

What that collapse will mean and how it will unfold we will know only what it happens.

But even if we do reduce our oil consumption to 10MBpD, that will only forestall the inevitable. Rising consumption of 3rd world countries, like India and China, will hasten when PO arrives and terminal decline starts.

Once that starts all bets are off on what the aftermath will be.

London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

The future of transportation is elctric. Electric right of ways for rail, trolleys, LEVs, possibly even cars. There's one guy on TOD who keeps advocating solar electric personal pod transportation. Annoying as his spam is, he could be right.

Without invoking the technology tooth fairy, battery powered cars today have a hundred mile range. Tesla 200 miles. That's more than most people drive on most days. Intercity transportation can be either bus, electric bullet trains, or electrified highways. We may run out of lithium and gandolinium but we aren't running out of lead or acid.

Gary's growth in light trucks isn't going to happen during an era of ten dollar or more gas. We can cope with a third the oil we burn today just by tripling the gas mileage of our cars. At which time, electric vehicles will look a lot more attractive.

There may be die-offs in the more heavily populated and environmentally degraded regions of the world but not in the United States. We can sustain 3*10^8th people. All we have to do is build a ten billion dollar fence and keep our troops home while watching them die and kill each other. The first world's billion people will do fine. The third world's five billion people will have their population cut in half.


I haven't escaped from reality. I have a daypass.

I'm not quite so sure we need to go somewhere so much. I don't, and when I do I can walk or bike. Guatemalans don't go anywhere, but live where they are. Kustler's right; we've created a problem for ourselves.

The 3rd world should have its population cut in half. I'd put it at a lot more than that - a population level that sufficed for millenia before we came along and 'developed' them. Same for the second and first as well.

If society is so intent on building all this newfangled transportation infrastructure, okay, but the sun comes up just fine right where I am. A few hundred years ago, people rarely went more than five miles or so from home.

Studies show that, past a certain point, more money doesn't increase happiness. I'd bet that past a certain point, the ability to travel further has a similar effect. In the 'ancient world' there were travellers who made it their business, but the majority were effectively stationary, and probably as happy as today.

When we go back to traditional agriculture we'll be too busy to tool around in the electric SUV anyway.


Arkansaw of Samuel L Clemens

The future of transportation needs to have a power source. Electricity is not a power source.

Electricity is a power source. Oh, either solar,wind,wave or nuclear electricity. My crystal ball doesn't see that far and we will probably have a mix of fuels anyways.

Until the 20th century, people didn't move around very much. I'm simply showing that we CAN continue our way of life. Except for the light trucks and intercity heavy trucks. Whether we will remains to be seen. Assuming our economy doesn't collapse (some will say big assumption) I expect tourism to increase.

What worries me more than peak oil is our declining social capital. Robert Putnam "Bowling alone". We've become a nation of sociopaths interested only in our next pair of kevin kline jeans.

The electric grid is optional. Photovoltaic panels do not have economies of scales. The grid has benefits but also costs. The biggest cost might be defending lawsuits by nimbyites. Railroads operate their own signalling system today and nothing prevents them from owning their own generator (of whatever fuel, 710). I own my own solar panels and charge my electric bike with them. I could charge an electric car from them if I had an electric car.

Just about every major US city had an electric trolley system at the turn of the century. See Alan D. for details. This is a back to the future. The growth of cars by the 20s and 30s killed them. No conspiracy. People like their own car.

Electric bullet trains exist in Japan. I rode one.

We don't have to build all this infrastructure. But we can. If roving bands of survivalists bring down civilization, well then we all deserve to die.


I haven't escaped from reality. I have a daypass.

On an infrastructure dependent on petroleum, where will that whatever power source come from?

Our transportation is dependent on petroleum. Our "infrastructure" is not. The game plan is therefore to shift transportation to electricity.

Silicon can be refined in a solar or electric furnace. If they don't already do so because of purity concerns. Steel can be made in a solar or electric furnace. Steel needs coal for carbon. They already make steel in electric furnaces. Making aluminum just requires electricity. Lots of electricity. A machine shop just needs electricity. So now can can produce all the solar panels and windmills we want. Power lines are made of steel and aluminum for strength to weight ratio issues. Home wiring can be aluminum if copper gets scarce. Thicker aluminum than they used in the 70s. As long as the EROEI is greater than one, and it is, we can just bootstrap up from there.

The four most abundant elements in the Earth's crust is oxygen, silicon, aluminum, and iron. We don't need anything else.


I haven't escaped from reality. I have a daypass.

Besides oxygen, silicon, aluminum, and iron, we need a huge amount of time, to make the whole thing go together - to build the factories to build the equipment you are talking about. Power lines need more than steel and aluminum-- they need transformers and other stuff that keeps the system together. We also need food for the workers, and lots of fresh water. The devil is in the details.

Yes Gail, we need time. Instead of telling people to stock up on more ammunition, how about telling them to buy their windmill and solar panels NOW. You gave one possible future and I gave one possible future. The one that comes to pass is up to us.


I haven't escaped from reality. I have a daypass.

Hi Gail,

GM is already advertizing the Volt. What difference does peak oil make if we reduce consumption faster than production declines? A solar panel fabrication plant is up and running at full capacity in 18 months with production ramping up during that time. One 500 MW capacity plant starting now is equivilent to two nuclear power plants coming on line in 2016, and it builds another every four years after that. There are two such fabrication plants getting started this year in the US, not to mention the expansion of thin film manufacturing capacity. The current growth rates in wind and solar displace all our other current energy use in about twenty years. And all the time they will be undercutting the price of other sources. Peabody Energy is going to be a mail order company that paints little sayings on its product like "Santa's always watching." The stone age didn't end because we ran out of stones and the fossil fuel age is ending now because we have something better. In some ways we are in a stone age; just think of the meaning of the word petroleum. We're at the end of the age of burning stones. But instead of the age of copper or bronze we are moving into a golden age of renewable energy, highly refined and extraodinarily sensible. Each solar panel we produce now can be recycled at a pittance. Each tower erected to catch the wind now can be used for centuries. Producing energy only gets easier with time as we shift into sustainable modes of doing things.


What difference does peak oil make if we reduce consumption faster than production declines?

The point of my economic articles is that reducing consumption faster than production is not nearly enough, especially for the US.

The problem for the US is that we are using vastly more than our share of the oil right now--about 25% of the oil, with something like 4% of the world population. About 60% of the oil we are using is imported. Furthermore, we aren't really even paying for it. We are selling bonds and increasing our balance of payments deficit.

We have done a lot of other stupid things with debt, too. It is clear that all of this is coming home to roost. It can't all keep growing, when peak oil arrives.

My "take" on this is that when this comes home to roost, our problems will create problems with all imports, not just oil imports. When this happens, we will be in deep trouble. We need imports for maintenance of a lot of things - roads, the grid, windmills, you name it. If we can't fix our roads and the roads fall apart, what good are battery operated cars? If we can't fix our grid, what good are our windmills?

Our infrastructure is dependent on petroleum. Pesticides, pharmaceuticals, antibiotics, cosmetics, asphalt, most synthetic materials, and everything made of plastic in a million critical and dependent applications. In addition to being used for the overwhelming bulk of transportation fuel for cars, trucks, trains, and planes.

The remainder of our energy sources, coal, solar, geothermal, hydro, nuclear, methane, and wind, cannot directly replace any of the above without several decades' worth of time for research, testing, development, and buildout which we do not have.

Oxygen, silicon, aluminum, and iron are currently processed in a petroleum-dependent infrastructure.

And in regards to whether or not we need anything else, we also need phosphorous, hydrogen, nitrogen, and carbon. Again, all processed today in a petroleum-dependent infrastructure.

And since all of these elements exist bound into other compounds, mostly oxides, they require additional energy to separate into the materials we actually need and use, which is addressed by a petroleum-dependent infrastructure.

Not one dependent on Fresnel lenses, solar furnaces, fission plants, wind farms, plant oil plastics, and electric cars. Petroleum. What we have today. Not what we wish we would have in 10 years, 5 years, 2 years, it's what we have today.

You go to war with the army you have, not the one you want, nor the one you should have developed 30 years ago. We have a societal metaphorical army dependent today on petroleum.

We cannot prepare for an imminent bar fight by currently wishing we had gone to the gym more often, or thinking about how the fight would go if we had gone to the gym more often.

With a petroleum-dependent system already under worldwide strain to deliver food, water, shelter, medicine, and a way of life to 6.6 billion people, increasing by 200K every day, where will the energy come from to replace petroleum as it declines further, without causing sufficiently more resource and energy strain that the system snaps?

It's so hard to get good henchmen these days. Do I have to think of everything?

Pesticides and Weedicides and Fungicides and whatevericides- Organic farmers don't use cides. They get Mexicans to do extra weeding and ladybugs and wood chips and however else organic farmers do it.

Pharmaceuticals- We'll have to pump a barrel of oil out of the ground to make pharmaceuticals. You know oil isn't disappearing. We'll produce 83 million barrels a day instead of 84 million barrels a day.

Antibiotics- Won't work in the future. The bugs got them all figured out.

Cosmetics- That's it, civilization is going to collapse without cosmetics. No hope.

Asphalt- No more side roads. Everything is concrete.

Plastic- What do we need plastic for?

Cars trucks planes and trains- electric

Do you know how your electricity is produced? Electricity is electricity. 100% plug in compatible. No device cares how it got made.

Phosporous- The USA exports 90% of the worlds phosporous. I got mine Jack.

Hydrogen- electrolyze water. The problem with hydrogen cars is that hydrogen can't be stored at STP and it take a huge amount of energy to liquify it or compress it. Chemical plants just produce H2 as they need it.

Nitrogen- distill air like today

Carbon- we are producing too much carbon not too little.

Fresnal lenses, PV panels, windfarms are what we can have in twenty years if you shut your yap and help out instead of get a hard on thinking about shooting all your neighbors and raping their daughters and dogs without any police to stop you and put you away.

The future is solar. There's lots of sunshine.


I haven't escaped from reality. I have a daypass.

The problem with solar and wind is the scope of the problem. Yes, they work, well, some of the time. But the issue is how many we need. Example.

Ontario Canada used 15 billion liters of gasoline a year. If it were possible to make all cars electric, how many nuke plants would be required? It's an easy calcuation and turns out to be 45 nuke plants. How many wind turbines? surprise -- 66,000 of them. How long to build them? 350 years. You people in the States would require 10x that.

Now you see the scope of the problem.

London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

Good point!

Also, once we build all of this stuff, we need to maintain it all. Someone has to have a ready supply of spare parts, and someone with the fancy machinery to install them. We would need to keep our roads paved, in order for the workers and the equipment to be transported to the windmills, or for people to use the battery operated cars. We would need to separate out uranium from increasingly low grade ore. It would not be an easy task.

All the electric freaks don't get it though.
I'm sure they think you can fill your car with a jerry can of electricity or flies through the air like radio waves.

Science will come to the rescue I'm sure, all cars, trucks, trains, ferries, ships and planes will run on co2. We'll pump all the tires up with it and manufacture the tires out of it.
Machinery will run forever, excrete clean water a fart incense.

It is best to dig the well before you are thirsty.

Now after pointing this stuff out, the scope problem that is, I say go for it. Build the turbines, build the solar arrays, build the biofuels reactors, etc. As down the road the people who survive the crash will thank us very much.

The scope problem isn't the technology, the scope problem is a human population problem. It's our sheer numbers that causes the scope problem.

Once the crash clears out 70-90% of the population, the scope problem dissapears. Biofuels won't compete with food production as the land required to feed a much smaller population is not going to compete for land used to make fuels.

If there is any action we can do that will be good in a PO future is preparing now for those who make it through to have better lives.

London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

We don't need to replace all 15 billion liters, and the few billion we actually need, we don't need to replace all at once. I probably used 600 liters of fuel last year, but most of that was because I wanted to get from the mall on one side of town (Conestoga) to the more interesting mall on the other side of town (Fairview).

The only reason I wasted that much is that gas is free :)

When fuel actually costs money, people will use much less.

That is true, but that is not the problem. Don't fall into the trap that if you, and everyone else, reduce your consumption a bit that the problem will go away.

The problem is too many people using too much fuel, period. Reducing our consumption will only put off the inevitable by a few years. The problem of PO is still there. It's not the consumption that is the problem alone, it's the production. It will come to a point where the drop in consumption by people making the decission like you did will not keep up with depletion rates. Because there are more people on the planet every year, and because countries like China and India are progressing so fast, any reduction you do is swamped by more consumption elsewhere.

It is also swamped by less output from producing wells in the near future.

London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

Hi jr,

Thanks and

re: "trap that if you, and everyone else, reduce your consumption a bit that the problem will go away."

It doesn't go away. Conservation does "buy" time. For something, perhaps the "right" things.

Excellent article as usual, Gail.

But ... and I hate to be a nit-picking language nazi, but since most people do the majority of their thinking in language, then the quality of our thoughts is only as good as the quality of our language. And the quality of our analyses will only be as good as the quality of our thoughts.

When you say, "people will come to realize that the most important word in the phrase "economic theory" is the word theory", it serves to further confuse the concept of what "theory" actually means, as if "theory" means the same thing as "conjecture", "just a theory", or "some crazy idea proposed by so-and-so".

I think it's important to further elaborate that when "theory" is the critical part of "economic theory", it means that theories can be proven or disproved with evidence, as once was the cases with the Theory of Gravity, Theory of Electromagnetism, or Theory of Thermodynamics.

Or as with modern economic theories, the current evidence indicates that they are presently joining the ranks of Humorism, or the theory of bodily humors.

I used "theory" in the colloquial sense. I edited the story a bit to make it clearer. Thanks for pointing this out.

Here is an article on a new Portuguese/Scottish wave power initiative.
The data quoted below my comment is to be found at the end of
the article:

The problem is time. Whilst those with solutions are beginning to make
themselves heard, there is still no urgency in the responses they are getting.
The following percentage targets for renewable power generation are frankly, pathetic.
Sadly this comes from a part of the world where the issues are actually
actively on various political agendas including the centralised EU debate.

EU current account Top generators

This year the EU set a target of increasing the share of electricity produced by renewables from 6.5% to 20% by 2020. European commission figures show that only 2% of Britain's energy use came from renewables in 2004. Germany has 200 times as much installed solar power and 10 times as much wind power as Britain.

Wind power set records in 2006, the European Wind Energy Association reported, as 7,588 MW of capacity was installed, a 23% rise on 2005. Germany, the world's wind-power leader, had 20,000MW of installed capacity; Spain was second. The UK has 40% of Europe's wind resource but is only seventh in the world in installed capacity.

Marine power
One of the world's largest tidal projects was recently unveiled off Orkney. A wave hub off the coast of Cornwall this month gained planning approval and could generate electricity for 14,000 homes.

In March the first commercial concentrating solar power plant in Europe was inaugurated in Seville. When completed in 2013 it will produce enough energy for 180,000 homes. According to industry estimates only 20,000 homes in the UK have solar panels.

The EU meets about 4% of its total energy needs with biomass. Its share the energy mix varies from 1.3% in the UK to 29.8% in Latvia.

Note that the words are "capacity". That's the maximum possible output from wind. The REALIZED output is less than 20% of capacity. Wind turbines get their maximum output at 50-55km/h windpeed. As you half the wind speed you 1/8th the output, yes one EIGHTH! That's because windspeed to power ratio is to the 3rd power.

Since the average windspeed is 20-25km/h, then the actual realized output is 1/8 that capacity. And this is 2-3 days per week. The rest of the time the turbines produce nothing (below 15km/h). Holland is now realizing this and in a full year only had one day at full capacity and many days at negative output. They are looking at replacing their entire array of turbines to more wind efficient versions. But the physics is still there. There is only so much energy in wind, and the ratio of the 3rd power applies.

This means the wind cannot whole sale replace more reliable power sources.

London, Ont.
No one is ahead of their time, just the rest of humanity is slow to catch on.

pardo i'm sure someone else read about it. Homeland Security wand its own force of 3000 Special Ops people not accountable to the Military as a "fast Reaction Force." aaaaaThe UN is also wanting its own military force of 200,000,Aircraft,including Nuclear Weapons. Add that to the possible problems.

If we look, we can find lots of military issues.

Climate change is another big issue I didn't touch much on. With the melting of arctic ice, we may be seeing rapid climate change in the not-too-distant future.