Geopolitical Disruptions #1: Theory of Disruptions to Oil & Resource Supply

The peak and gradual decline in world oil production is beginning to spawn a set of geopolitical positive-feedback-loops that seem likely to exacerbate depletion and accelerate the effective rate of decline of world oil production. Rather than isolated incidents, these geopolitical feedback loops are the direct result of geological peaking in oil production. Unlike geologically driven peaking, however, the effective rate of decline caused by geopolitical feedback loops has the potential to continually accelerate. This post will lay out a theory to better understand the impact of this system of geopolitical phenomena.

While geological peaking presents a significant challenge (black line = geologically determined oil production rate), it also acts as a catalyst for a system of geopolitical feedback loops that may catastrophically exacerbate the situation (red line = potential impact of accelerating geopolitical feedback loops on oil production rate)

I've discussed the impact of various types of geopolitical disruptions to oil production previously at The Oil Drum. One of these geopolitical phenomena, the Export Land Model (ELM), has been well developed by TOD members Westexas and Khebab (see their Iron Triangle post and Wikipedia article). While I think that ELM is already proving to be the most significant of the geopolitical factors--especially in the earlier phases of peak oil--I think that it is important to place ELM into the context of a larger set of geopolitical pheonomena. In part, this is the case because of a similarity between the various geopolitical forces at work. In part, it is because these forces tend to act as alternatives to one another, and their full implications cannot be properly understood in isolation.

In this post, the first part in a series, I hope to lay the framework of a theory for better understanding these phenomena, for extrapolating trends, and for predicting their future impact. It is also important to place the problem of geopolitical disruptions in context, and to highlight the danger of dismissing these phenomena as isolated and separate "above ground factors." The next post in this series will review and update the set of geopolitical feedback loops currently in action, looking not only at disruptions to oil production, but also at the larger issue of resource production, including gas, coal, fertilizer, metals, etc. The final post will discuss the interrelationship between the various geopolitical forces at work as well as the potential approaches to "solve" this system of problems.

Building a Theory of Geopolitical Disruptions to Resource Supply

Since this theory is still very much in formation, I'll proceed by asking a series of questions, followed by my best answer at present. I hope that readers will help to both refine these answers, as well as propose additional questions that must be addressed:

1. Are Geology and Geopolitics Separate?

When considering peak oil, it is tempting to look at the issue as a purely a matter of depletion due to geology and production economics. While peak oil certainly begins with the study and understanding of geological depletion, it spawns a set of exacerbating geopolitical factors that are critical to understanding the ultimate scope and impact of peak oil.

Some commentators consider "above ground factors" to be separate, stand-alone phenomena that are neither related to nor driven by the geological peaking of oil production. This is a critical mistake. Rather than being merely isolated phenomena, these geopolitical forces are best viewed as phenomena that would not exist but for geological constraints. Without geological constraints on oil production--specifically without geographical constraints on where remaining viable oil reserves are located--oil producers would produce sufficient oil from geopolitically stable locations. In reality, resources are almost always subject to uneven geographical distribution.

For economic and political reasons, consuming nations tend to produce domestic supplies first. When consuming nations produce oil in foreign nations, regions with geopolitical stability and stable legal systems to protect property interests are favored, so oil from these countries tends to be produced first. As a result, when the world has produced roughly half of its reserves, and when world production approaches peaking, the majority of remaining reserves (especially the majority of economically viable reserves) tend to be located outside consuming countries in the least geopolitically and legally stable regions.

This, roughly, is why "our oil" is increasingly likely to be located "under their sand." As a result, today's increasing geopolitical problems in oil and resource production are a direct result of geological factors combined with picking the low hanging fruit first. If it had made more sense to produce oil from offshore Nigeria, Azerbaijan, or the Arctic first, and save Texas and Alaska oil for later, we would have done that. But because that wasn't what made sense, today's geopolitical problems are a direct result of geography when viewed from a macro perspective. Additionally, this process of explaining why geopolitical problems exist today also demonstrates that it is useful to view geopolitical problems as a global system of phenomena, not as isolated events.

2. Are Geopolitical Disruptions Feedback Loops?

It seems that geopolitical forces act as positive feedback loops. I'll detail the feedback inside and between various geopolitical forces in my next post, but for now I'll outline the general concept: 1) global scarcity of oil, energy, or other resources increases the likelihood of disruption to the supply of that resource (for various reasons that I've discussed before and will outline in more detail in the next post in this series); 2) when these disruptions occur, they further increase the global scarcity of the resource, increasing the effect noted in #1 and creating a positive feedback loop.* For that reason, I call this set of exacerbating factors "geopolitical feedback loops" as they are subject to positive feedback both from their own operation and from the rate of geologically-driven depletion. I think that term is appropriate, but admittedly a bit cumbersome--I'll shorten it to "GFL" for now.

*Some GFLs may not be positive feedback loops--the Export Land Model, for example, is probably a positive feedback loop to the extent that the drop in net exports from one exporter causes global prices to rise enough to make that exporter's export revenues increase despite the decline in net export volume. However, it would be a negative feedback loop if the rise in domestic consumption due to high export revenues (the system's output) has the result of decreasing export revenues (feeding the system's output back into the system in an inverted manner) and thereby causing a decrease in domestic consumption (acting to re-establish equilibrium).

Oil supply scarcity drives geopolitical supply disruptions which, in turn, drives scarcity in a positive feedback loop

3. How Does the "Rate" of Disruption from Geopolitics and Geology Compare?

There are also critical differences between the rate of geological depletion and the potential rate at which geopolitical disruptions cumulatively impact oil supply rates. Unlike depletion, whereby oil production from a given field or set of fields decreases rapidly after peaking before beginning to "tail off" and decrease more slowly (the black line in the graphic above), geopolitical forces may disrupt production catastrophically, or may disrupt production at a rapidly accelerating rate (the red line in the graphic above).

This is not to say that GFLs will have a greater impact than geology--while it is certainly possible that a single geopolitical disruption will dramatically outpace geological depletion over a short time period, geological factors will likely be the main determinant of oil production declines during the initial phases of peak oil. However, depending on our society's ability to mitigate Peak Oil with substitute energy sources and to adapt to a lower energy world, it also seems likely that geopolitical disruptions will eventually overtake depletion as the most significant problem. Because geopolitical disruptions will have a disproportionately greater impact in an environment of increasing oil scarcity, as well as due to factors involved in secondary and tertiary recovery methods, the right half of the global oil production curve will not look like the left--when the impact of GFLs are added to the rate of geological decline, the drop in global oil production may be much faster than generally expected.

4. Along What Timeline Will Geopolitical Disruptions Unfold?

Geological forces do not require an actual peak in global oil or energy production to begin to form positive feedback loops--rather, the catalyst for positive feedback is the onset of diminishing marginal returns in investment in energy, where energy begins to become more expensive in relative terms. While global oil and energy supplies may not have peaked, we have almost certainly crossed the threshold of more expensive energy. Also unlike depletion, geopolitical feedback loops may disrupt production in a region that is still far from geological peaking. For this reason, it is reasonable to expect GFLs to increasingly disrupt global oil production alongside an increase in the scarcity of oil, and before an actual peak in global production. Annecdotal evidence supports this view of the the timing of geopolitical disruptions: while some degree of scarcity of oil has coincided with geopolitical disruptions in the past, increasing scarcity over the past decade has coincided with easily observable increases in geopolitical disruptions. While I think the general issue of timing is obvious, one critical unanswered question remains: how fast will geopolitical disruptions impact overall production rates?

5. Will the Aggregate Effect of Geopolitical Disruptions be Smooth or Unpredictably "Bumpy"?

Unlike geological depletion, geopolitical disruption is uniquely susceptible to "black swan" events--things that simply cannot be predicted. This is problematic because, unlike geological depletion which can be understood as a slow but compounding process, geopolitical disruptions may appear non-existent, but then suddenly exert a huge toll on global production. This makes predictions of future oil production levels even more uncertain than predictions that account for only geological factors, and increased uncertainty in estimating future oil production makes selecting and mobilizing the necessary political will for various mitigation options more difficult.

Some GFLs, such as the Export Land Model, will likely produce fairly smooth and predictable effects. Others, like the increased motivation to target oil production infrastructure, will likely produce relatively smooth aggregate effects, but will be subject to significant and sudden disruptions--for example, if al-Qa'ida successfully destroys the export terminal at Ras Tanura, or if Iran blockaded the Strait of Hormuz. The critical unanswered question here is whether, in aggregate, the impact of GFLs will be predictably smooth (as assumed in the graphic at the top of this post) or unpredictably volatile.

6. Is the System of Geopolitical Feedback Loops Solvable?

Because individual geopolitical disruptions can be "solved", there is a tendency to think of them as separate from geological challenges (and thereby a convenient alternate explanation for those who don't like the implications of geological depletion). Additionally, there is a tendency to think that because individual problems are solvable, the system of geopolitical forces can also be solved as a whole (specifically, solved by the same tool-set of security, military force, etc.). In reality, while the occurrence of individual events and geopolitical disruption in individual regions is highly uncertain (and too complex to predict mathematically), the increasing scarcity of oil and other resources caused by geological factors creates an ever increasing catalyst to geopolitical disruption.

In the face of geological depletion, geopolitical disruption is not a question of if, but a question of where and how fast. If a single geopolitical disruption--say, a militant group attacking a pipeline--can be solved, why can't the larger system also be solved? In theory, it can, but there are systemic problems to solving the larger system. In general, this is because the "solutions" to the individual problems are actually to overwhelm and repress the root cause locally--something which will become increasingly difficult globally.

For example, the Nigerian rebels can, theoretically, be defeated by overwhelming government force, but this does not solve their grievance--that their ethnic group is being oppressed and resources that are rightfully theirs are being appropriated. Rather, it relies on overwhelming military force and expenditure to repress it (and, it should be noted, this "solutions" is being discussed theoretically, as the massive military force and expenditure by Nigeria's government at present is failing miserably to repress rebel attacks on oil infrastructure). It seems, at least to me, far more likely that the world can concentrate resources to temporarily repress geopolitical flare-ups regionally, especially in the earlier phases of peak oil. However, if global resources are spread thin, it is impossible to address every trouble spot simultaneously. Because of this, it seems unlikely that there would be enough pressure at individual points to repress disruptions across the entire system.

Finally, while many geopolitical problems can be repressed by favoring one side in a dispute as leverage against the other (the Exploitation Model), it is often not fundamentally possible to actually resolve the issue by making all parties happy (thereby eliminating the root cause of the geopolitical disturbance) because the minimum demands of opposing groups are often mutually exclusive. I've written about this problem of Mutually Exclusive Overlap before, and I think that it makes the global system of geopolitical feedback loops an inevitability. However, while I think that the broader system is not "solvable," I do think that it is possible to buffer their effect, a topic I will discuss in a later post.

7. Is Price the Sole Catalyst of Geopolitical Disruptions?

While demand destruction and economic troubles may grant a temporary reprieve from increasing geopolitical tensions (because they may temporarily reduce the underlying catalyst of scarcity), the steady march of resource depletion will eventually catch up and cause geopolitical tensions to escalate again unless a truly economical, scalable substitute for fossil fuels is built out sufficient to negate depletion and accommodate continued economic and population growth. In that sense, if peak oil is not a problem for humanity, neither will we suffer the exacerbating effects of geopolitical feedback loops. However, to the extent that peak oil presents a serious problem, it will be increasingly exacerbated by geopolitics.

Additionally, demand destruction is particularly inefficient at buffering these geopolitical feedback loops because the lowest value consumption tends to be "destroyed" first. In a demand destruction scenario, when consumers are forced to reduce consumption out of economic necessity, they will choose to first eliminate the consumption that is least necessary to the maintenance of their quality of life. As a result, as demand destruction gradually decreases consumption, the consumption that remains is, by process of elimination, increasingly inelastic. For this reason, demand destruction actually exacerbates the positive-feedback nature of these geopolitical phenomena.

A pipeline bombing, cartel action, or rise in domestic consumption that removes 500,000 barrels of oil per day from the international market exerts far more leverage on a future United States that consumes only 10 million barrels (due to demand destruction) per day of oil than it does on today's United States that consumes roughly 20 million barrels per day. However, if this same future United States only consumes 10 million barrels per day of oil due to the development of economically viable substitutes and voluntary efficiency measures, then this would not be the case. I'll address this point in more detail in my discussion on buffering GFLs in a later post. In general, if scarcity is the underlying catalyst to geopolitical disruptions, I think that price is not the best indicator of that scarcity--rather, price of a barrel of oil as a percentage of purchasing power parity may be more appropriate.

8. Are Geopolitical Feedback Loops "Scale Free"?

A scale free system (aka a fractal) is one that exhibits the same behavior at all levels. Do GFLs operate as a scale free system? Assuming that, at a point in the future where total oil production is rapidly declining, there would be a world wide catalyst for geopolitical disruption to oil supplies, would it also be true that a region where oil production is rapidly declining will see a regional catalyst before world supply begins to decline? The answer is still unclear. Mexico, for example, is already well beyond its peak in oil production--ahead of the global process of peaking. Does this mean that internal pressures in Mexico are greater than elsewhere, that the driving forces behind geopolitical feedback loops are greater than elsewhere, or that the attacks on Mexico's gas pipelines can be attributed to GFLs being more advanced in Mexico than elsewhere? We don't know.

In theory, it seems reasonable to suggest that a country experiencing the problems with its own early peak may experience greater geopolitical pressures than others, but it is far from clear that this is the case in Mexico where oil export revenues are still rising, and where there are ample alternative explanations for the gas pipeline attacks. Additionally, other countries where production peaked well before global production (e.g. the US, Norway, UK, though arguably not Indonesia) haven't experienced a localized rise in geopolitical tensions. There are many complicating factors (especially when viewing the US and UK and their position on the world stage), but this is a possibility to keep track of as some regions progress past peak before others.

9. How Should Quantitative Data be Integrated in this Model?

One criticism of this model of geopolitical feedback loops is, quite understandably, its lack of hard, quantitative data at its base. In one sense, the subject matter is fundamentally less suitable to quantitative, data-driven analysis than the core issue of geological depletion. Some exceptions stand out--the Export Land Model, mentioned above, is a prime example of a geopolitical feedback loop that is well suited to data-driven analysis.

Even ELM, however, presents problems for data-driven analysis. For example, when an exporting state that currently subsidizes domestic fuel prices decides to cut that subsidy when export revenues begin to decline, or if a state decides to buy domestic political support by using some of its export revenues to boost subsidies, how do we integrate the impact of this fundamentally political maneuver with the more pure analysis of net export declines? Similarly, it is quite challenging to gather accurate data of nationalist sentiment (and the degree to which this sentiment may lead to violence), the ability to mobilize political will to conserve resources for future generations, the degree to which resources motivated a military "adventure"--all of these demonstrate the challenge of bringing data-driven analysis to inherently "fuzzy" topics.

Perhaps the most important question is the degree of importance of data-driven analysis to this topic. Will the quest for mathematical analysis of these topics provide more predictive power for a given amount of effort, or will it create a misleading appearance of accuracy and predictive ability while actually creating faulty conclusions? If quantitative analysis is appropriate here, how, specifically, should it be carried out? This question, in particular, is one where I hope the many TOD readers with experience in this area will weigh in.

I plan to begin to introduce some quantitative data in the next post in this series by attempting to tally the amount of production currently shut-in or otherwise disrupted due to the various categories of GFLs around the world. I expect it will be difficult to accurately track this data over time (at least when compared with our ability to track actual oil production), but it seems like the best place to start with quantitative analysis, and may provide some insight into the rate and timing of geopolitical impacts on oil production.

10. Is the Potential for Financial Crash a Geopolitical Feedback Loop?

It's purely artificial to separate the financial impact of peak oil from the geopolitical impact--in fact, there are broad areas of overlap between the realm of finance or macroeconomics with geopolitics. How should these issues be integrated into this model, if at all? It is unclear to me whether financial markets are an exacerbating or mitigating factor in the context of broader geopolitical disruptions.

In one sense, the financial turmoil caused by high oil prices makes it more difficult to raise capital necessary to exploit new technologies, develop substitutes for oil, and to produce more economically challenging oil reserves. Likewise, price volatility and peak oil combine to exacerbate both financial and geopolitical issues. However, it can also be argued that financial turmoil mitigates the geopolitical problems of peak oil by destroying demand and reducing scarcity (though, as mentioned above, this is a double edged sword because it may increase inelasticity of the remaining demand).

I hope that readers can propose the best way to integrate models and predictions of financial turmoil (such as Gail the Actuary's recent financial market predictions) with this model of geopolitical feedback loops.


I've recently finished the book "We Think" by Charles Leadbeater. This book is an outstanding discussion of the advantages and pitfalls of collaborative innovation. I'm not proposing that the theoretical framework I'm setting forth in this and later posts is in any way gospel truth--it is an initial effort to tackle a very complex system of problems, and certainly needs further development. The Oil Drum is, in many ways, an ideal example of a "we-think" collaborative environment, and I hope that the amazing breadth and depth of knowledge of TOD readers will help to further develop this theory. Developing a better understanding of the impact of a system of geopolitical feedback loops in resource production is a critical first step in both improving our ability to predict future energy and resource supplies, and in understanding how to best act to mitigate resulting problems. Hopefully my answers to the above questions begin to lay out a foundation for a broad theory of geopolitical disruption to resource supply. In the next post I will look at several discrete geopolitical phenomena within this analytical framework, but for now my hope is to start a discussion of the overarching issues raised in this post.

Debt is a bomb. We can have a Bear Stearns event that ends US ability to borrow to buy oil. That would cut access to oil by 70% overnight.

What Debt?

You mean like this:

US Debt vs gdp

Based on mortgages of inflated house values which have gone up like this:

US household values (inflation adjusted)

Surely there is no need to be worried :)

We can have a Bear Stearns event that ends US ability to borrow to buy oil.

Actually no, you can't. You see, the US is in the unique position that oil is priced and sold in US dollars. While the Saudis continue to insist on this, there is no way that US access to oil will be compromised.

You may now understand why US politicians are particularly fond of the Saudi royal family, and it may perhaps go somewhat towards explaining why 15 of the 19 9/11 terrorists were Saudi.

There were alot more than 19 terrorists involved in 9/11 and they were mostly not Saudi (unless Cheney is an old Arab name?)

Please correct "Diruptions" in the title

Fixed--thanks. You think you get all the typos and miss the most obvious...

I think another positive feedback loop leading to rapid supply decline is that there is a maximum price that our industrial economy can tolerate. The effect is somewhat masked by all currencies being fiat, but if demand destruction sets in with oil at say. $150 /barrel, then the maximum marginal cost of production can not exceed $150/barrel for very long, before demand falls to the point where supply and demand balance again . With the real costs of new production rising very rapidly (are they $50 or $80 /barrel yet? Deep sea, tar sands, remote areas are very expensive in infrastructure and trained personnel) then there is a law of receding horizons. These fields will not be developed. Supply will shrink more or less in tandem with global demand as economies shrink. Expensive oil will stay in the ground, for ever.

What is the most expensive oil that the world can afford to pump (in 2008 dollars) ? I don't know.

I think that our industrial economy can tolerate very high oil prices for select functions, and much lower prices for more discretionary functions. Basically, the price elasticity of demand is quite different for different functions--I think we can't maintain our present levels of consumption at $200/barrel oil, but as oil supplies gradually decline, I don't see any reason why the world won't be happy to pay $500/barrel in a future where only 40 million barrels per day is produced. If we can bring on line adequate substitutes, then I think your general point is right--I don't think the industrial economy can afford $500/barrel for 85 million barrels per day or its equivalent.

However, as a catalyst for geopolitical feedback loops, price isn't the sole indicator of scarcity--if price is lower because our ability to pay is less, the scarcity of oil, and thereby the degree that this scarcity drives geopolitical disruptions, can still be much, much higher...

Hi Jeff Great article.

"I don't think the industrial economy can afford $500/barrel for 85 million barrels per day or its equivalent."

But the world is NOT going to be paying $500 * 85 million because of subsidies and low prices in oil exporting countries.

Also, IMO, we are looking at a smaller group of consumers paying a higher unit price for a smaller volume of oil--as forced energy conservation moves up the food chain.

Good article BTW. I don't have much time today. I'm on the second leg of New York and Chicago speaking gigs this week. I presented our export work to a large investment firm in NYC on Tuesday, and I just sent them the link to this article.

I have suggested Phase One & Phase Two export declines. In Phase One, the cash flow from export sales increases--even as export volumes fall--because oil prices are going up faster than volume declines. In Phase Two, rising oil prices can't fully offset the decline in export volumes.

BTW, would NIgeria be a good example of what happens when an exporter tries to maximize exports, without meeting domestic demand?

I think that Nigeria is a great example of two complementary feedback loops at work. Right now, due to graft and ethnic conflict, Nigerian leaders are essentially stripping the country of their oil wealth to enrich themselves, while their people stay miserably poor. This is driving the militant attacks on oil infrastructure, which is keeping a significant quantity of oil of the global export market. ELM isn't a huge factor in Nigeria compared to other like situated exporters. However, IF the country got its at together, distributed the oil wealth to the people in an appropriate manner, resolved the ethnic disputes, etc., then that geopolitical disruption *could* be largely solved. The problem here is that it would essentially be replaced by a new set of geopolitical feedback loops--first ELM as rising median wealth leads to rising domestic consumption, and probably also by a far-sighted desire to conserve resources for when they will be more valuable. The net effect will be that the oil freed up from militia attacks still won't make it to the world export market, at least not over the long haul. More on this notion of complementary feedback loops in a later post...

Exactly the interaction of the feedback loops shows that they almost always work to prevent things from getting better.

A simple example a person drives a Hummer but makes the decision that if Gasoline costs more than five dollars a gallon they will switch to a more economical car. Several people decide that as gasoline goes over four dollars a gallon the will switch to a more economical car. Since the second group acts first it delays the time when the first person driving a Hummer engages in conservation simply because he had a higher pain threshold.

Somehow these sorts of contradictions seem to be related to a sort of maximum power principal in the sense that the underlying problem is that all parties wish to maximize their lifestyles almost always by increasing consumption or delaying a decrease. No one wants to be the first to change and everyone is willing to take advantage of the first people to change. A re-balancing or shift in the consumption invariably does not change the overall consumption since the entire system remains at maximum power. The export land vs king model is a perfect example.

As long as we fail to recognize that without serious intervention the natural result is that the collective system operates at maximum power we will be unable to really make changes.

In my opinion what we call wealth and lifestyles or a good life almost always is directly related to a energy quality measure of some form. As long as we desire energy quality transformations we are stuck
in a maximum power rut if you will.

Its interesting that some of our greatest works music, books and computers are objects that break this direct relationship between energy and desirability. Art in all its forms seems to be the only way out.
However we often debase arts such as a beautiful dress design by coupling it with mass production which links the beauty of art with the material needs of a mass produced quality transformation.

This shows that mass production itself is far more dangerous then we realize since it devalues a work of art and causes it to be translated into a replicative maximum power problem.

Certainly at some levels it makes sense to mass produce common objects but our society has no concept of the need to balance the ability of art to satiate our desire for a good life with its ability if kept within reason to limit and treasure the material manifestations of art by not mass producing it.

A great example is fine china tableware which has lost all value via mass production. It used to be hand painted and crafted art. Not anymore.

A great example is fine china tableware which has lost all value via mass production. It used to be hand painted and crafted art.

No it hasn't "lost all value". It may have become a lot lower in price but it remains the same fine china tableware with the same (non-monetary) value. As in knowing the price of everything and the value of nothing!

Very much the same fallacy as Simmons points out about oil - that because its price is only £1xx it fails to be properly valued as more like the $2xxx + that it is really worth, too valuable for mere burning and transport.

I disagree in the past people handed their fine china down from one generation to the next not only did it have monetary value but it picked up tremendous sentimental value. Or it was presented as a wedding gift and this invoked feelings every time it was used etc.

It was not a price issue although price/cost and limited availability ensured that china could be used as this sort of gift.

Mass production destroys these concepts. Look at the McMansion craze in housing. Large homes used to be custom homes built for people with real wealth and generally speaking they where works of art ( Often ugly but )

The McMansion destroyed this concept and created the middle class mansion instead that probably will decay rapidly because of its cheap construction.

So all value has been lost.

Another thing one reason that ELP (Economize Localize Produce) is so attractive is that local production naturally ensures that what is produced is resource constrained at some level. This constraint is really about getting back to making works of art not mass produced garbage. And I'm not talking about the physical serviceability of mass produced work such such a china vs hand made china. I'm talking about this concept of treasuring and in a sense respecting the giving a long life to something every time we change the value of the raw materials by applying energy and creative thinking.

Every time a object no matter how mundane is made by hand you have the chance for human inspiration to create something new and different. Mass production destroys this. What we treasure is this embodiment of human thought and skill in a object and with that its treasured art and more often a unique capturing of a thought whim or even more important concept or breakthrough.

Localization and by default constrained and limited production brings this back.

I agree there is some validity in your reply. But it is a largely subjective thing and depends on the person. And meanwhile the teacups are still teacups that hold the same amount of tea just as solidly.

A person such as myself recognises a thing for its beauty and usefulness. I don't care how cheap it was or how mass-produced.

I'd like to cite an example. I have 2 Bechstein model 5 (= model 10) pianos. The market price of these is relatively low because ignorant people (= the vast majority) assume that non-overstrung pianos are inferior. But I myself just recognised outstanding, brilliantly-designed pianos for what they were - it is so rare to find pianos that have good uniform tone etc., let alone with a smaller size too. Only later via the internet did I learn that expert others with the required discernment of quality recognise these as some of the best pianos ever made (and in my experience there are far more Bechstein 5s/10s than any other model of any make, a reflection of that fact). Personally I don't give a fig that the ignorant assume these to be less valuable, more fool them. By the way, quality pianos have been in great part mass-produced for the past 150 years, big deal. The higher the quality the masser the production (because huge research and expertise is involved)!

Good observations. I've thought about a related concept in regards to digital reproduction of art.

In the recent past the (audio) quality of recorded music would decline over time, and there was little that could be done about it. Now with digital storage, it can be copied and what's more, distributed around the world in an identical state. Does it lose value through this, or gain it?

As a musician, I'm socially dissuaded from investing all my time in songwriting/performing, because so much music is available due to modern distribution channels (internet/tv music channels/radio). I think my inclination to write/perform comes - to a degree - from the wish to acquire social capital. But since there's now a global market to compete with, I'm forced more into the (more detrimental) aquisition of financial capital instead.

I have often thought how much difference it would make to social outcomes of musicians if music could not be recorded or amplified. Performance would be limited to small groups. The same applies to many art forms.

To some extent this issue is not a matter of recording but access to distribution channels. If you think about it the real problem is a performing art needs an audience. The reason I bring this up is obviously there is a imbalance in access to customers between the small time musician that the industry. Internet radio is beginning to close this gap. But the key point is that every time you don't perform we lose the chance for a famous song to be created. So the main point of loosing the chance for human inspiration stands. Only when people are actively involved in a process esp the arts can new art be created. The recording industry destroys a lot of this. Look at Rap and indeed most of our new musical forms they where all developed by street musicians or bar bands.

I've noticed in bars the tendency to have DJ's instead of live music for example.

Back to the interesting problem of high fidelity recording. All I can do is compare it to a computer program programs can be perfectly copied but we have a vibrant open source community so perfect copying works to our advantage. The big difference I see is the with programs we can choose to send the source which allows people to apply their own inspiration to a original work. I'd say that the problem with music in a world where it can be perfectly copied is that you lack a real format for sending music out in a form that allows it to be edited and modified by others.

So what probably needs to happen is that music should actually be send in the form of a electronic notes. Voice removed editable tracks etc. The voice format itself probably needs some sort of word recognition boundary so that its also editable. You can see that I'm suggesting that the problem is music is not being distributed in a form that allows others to perform the work and add their own inspiration. Karaoke is a small example of this and it keeps older songs alive and well.

In general this problem is true for all of the performing arts to overcome the problems of digital reproduction and its destruction of human inspiration they need to follow the open source model and release the ability to perform and edit the work to create new works. Thus the underlying problem is not high fidelity reproduction but having closed the doors to allow works to be adapted.

I see what you're getting at, but don't really equate the creation/performance of music with software development (I do both). Maybe it's a personal thing, and although both are creative, I consider software development a logical, rationalised and designed process where there is little room for emotion, whereas music (for me anyway) is an emotional outpouring during which if the rational mind intervenes too much, the music suffers.

I have thought about open source music before though, and it seems like a good idea, although most musicians I've met are quite precious about ownership issues - perhaps that's because they tend to earn less than software developers?

I still think I'd prefer a less globalised music market, on the other hand I'm certainly glad to have had access to such an array of choice and influence... so maybe it's just jealousy!

I suppose employing DJs for entertainment rather than instrumentalists is analogous to employing a man and a plough rather than and army of people with spades. In both cases cheap energy/technology is leveraged, and forms a replacement for people.

Its a interesting problem and exposes the flaws of generalizations perfectly. But by using the basic concept of what your trying to achieve which is to inject and distribute your own musical inspirations I think you can frame the problem correctly. As is often the case the biggest problem is identifying the problem once its identified then solutions can be tried. Personally I think the entire music industry is seriously sick sort of like the Software industry which is controlled by a few major players. The open source movement was lucky to succeed. I think the music industry needs the same sort of lucky/stealth change that breaks the strangle hold of the recording studios. Considering the immense wealth offered to successful musicians it not surprising that they are part of the problem. The film/acting industry suffers from similar dynamics.

As we run out of Natural Gas to fire our air conditioners maybe people will return to live music and this will break up the recording cartel.

I dunno all I do know is that on average the poorer communities are far more musical then the wealthy ones.

I do know from my own life that cool music was far more prevalent when I was younger then it is today. Although I don't like rap in general some really good songs where created early on now its been commercialized.

Its interesting that the state of music at any point in time seems to be very reflective of the social and economic conditions. I'm not sure how to interpret this but music somehow acts as sort of a indicator of our social state. Not just rich and poor but also it embodies our happy/sad concepts in a collective way.
Country music for example..

I think we have made a mistake by not really listening to our own music to understand our societies.

I think you're right about music reflecting society, but also think music (and art generally) has some emotional power to help change societies to some degree too. At the moment I'll admit there's little evidence of this.

Appealing to peoples emotions has often been useful for leaders in difficult times - sometimes notoriously. If we can harness these powers positively on a more local level - as global/national institutions reduce in significance, it might help provide at least a little help in getting our societies through what is coming.

it remains the same fine china tableware with the same (non-monetary) value. As in knowing the price of everything and the value of nothing!

In a perfect world, I agree with you. As the main character in "The Forgotten Door" says, "How can a thing have two values?" But in a market economy, you are dreaming dreamy dreams.


The market economy is only relevant to the price, not to the differing values it has to different people. The market makes not the slightest difference to the sound etc of my piano. Or the elegance of a fine design. The high prices of Rolex watches do not make them any less ugly, let alone more attractive than my £20 highly-accurate and reliable Lorus which is actually elegant unlike any Rolex I've seen.

I am reminded of the bidders one encounters on ebay, whom I call loonies. They have no concept of how much it is worth to themselves. For instance I happen to want a second widget w to go with my present widget w, which works well with my already-installed system. So a w is worth twice for me what it is for others. But when the looney sees that I bid 80 for it he then "reasons" that it must be worth at least 85 for him. And so on ad idioticum to his """winning""" the auction at whatever idiotic cost it takes. There's a way of beating these loonies but that's a trade secret not to be given away here.

Unfortunately most of the loonies bidding on oil futures are working to a presumption that the price is "high" at present and will come down even in the longterm.

Marketing junk aside i.e Rolex etc. What one pays for if you choose a different economic model is to purchase products that are built using continuous input of human inspiration or purchase copies of a single design session. If you choose products that have continuous input then you probably will pay a slightly higher price then those that don't. Hand made really means a unified design and manufacturing process i.e the designers are the builders and also directly responsible to the customers.

No marketing depts no sales no managers etc etc just people building something beautiful because they love to built it and making a decent living. As the costs of mass production, marketing and distribution increase I think we will find that moving back to a simpler approach makes sense and then we will discover how much we lost by cutting the designers out of the manufacturing process.

Just to bring this back slightly on track :)

We have the same problems in politics the voters have been isolated from the governments.
Democracy works very well up to a certain threshold but the process is readily corruptible and turned into a marketing campaign when the voters lose personal contact with their representatives.

Or system of laws tends to work a lot better when its derived from case law not the ones congress imposes since its far less disconnected from the populace. I'd lave to see the courts really be able to rule on tax laws based on case history for example the IRS would lose more often then not.

This disconnect between the rulers and the ruled is what allows these political problems to develop.

For example take the Georgia conflict I'm sure that if all the citizens of the countries involved were allowed to hammer out a agreement then we would not have these sorts of problems. Physically thats too many people to get together but a representative approach of 1:100 or 1:1000 is readily doable and these people could reach a binding agreement probably in a few weeks at worst.

You will notice that no modern form of government allows people to take this sort of direct approach for solving major problems this is by design.

Hi Jeff - ever read 'The Work of Art in the Age of Mechanical Reproduction' by Walter Benjamin? He was onto similar ideas about the value of hand-crafted art objects vs. mass-produced.

I haven't, but I'll add it to my (unfortunately, already too long) reading list... thanks for the recommendation

The situation in Nigeria is quite a bit more complicated than either of you seem to imply. While circuits of social and economic regress are most certainly tied to the (lack of) distribution of oil wealth, these circuits of regress can be traced back to years of colonial rule, divide and conquer techniques of social control, and years of dictatorial rule which further divided the land and its people. There is also a federal police system, the ethnic composition of which is far from representative of the Nigerian population, and over(t)ly aggressive police responses to relatively minor protests have further entrenched ethnic divisions and incited ethnic violence. But getting back to the question of oil and the distribution of oil wealth... Even IF a 'fair' distribution was to exist, there is the simple fact that oil production and all that comes with it (flaring of gases, the laying of pipelines through delicate wetlands, leaks both small and large - both unintentional and intentional) have destroyed more traditional ways of life, like fishing and agriculture. Significant populations have been displaced so that production facilities can be located in an optimal site. These are the types of disruptions that an 'equitable' dispersion of oil wealth simply cannot overcome. My simple point is that any solution in Nigeria must be more comprehensive than an enforcement of the distribution of wealth. For a solution to be viable it must break all of the circuits of regress, not simply those related to the distribution of oil revenue. I could go on and on about this topic, but fear that "the length of this document will guard it well against the risk of being read" (Winston Churchill). I encourage anyone interested in learning more about these feedback loops to email me directly at dohne[at]

But the population of Nigeria is 124 million.
Its oil production is about 2.3 mbpd any way you divide that in to 124 million to come up with a reasonable oil usage level for a decent living standard leaves no oil for export.

There is no humane solution to the Nigeria's problems.

I agree, there is a danger in oversimplifying the problem set in Nigeria. I think that there are broad and relatively simple trends, but they interact with numerous much more complex issues in often unforeseeable ways. In the end, though, I think this reinforces the strength of the simpler trends (such as notions of "nationalism," "corruption," "privateering," etc.), and make me think the complexity makes the situation even less likely to be resolved. Here's an article that I wrote for The Oil Drum focusing specifically on Nigeria and many (though not all) of these complexities you mention:

Nigeria: Infrastructure Firestorm

From the big picture the best way to understand politics in oil is to realize that if you expand what I said for Nigeria and assume that the populations of the worlds exporting nations where allowed to have a lifestyle close to that of the US with oil usage say half or a third of that in the US per capita we would have seen peak exports a long time ago at a much lower level then today. We basically would have never had the decades of large oil imports into the US and Europe in a equitable world.

The last 40 years where a mirage created by oppressive regimes stripping the wealth of their countries.
This holds pretty much across the board for all commodities even food and timber in the US.

We have run the world as one big leveraged buyout and asset stripped the hell out of it with no intention of ever repaying the debt.

Yes-the relevant metric is oil exports x oil price.

The World GDP is on the order of $65.95 trillion /year or $180 billion /day. At $500 / barrel the 85 million barrels a day of oil would cost $42 billion / day, or about 1/4 of the world GDP. That level is not possible/sustainable in out present global economy.

First of all, only about 45 mbpd is exported or sold. The rest is consumed domestically. Secondly, when oil is trading at $500/barrel, a lot less than
45 mbpd will be exported.

So if exports are cut in half and the price of oil is $500/barrel, you get:
$500 * 22,000,000 = $11 billion per day.

The average price of oil so far this year is $115. So we are spending about
$5.175 billion per day ($115 * 45,000,000 bpd). We have some demand destruction in US & Europe but no economic collapse so far in any country of consequence. So I think spending $11 billion a day is probably sustainable.

Well obviously exports would go to 500 before oil production was halved.
We have had significant price increases with no real change in production to date.

I'd say we would see 500 dollar oil with a 5% decline in production so I think the orginal
estimate is close to correct.

However I think a big mistake is being made the money does not flow into oil producing nations and disappear its spent on goods and services. Eventually it flows back into the economy as new production of something.

The only real change is that wealth concentration in the producing countries will increase and the people who are exchanging cash for goods change nationality a bit and geographical location.

A example of this type of flow is government taxation it takes money from the public and generally redistributes it to friends and family of the government in power. Its output or efficiency is very low.

For all intents and purposes the net result is a doubling of the tax rate on the oil consumer since 25% of his output is now redirected to what effectively the same as a government tax. It simply reduces his consumption by other goods and services by about 25%.

Its a punishing tax but its possible to handle this type of burden its not a lot different from the tax loads found in the northern European countries. Since your not getting any social services in return obviously it will probably cause the formation of a large poor class. But this same poor class will have a lot lower energy consumption foot print while it will have a high productivity as slave workers for producing the needed goods and services to get the oil in the first place.

So the only real change is the formation of a impoverished class willing to produce goods and services in exchange for a lot less energy in this case probably a 10% or more reduction in energy footprint.

More likely is that the lowest classes will both grow and be forced to cut their energy footprint by more like 50%.

Its only when we go past this amount that further price increases become dangerous to the status quo.
The US had a large impoverished class right up through the 1970's and I'd argue even into the 1980's so its only been about 20 years that this class has really shrunk to the difficult to employ.

Given that we are talking about the current lowest classes falling into abject poverty or becoming employable and classes above this that are capable of working falling into poverty at least in the since of a serious reduction in the goods and services they can purchase I don't see a real problem with oil going to 500 and destroying the economy.

As we see time and again the days of the middle class are numbered in a resource constrained world but the end of the American middle class is not the end of the world. In fact even without peak oil we would probably have had this sort of transition anyway via globalization peak oil simply changes the names of some of the players who will be the center of wealth concentration.

Certainly at some point after this you cannot continue to impoverish large parts of your population and keep production up to keep the oil flowing at some point if falls apart. However thats probably a lot higher then 500 dollar oil more like 800 dollar oil where real conservation results in demand dropping to keep prices stable. The problem is that as oil passes 500 dollar a barrel a lot more people will be reduced to subsistence living and no longer have value even as slave labor they simply are not worth using even to produce cheap goods for export in exchange for oil. Labor at this point is ample shortages of other material limit production esp oil itself.

So a stable response to oil up to 500 dollars is possible via continued destruction of the middle class its only when potential labor builds to the point that its not in limited supply that you run into trouble.
At this point a lot of people have no value not even as slaves since they are worth less than the food and energy they would consume. At that point a lot of people would have less value than a tank of gasoline.

Thats when you finally have real problems. Poorer countries that are closer to this brink will probably have regions fall into chaos earlier. But even then we probably will see divisions made pushing these subsistence farmers onto the poorest lands. In the western countries probably as criminals etc.

So even at this point that many would consider the end whats really happening is these people that now have no use are herded to the poorest regions of the countries to live or die.

We have a long long way to fall before the price of oil really forces us to change. All that probably will happen is simply larger and larger groups will be isolated and effectively allowed to starve.

Well obviously exports would go to 500 before oil production was halved.
We have had significant price increases with no real change in production to date.

I was talking about halving of exports and not production.
While production may be on a plateau since 2005, exports have declined by around 5% since 2005. I think price is driven by exports and not production.

I'd say we would see 500 dollar oil with a 5% decline in production so I think the orginal
estimate is close to correct.

Are you sure? We could get a 5% decline in production by the end
of 2011. Do you think oil will be $500/barrel by then?

Sorry for mixing defs. I expect a real 5% drop in production to have a bigger impact on exports given the current 5% drop in exports I'd say a 5% drop in production will cut exports even more say 5-10%. Also of course the production drop won't just be in exporting countries in fact I think the US is going to or is already seeing a sharp drop in production thins drop in internal production will have to be met by increasing imports so as you see when real production begins to drop things get messy since the largest drops should be in the politically stable producing areas. In short import demand goes up. So this is why I said a 5% real drop in production is probably 500 a dollar barrel oil. I suspect we are in broad agreement on this.
Also added on top is a projection that starting this year and going forward we will see real declines in light sweet production which has a larger impact on price then heavy sour production. Also included is increasing problem from more expensive NG and its tie to heavy sour. And finally export land moves on.

And the last factor demand reduction to date seems to be driven by a slowing of growth and eventually a slight decline. However there is a huge difference between this and decline via a real declining economy.
Historically and posted in this thread demand drops greater then 2% will probably begin to hit inelastic demand. Also of course for political reasons we can be pretty sure that OPEC will be willing to cut production if they think they need too regardless of decline.

So second part of your question answer 500 dollar oil by 2011 ?
Yes I believe once you get a 5% drop in production we will see 500 dollar oil the price response is non-linear and secondary factors like I mentioned will serve to magnify the effect.

Just to lay it out.

I think we will see 160-200 dollar oil by December with oil near 300 by the end of 2009. 400 by the end of 2010 and 500 by 2011. The range of changes is +/- 50 dollars or so. So we could end with 450 dollar oil in 2010 as prices cross about 250 or so I don't think it really matters since we will be in the inelastic demand period and prices will be going up based more on economic destruction. However at least till 2010-2011 the losers are going to be the poorest countries which collectively don't use a lot of oil.
However they will try and hang in as long as possible thus ensuring strong price increases.
Also I feel that all currencies will begin to slide in value vs oil. Over the very short term I expect OPEC to pull back on production for a number of reasons including real production declines to force oil back over 140 for sure regardless of the economic consequences to importing nations. And last but not least this political feedback problem will have a impact.

If you just assume prices are increasing by 25% every 12 months and take 100 in 2007 as the base you get this.

2007 100
2008 125
2009 156
2010 195
2011 243

What I'm basically assuming is a increase of about 50% every 12 months.

2007 100
2008 150
2009 225
2010 338
2011 507

But its shifted slightly with stronger increases in 2009-2010 is inelastic demand is hit but the economies are basically still functioning and in slow 1-2% declines with oil usage demand at say 0.2-0.5% with at least a 1-2% decline in production each year ending 2011 down about 5%.

Once oil crosses 500 a barrel is when we enter the unknown. Needless to say I'm planning on being wherever I will be for a long time by 2011 at the latest.

One thing people don't do is explain exactly how demand destruction takes place. All my scenarios show that we won't see significant demand destruction int the wealthier countries until after all consumers default on their long term debts. The one exception was the crash of the housing markets. This precedes the serious waves of debt defaults and causes a real contraction in demand. But from basically now going forward we will see demand remain relatively strong but a tidal wave of debt defaults. This will take at least 2-3 years to accomplish simply because of shear inertia. Coupled with this will a steady decline in incomes.

Only once we get past this debt defaulting phase do we really reach the point that further increases in oil prices cannot be handled since they result in consumers exceeding their budgets for the basics food,rent,transportation etc.

This is in the 2011 time frame and coincides with 500 dollar a barrel oil and about 8-10 dollar a gallon gasoline in the US. I certainly see serious problems in the banking industry as far as consumer debt and commercial real estate goes. Also of course discretionary spending will take a nose dive. But you still have not gotten into the region that people are having real problems with food clothing and shelter.

Lets assume your a couple and you make 15k a year each with a total income of 30k.
Assume together you drive 40 mile a day five days a week and assume your car gets 20mpg.

Thats ten gallons of gas a week or so at 10 dollars a gallon that 100 dollars a week or 400 a month.
Lets say your take home income is 2000 a month. You still have 1600.
Assume food is 600 a month that leaves 1000 assume rent is 800 a month that leaves 200 dollars.
Assume car payment is 100 dollars this leaves 100 to spend.

Now this is a pretty low wage like 8 dollars and hour and even with that you could tweak the calculation to squeeze out some money rent you go lower say 500 a month for 1 bedroom. Since this is the minimum wage you can live anywhere and your income would not change. Given the large number of homes available. Rental expenses could be as low as 300 a month. A quick search on shows 1 bedroom apts available for 260-306.

These are people at what is now the lowest rung wage wise and I've not even added in actual conservation like using a motorcycle or more fuel efficient car etc into the equation add in some of that and these people can survive even with gasoline at 10 dollars a gallon. If you cannot come up with a good way to cause real demand destruction even with gasoline at 10 dollars a gallon for the poorest rung of society we can be pretty sure that demand will remain fairly inelastic for more affluent members. Just one step higher say at 15 dollars and hour and 10 dollars a gallon gasoline can be dealt with easily by moving to a existing and ok 1000 dollar a month 2 bedroom apt. 15 dollars a hour is about 30k.

I've done this sort of post a number of times and outside of the obvious that most people will ditch long term debt in favor of cheaper rental living and maybe some conservation the demand remains strong.

On a slightly bigger scale what we will see is workers with reasonable skills go from say 60k a year to 30k a year for the same job. Some with unneeded skills go from 60k to 15k a year but even with this drastic cut in wages we still have more then enough money to buy gasoline you just can't own a house at anything close to todays prices. Also of course because of gasoline costs it smarter to be more mobile via renting since it pays to move close to work with gas at 10 dollars a gallon. This is negated somewhat by the assumption of supporting two incomes with the potential for the job sites to be distant from each other.

But no matter how you do the math it seems demand for 10 dollar a gallon gasoline remains fairly strong.

I incline to agree with most of that long post of Memmel [above the even longer one he's just now put above]. But I suspect there may be some flies in the ointment, even apart from the likelihood of more specific energy crunch problems (electricity etc) intervening harshly before this story reaches its end.

My doubt is about the notion that the end of the middle class is not the end of the world. The problem is that within that middle class there are numerous timewasting occupations such as marketers and the judiciary, but also there are sure to be some rather crucial people whom we will have failed to appreciate till it is too late. Various sorts of engineers, agricultural experts , economics people, who knows. One day we wake up to find that there aren't any xxxatricticists available to prevent/correct some crucial problem and as a result the whole industrial system is totally gubbered.

My doubt is about the notion that the end of the middle class is not the end of the world. The problem is that within that middle class there are numerous timewasting occupations such as marketers and the judiciary, but also there are sure to be some rather crucial people whom we will have failed to appreciate till it is too late. Various sorts of engineers, agricultural experts , economics people, who knows. One day we wake up to find that there aren't any xxxatricticists available to prevent/correct some crucial problem and as a result the whole industrial system is totally gubbered.

Believe or not.

Not having that expert is not the end of the world. Sure factories may set idle for a few days waiting on some expert to show up look at Africa where you can find numerous examples of a stuttering economy. Also of course we can assume a fairly reasonable communications network even if it means satellite phones.

So given communication a expert can be found thats remote and the problem at least looked at.

Will the industrial machine have serious problems will electric grids go down sure but we can also expect that these costly mistakes will result in finding these experts or training them. I actually think the biggest problem won't be people or knowledge but missing spare parts that used to come from some factory in china thats now been closed. This is going to be a challenge. But I'm sure that people who lived in other parts of the world can chime in and explain how they managed to make it with what we would consider to be disastrous conditions. I used to live in Vietnam and the electricity supply went down for several hours every few days. We bought UPS's for the servers and basically everyone got a small holiday while the power was out and just worked a bit later that day. And this is losing electricity for 1-3 hours every 2-3 days.

Laptops where quite expensive at the time but today I'd just have everyone use a laptop. With a bit more money and say some solar wind power and extra batteries I could have the office running fairly smoothly with a even more erratic power supply. Also of course although we did not get one most places had backup diesel generators. People will store up critical parts etc etc.

I'm not saying we won't have problems but I think you will be surprised at what people can overcome.

Is it what we call a second/third world existence yes but its not the end of the world most of the worlds population lives this way right now.

Could we prevent it sure put in electric rail and support ELP.

I'm not saying we won't have problems but I think you will be surprised at what people can overcome.

By the same token, those people marginalized and left to starve (your comments up post) will be every bit as resourceful, but their resourcefulness will not be directed towards the maintenance of the faltering system. Instead they will be seeking to destroy the system or force it to support their needs.

Well the poor will try but generally they get isolated in ghetto's visit the mega-cities of South America for examples of marginalized populations. Most of the violence is internalized in the Ghetto communities.

I suspect in the US at least you will have a few riots then sections of the city and potentially later larger regions will be turned into ghettos. Poor people who break minor laws will be shipped to these ghetto's.
Look at the crimes in Britain that caused people to be sent to Australia many where fairly minor.

Dealing with large masses of poor people is not impossible and like I've said its dealt with in most second and third world countries. Generally you have a sort of dual law system or more correctly and obvious double standard.

In the US we had such a system and its at best been dismantled recently however the response to Katrina gives you a taste of what the future US will be like.

Even today consider how illegal immigrants are treated many in LA effectively live in a third world country that fits what I'm saying today.

Take the US population and consider the energy balance what we are talking about is probably about 50 million people or so reduced to abject poverty and another 50-100 million living paycheck to paycheck and willing to work for minimum wages. The US has about 40 million people living below the poverty line now so this group will drop and a similar sized group will take their place. In aggregate this 100-150 million people will reduce its oil usage say in half or later more. What this does is cut US oil usage by say 20% or so. Sufficient once oil reaches a breaking point price of say 500+ a barrel to ensure no further increases.

The easiest way to conserve will be to push parts of the population into ever deeper poverty.

But this can and will be dealt with just like its dealt with in most of the countries of the world today.
The term Brazilification of America is used to describe the process.

Peak oil simply accelerates this process its been going on since at least the 1970's.
Wages have been stagnant for about 10 years so we really hit the beginning of the end of the middle class before peak oil if you look back at history.

The importance of peak oil is not that its causing what I'm describing simply that its accelerating the process without peak oil it could have taken another 10-20 years to completely destroy the middle class.

But I can't imagine given the way things where going that we would not have hit another resource wall and we would have been talking about peak whatever causing our civilization to fail.

Do we all understand what you mean by "the middle class"? I don't. I thought there was a fairly seamless spectrum of SES gradation in the US as in the UK. Mid-level SES can encompass extremely divergent functions such as marketing timewasters, used-car salesmen, or key scientific/engineering personnel. These distinctions are very important and cannot be glossed away with vague class concepts.
And what do you mean by the "destroying" of the middle class? Do they all die, or what? I suggest that you need to slow down your writing and tighten up your terminology and underlying concepts. Cheers

The term Brazilification of America is used to describe the process.

As a native born Brazilian who grew up in Sao Paulo I can assure you that the Americans, (I've been a US citizen since 1965), Should be so lucky as to be Brazilianized. Some of the happiest most wonderful people I have ever met were dwellers of places such as the favelas of Rio and Salvador. BTW if you are a stupid arrogant gringo don't bother trying to go to such a place because they will eat you alive.

This is an over simplification of course but a famous Brazilian comedian once said this about Brazil and the USA, (it loses a bit in the translation) "Brazil, it sucks, but it's good! The USA, it's all good but it sucks!

There is something in Brazil that very few non natives will ever understand it can't really be translated it is known by all Brazilian as the famous "jeitinho" The Americans just don't have it! Too bad for them because if ever they needed such a quality it is now.
My sincerest hopes for the Brazilification of America!

Dude, don't get so defensive :-) What memmel means by Brazilification is a two tier society where a vast majority live in abject poverty with a relatively small middle class and even smaller wealthy class. You can't deny that this applies to Brazil where the rich live in mortal fear of the poor behind high walls patrolled by armed guards.

Actually this is true of many other countries like Mexico & India except for the fact that the urban poor in India are not as violent as the urban poor in US, Mexico and Brazil. The favelas in Mumbai are pretty safe and there are hardly any kidnappings/car jackings in Indian cities. Can't say the same for Rio/Sao Paulo/Mexico City.

I agree with Memmel that peak oil will cause oil importing first world countries to get Brazilified/Mexified/Indified.

By the way, if Brazil is such a wonderful & happy place how come you don't live there?

I am quite capable of understanding exactly what is meant by the term Brazilification.

I'm also capable of parsing this term from multiple perspectives simultaneously.
One of those perspectives is that of someone who considers it to be a term invented by someone who lives in an ivory tower with a one dimensional view of the world, a view that is akin to that of the blind men examining the elephant, the one who grabs the trunk describes it to be snake like, the one who grabs the leg thinks its like the trunk of a tree, the one that grabs the tail says the elephant is like a swinging rope, they are of course all wrong and cannot see the full picture.

Hovever it is very hard for me to respond to your request for me not to get so defensive, for the simple reason that you would really have to be inside my head to understand why what you ask doesn't even compute. You are not even wrong, you are fractally wrong. Yet at the same time you obviously have struck a nerve but not quite the one you imagine.

BTW I live in the world and Brazil is a part of it I hold three citizenships and have lived and worked in many countries. The fact that my current physical address is somewhere other than Sao Paulo doesn't mean that I do not live in Brazil, but I very much doubt that you are able to understand that.

One of those perspectives is that of someone who considers it to be a term invented by someone who lives in an ivory tower with a one dimensional view of the world,.....

I think context is very important. Memmel used that term in the context of a formerly well off middle class that becomes impoverished due to peak oil.
I don't think he was being patronizing to Brazilians.

Do the people living in the wealthy countries sometimes look down on the people living in developing countries? Of course they do. But you see the same thing in countries like India, Mexico and Brazil where the wealthy treat the poor with utter contempt.

Suyog, I totally get both the context and the meaning and am not even criticizing Memmel for using it.

As I mentioned I was parsing it from multiple perspectives simultaneously and that was *ONE* of those perspectives. Trying to explain how my mind both compartmentalizes and syntehsizes things simultaneously is not a very easy task. I am both the sum of my parts and the individual parts at the same time. Sort of like a pulsating three dimensional Venn diagram where the intersecting spheres are constantly varying in size and permeability. I was neither being offended nor was I trying to offend.

Actually I've lived in Vietnam which has a similar class structure to Brazil and I do understand the concept of the happy poor. It would be nice if it could exist without the underlying desperate poverty. But when I use the term my focus is not on the social part as several have said but on concentration of a valuable commodity in the hands of a few just like we concentrate wealth land etc. Any time something is in short supply societies set up to concentrate this needed item in the hands of a few. In general this means that as the populace has less more and more people need to be forced into abject poverty to maintain the flow.

As a example the current price of oil is shutting out oil deliveries to the poorest countries and they are being forced to give up on subsidies. This means less oil flows into these countries but the problem is they did not use a lot of oil in the first place. Because supplies are removed from the poorest first you need to impoverish a lot more people to ensure that supply to the wealthiest remains constant or grows. This bottom up removal of excess to oil has to expand to encompass more and more people as supplies drop. Eventually the wave reaches the wealthiest countries and they begin to impoverish their own citizens.
Certainly the people will conserve basically because they are forced to but this dynamic does not lead to the creation of alternatives such as electric rail that allow the people to move off of oil but maintain a lifestyle in fact I bet we will soon see bus transport and other public transportation cut in the US as the price of oil increases.

Brazilification is really just a way to describe a country thats locked into this sort of pattern with wealth flowing to the top and little or no social movements between levels. The western countries are unique in having a fairly large middle class thats not needed to support the wealthy directly. While the infrastructure and social pyramid of most countries is optimized to ensure the concentration of wealth at the top. The US right now with its unoptimized structure uses a lot of resources esp oil. Once oil becomes dear we can and will optimize our social structure along the lines of Brazil and in fact most of the countries of the world Brazil simply happens to be a good counterpart to the US because of a lot of similarities between the two countries population wise amount of arable land etc etc. Certainly they are different but its the closest country to the US in a lot of ways. The biggest difference is of course in the social structure Brazil has optimized its social structure to support the wealthy while the US still has a ways to go.

Somehow going forward in a resource constrained world we have to figure out how to have the quality of life you have in Brazil but with a dignity of life in a sense like you have in the US. The US middle class is not and never was viable since its based on excessive resource consumption. Brazilification does not mean abject poverty is required but its up to Brazil and eventually the US to decide how to break this cycle of wealth concentration in such a way that people can live with dignity on limited resources.

Although I've not been to Brazil I understand the dynamics of populations that are poor because of simple lack of money which mean a lot of talented smart individuals live in the poorer communities and enrich them. In the US because its fairly easy for anyone with even a small amount of initiative to leave the poor areas our poor population is comprised of people who generally have problems of on sort of another. Social economic, mental, family etc etc. In many cases its simply people that don't fit into our rat race society.
Nothing intrinsically wrong with them. So I've seen the dynamics of more diverse poor societies where the talented sons and daughters don't leave the community.

But I by no means have a solution to what to do after society stratifies because at the end of the day the problem is at the top and from what I can tell the desire for humans to concentrate wealth is infinite as long as this exists I'm not sure we can change. The real social deviants are not at the bottom rung in the ghettos but at the top where people with insatiable desire for wealth and power end up to the detriment of us all. This happens because everyone even at the bottom suffers from the same disease which is a desire to be at the top and the people at the top use this disease thats builtin to manipulate us to play the pyramid game. We are all collectively suckers for the ponzi scheme of wealth concentration.

I do understand the concept of the happy poor. It would be nice if it could exist without the underlying desperate poverty.

Why? The reality is that the happy (poor is utterly pointless here) are, well, happy, and the unhappy wealthy (wealthy is not utterly pointless here) are, well, unhappy.

I, too, have lived and worked in a variety of countries. The poor in undeveloped countries that have a strong family structure and are not literally hungry and unwashed blow American "happiness" completely away.

The one key above all others is family. Americans think they've got family values, but they haven't a freakin' clue. When you've lived places where family really is important and, more importantly, cohesive, this becomes obvious.

America, and the world, would be well-served if we could afford to have every American shipped off to a 2nd or 3rd world country for a year.


Good points ccpo, I couldn't agree more with "happy" being the key word here and "poor" being an utterly pointless modifier.

As for:

America, and the world, would be well-served if we could afford to have every American shipped off to a 2nd or 3rd world country for a year.

It seems that if things contuinue to develope as they are, in a world post Peak Oil those conditions prevelant in what people in the so called "1st world" refer to as "2nd or 3rd world"
(aren't these concepts just so much fun), will exist here (I'm in the US at the moment) and we won't have to send them anywhere.

I like looking at the world from a different perspective sometimes...

They exist in the US already, but alongside the lie that everyone can be rich and beautiful. Or at least powerful. It is true that almost anyone has the potential opportunity to become rich, it is not true that everyone can.

But that lie that makes it seem we can all live the dream and that all it takes is hard work has the sheeple by the nads.


Well the poor will try but generally they get isolated in ghetto's visit the mega-cities of South America for examples of marginalized populations. Most of the violence is internalized in the Ghetto communities.

I recognize the point you a making, however, I suspect not everyone will go quietly into the say "generally" but I think even if only a few succeed they will be able to create substaintial disruptions. And enlist new participants...see "Bazaar of Violence"

  • If you consider other writings by Jeff Vail and John Robb I think you can see the potential for infrastructure disruption. The Niger Delta people are about as impoverished as any third world ghetto, but they have still managed to disrupt 200,000-500,000 bpd of production despite an active military campaign against them. To use the terminology of 4th generation warfare, the return on investment for systems disruption can be huge. Once effective systems disruption become the norm, the legitimacy of the state becomes less and people return to primary loyaties.

    Besides, the so-to-be-former middle class in America is well armed and retains a fair degree of technical expertise. The infrastructure in America is designed to be efficient rather than resilient. I suspect that half the people on TOD have the knowledge necessary to cause system disruption without resorting to anything dramatic like explosives. Natural gas lines, high voltage lines, railyards, telephone exchanges, traffic signal boxes, government offices etc. exist in or cross our neighborhoods and towns and are unhardened and vulnerable. Frankly, the attitude that "if I can't have it(power, heat, running water, phone service), they don't deserve it either" is pretty well entrenched among the middle class.

    What your describing is a French revolution type situation. I'd agree with you except I think the US will rapidly move to a strong military government during the first signs of uprisings.

    The American Civil War ranks as one of the most brutal military campaigns in history. Don't underestimate our ability to turn on ourselves at the first hint of instability.

    Although people complain about American brutality throughout the world I think people including most Americans don't realize how brutal American culture really is. The flow of wealth has worked to hide this not destroy it. I think you will find that the US will rapidly revert to a bigoted racist repressive society the moment that the flow of wealth into the US starts to dry up. It may be a slightly more racially integrated repression this time around but I'm confident that the US will successfully create classes of scapegoats that need to be repressed and revert quickly to a military government.

    Freedom of movement will vanish overnight and once thats gone ghettoization will be rapid.
    This is the main reason I will physically locate in a naturally fertile farming region in the near future
    since the first thing to go will be free movement.

    Infrastructure attacks like your talking about will simply serve as the catalyst for this change.

    Since I think the same thing will happen all over the world I don't see any advantage to moving to this or that country. At least the US has the concept of democracy so we have a small chance that this scenario might not play out. However I doubt it. The empathetic/sympathetic abilities of most Americans is negative.
    I shudder to think about America when we redirect our own callous hatred and disregard for life onto ourselves. Needless to say the random rebel probably does not stand a chance in the US. I'm sure your aware of the outcomes of the interaction of splinter groups with the US government. Internally we have no problem controlling dissidents. The Chinese could learn a thing our two from us.

    What your describing is a French revolution type situation. I'd agree with you except I think the US will rapidly move to a strong military government during the first signs of uprisings.

    No, I disagree, this will not be a French Revolution-type scenario. Direct citizen action/peasant revolt is exactly the sort of challenge the Federal State will be able to respond to. A direct, massed challenge would be "blown to flinders" given the state's monopoly on massed firepower. The "death of a thousand cuts" type of system disruption will leave the state ham-strung and ham-handed, eroding the support of the remaining loyal population. The state's inability to provide essential services due to infrastructure disruption will further erode its legitimacy.

    Your assumptions that the US federal government will remain intact, monolithic and effective in the face of systems disruption and declining available energy are not shared by me.

    Frankly, devolution of power to localities and government engagement with some substantial fraction of the citizenry seem like a better response to the coming challenges

    I'm sure your aware of the outcomes of the interaction of splinter groups with the US government.

    This strategy only works as long as the government can effectively portray these "rebels" as "splinter groups". The strength of government propaganda may not be up to the task once the middle class are targeted en masse. The cognitive dissonance of collapsing expectations will leave many people skeptical of the governments pronouncements; consider already the number of people who doubt the Federal Government's explanation of 9/11. Fox News' ratings are trending downward for several years in a row now.

    but I think you will be surprised at what people can overcome

    Whereas I think you'll be surprised at what they can't. I'm surprised Memm by your complacency about these potential difficulties. Some experts can't "just" be sourced from another country. Many experts can't be usefully used remotely via communication links. Especially if systems are already failing.

    And we're not talking about a return to 2nd/3rd world; those people have never addicted themselves to oil/leccy/cars in the first place. Take an alcoholic's drink away from him and he's in a much worse situation than teetotaller myself. Most people in cities haven't a clue how to source adequate food if the supermarket shelves are empty.

    And I think you seriously underestimate the psychological factors. A huge proportion of the rich world are going to be going out of their minds at the paradigm shift that imposes itself in the next few years. They won't know what's hit them even after it has. This is going to lead to huge psychological breakdown and consequent breakdown of the social and industrial structures that depend on those people. And that's before we even start on the grief of losing not just jobs but many friends and relatives to starvation and disease.

    I think your phrase "end of the world" is too vague to enable useful communication. We should here avoid such vague language and substitute more meaningful things such as unavailability of mains electricity, extensive food shortages, rapid die-off of x percent of population. Such less vague terminology helps to clarify our thinking and to reduce timewasting misunderstandings going round in circles.

    "Man is an animal who can get used to anything."

    I'm not complacent its simply I will be really surprised if the population of the world is over 2 billion in 50 years. I think however even with the biggest disaster the world has ever seen we probably will be able to maintain technically advanced civilizations for say 500 million or so people scattered around the globe.

    By this I mean in the US given its resources about 100-150 million people will be able to continue to live and produce and support a technically advanced society same for other areas of the globe.

    The vast majority of people will probably be killed over the next 50 years.

    The only way out would be some sort of collective rejection of our current society and the establishment of some sort of minimum level of human dignity based on renewable living. This basically implies a vast transfer of wealth through out the globe and of course a significant increase in the medical care for the poorest people. Its the exact reverse of the wealth concentration pyramid you start at the bottom and ensure self sufficiency and you work your way up taking wealth from the very top until everyone has clean water food and shelter. This also includes realistic population control. The top is not allowed to concentrate wealth beyond a certain level until every single person in the world lives in a dignified manner.

    This is the only solution and its not going to happen therefore realistically a lot of people are going to die and live lives of misery.

    Eventually our planet will recover from our excess and our population will drop and at some point in the future people will finally accept that we have to strip the wealth from the top and infuse it directly into the lowest rungs of the social ladder. Call it the Robin Hood social system. Its the exact opposite of the trickle down economics. And its important that the money is directly redistributed with no middle men and no string attached.

    It works exactly like a renewable garden with the excess composted and put directly back into the soil.
    We have to recycle our wealth in the same sort of direct manner.

    Until we do now that we have burned up or best non-renewable resource we will live in a world with a shrinking population and most living in abject misery. This could well go on for thousands of years even if we maintain a small technical core civilization. It does not matter until we finally recycle wealth.

    This basically implies a vast transfer of wealth

    I think this phrasing is a subconscious grasping onto BAU. What it implies is a vast abandoning of wealth and a redefinition of what wealth is.

    Potato/potahto perhaps.


    Thanks a lot. I mostly agree with what you say. I am curious to know what eastender's (from Hungary) price model looks like.

    So am I. As long as someone doesn't bring up the consequences of the Magyarification of Brazil ;-)

    >>We have some demand destruction in US & Europe but no economic collapse so far in any country of consequence.

    ...correct... we have not seen a *collapse* yet, but early signs of recession have appeared:

    The World GDP is on the order of $65.95 trillion /year or $180 billion /day. At $500 / barrel the 85 million barrels a day of oil would cost $42 billion / day, or about 1/4 of the world GDP.

    Except that "GDP" is the sum of all money spent, so the extra cost of oil would raise GDP. Thus your equation must be reworked.

    Today, oil ~ $120/bbl, 87Mbbl/day = $10.4 billion/day, which is 10.4/180 = 5.8% of world GDP.

    Imaginary future, oil ~$500/bbl, 87Mbbl/day = $43.5 billion/day. However, this extra $33 billion/day is added to world GDP, so that it becomes 180+33= $213 billion/day, which is 20% of the new GDP.

    Of course with oil going up by a factor of four we might expect that consumption would drop (after all, it's not likely to go to $500/bbl overnight, so presumably world production will have passed its peak by then and be less than 87Mbbl/day; $500/bbl x (say) 50Mbbl is a different thing to $500/bbl x 87Mbbl!) and other parts of the world economy change, leading to overall higher or lower GDP.

    So I'm afraid simply multiplying it by its current cost doesn't quite work, especially since you're not even using the PPP value for GDP, important when considering whether countries can afford certain levels of oil cost.

    Since in general we are talking about imports of oil in exchange for goods and services created with said oil. Some going towards internal use and some exported to eventually pay for oil. I think the real issue is not the price but if the importing nations can produce enough goods and services to pay for the oil.

    All that happens is that consumption of non-essential items drops in the importing countries. Next of course they pay by selling companies land etc basically all the assets of the country.

    Given all this I really suspect the key posts concept of political feedback loops is very important since it will be obvious soon that he who controls the oil will own the world. I suspect that it won't be long before the oil fields of the middle east are seized by the leaders of the importing countries.

    Hopefully, as the years tick by past the peak, global energy efficiency and productivity will increase dramatically. Imagine if America was as energy efficient as Japan. That would reduce demand for oil considerably. And more importantly, it would also increase the amount of money we would be able to afford to pay for oil without it harming the economy.

    Imagine if America was as energy efficient as Japan.

    A small leap of imagination, a huge leap of reality. It would require a gargantuan redesign of US infrastructure replacing tons of indulgent suburbs and freeways with Japan style compact housing and extensive public transport. It couldn't be done even if the gov't had the will to order it. And it doesnt have the will anyway.

    I always find your articles interesting and thought-provoking, but I thought this one, in particular the explanation of how GFLs and geology interact, was outstanding. It's difficult to expand my understanding these days...thanks.

    "Perhaps the most important question is the degree of importance of data-driven analysis to this topic. Will the quest for mathematical analysis of these topics provide more predictive power for a given amount of effort, or will it create a misleading appearance of accuracy and predictive ability while actually creating faulty conclusions? If quantitative analysis is appropriate here, how, specifically, should it be carried out? This question, in particular, is one where I hope the many TOD readers with experience in this area will weigh in."

    Math anaysis is good 95% of the time.

    The other 5% is Power Laws/Chaos Theory.

    I didn't see Systemspunkt or Cascading Systems Failure used above.

    "Within this new calculus, actions that undermine the moral psychology of these markets vis-a-vis the target country, is the new measure of victory. Market psychology (of investors, trading partners, etc.) is marginally influenced by traditional terrorism. Systems sabotage is different. It can radically impact market psychology by building uncertainty (kryptonite for markets), menace to contracted export flows (resources in this case -- 1/3 of Europe's natural gas comes from Russia), and mistrust (a flight to alternative suppliers and investment opportunities).

    If Russia can be put to the edge of financial catastrophe due to a moral victory won in global markets, the achievement of the limited objective of Chechen independence is easily possible.

    I note here that John Robb really wants the US to do/be this
    but once again Russia is ahead of us in virtual open ended
    4GW warfare.

    Another negative feedback loop:

    Higher crude prices --> more income for the producer --> more thinking by producer about what his assets under the ground are worth --> AHA! --> produce less --> Higher crude prices

    I think this holds true for states, particularly those with stable governments and existing high standards of living. While I'm sure it's an influence on all producers, I think that corporations and less stable states are still highly incentivised to maximize near-term production at any cost.

    For corporations, the time-horizon for stock prices, investor returns, quarterly reports, and annual shareholder meetings is very short--these companies need to focus on maximizing profit this quarter, and can push that time horizon out as far as five or six years if they are effective at communicating their reasoning. In theory, stock price (and therefore shareholder & director action) is the total of all future profits discounted by the time value of money. In reality, the time horizon for discounting future profits is seems to be very sharp. If Exxon said they were going to cut production by 50% next year, and as a result they had rock-solid proof that their future profit discounted by TVM would soar, they would be besieged by shareholder derivative suits and efforts to replace directors almost immediately.

    For states with unstable governments--or, more importantly, states with tenuous control by one of two+ competing political factions--the time horizon to maximize revenues is the next election, or at most the one after that. Some states--Qatar, UAE come to mind--could effectively take this tact. Maybe Norway, Saudi Arabia and a few others. But if Nigeria or Mexico or the US tried this, the party in power making that decision wouldn't be there for long, and the policy would soon reverse--this is "structural vetting." I think, as the reality of depletion becomes increasingly obvious to politicians worldwide, we'll see many people and parties try this tact, and no doubt some will succeed. It will be interesting to see how this plays out...

    Great article Jeff.

    THere are some private companies and public companies who are much better than others in managing production. When commodity prices drop in the lower end of their range they cut back on drilling (also cut back when drilling becomes more expensive due to a higher demand),shut-in production and manage their land base much better than others. Their allocation of capital and control of costs standout compared to their peers.

    Some of the criteria I look for when investing is the percentage ownership by management, how they acquired their equity position and how long have they own their shares. Companies with free cashflow who do not buy back their shares are more apt to not freely give stock options. Unfortunately they are the minority.


    Thanks for the article.

    Maybe less stable oil producing states will on the whole become more stable as oil prices rise, since they can spend more - either on their populations, or suppressing them. Although maybe not, as the oil infrastructure becomes more vulnerable under the same circumstances.

    These feedback effects are frightening to me. In the UK people are stealing drain covers and power lines all over the place (maybe exaggerating), to sell as scrap. Rapid currency/commodities movements have the potential to change society over night.

    "In the UK people are stealing drain covers and power lines all over the place (maybe exaggerating), to sell as scrap. "

    Think how much worse this will be in a year's time. This is hugely harmful stuff, which greatly increases gdp while hugely impairing efficiency and quality of life and threatens the whole system which is based so heavily on trust.

    I think that states with existing fault lines (ethnic, religious, class, regional, etc.) or poor government will see those trends exacerbated by rising oil prices. But, as you point out, some exporting nations may be stabilized--there's nothing to say that a corrupt government can't reform, I just think that the trend will be for most already poor governments to get worse under this pressure...

    Excellent post, even though it gives me a sick feeling to read it and think of the consequences.

    Will the quest for mathematical analysis of these topics provide more predictive power for a given amount of effort, or will it create a misleading appearance of accuracy and predictive ability while actually creating faulty conclusions?

    I vote for "a misleading appearance of accuracy"

    Systems type thinking can be suggestive, and lead to insight -- as in this essay. But it is a a vain enterprise to believe that one can attain the type of accuracy possible in physics. This is a different intellectual realm than the hard sciences, with ample opportunities for self-delusion

    History is littered with the remains of theories the authors felt to be failsafe. Countries that acted on them suffered as a result. I think of Robert McNamara and Vietnam, of the Maginot Line, of free market economists and Russia, of the certainties of traditional Marxism.

    Intellectual modesty should occupy a key place in the toolkit of any social theoretician.

    Energy Bulletin

    I agree, I think that too much focus on mathematical predictions of social systems will serve us poorly over the long term--the system is simply too complex to model accurately. I think there is some promise to produce valuable empirical models using agent-based modeling, or perhaps by looking at it as a complex adaptive system--John Holland and the Santa Fe institute have done some amazing work with these theories (though not applied to anything as complex as the global economy). I don't have the skill set to pursue these routes. For now, I think the most useful next step will be to try to quantify and track the amount of production shut in by the various geopolitical phenomena, but I don't really know where that will lead. I think the best we can hope for now is to improve our understanding of what is happening right now, and to gain a bit better ability to assign probabilities to future events and trends--not certainty or high resolution predictions.

    Even if the predictive value is low, it still makes one aware of possible failure points.

    Surely the best approach is set out as much maths as one can, and then recognise the known uncertainties and the scope for likely unknowns. One could for instance say we are 90% likely to be all doomed to scenario z by year x unless a solution of type y comes along within t years.

    One could for instance say we are 90% likely to be all doomed to scenario z by year x unless a solution of type y comes along within t years.

    Isn't that right out of the IPCC report? Pulls fedora low over his brow and turns up his collar as he strategically exits stage left...

    Looks like I can only plead that great minds think alike.

    I think there is some promise to produce valuable empirical models using agent-based modeling, or perhaps by looking at it as a complex adaptive system

    This wouldn't be hard to do with a rules based system like those used in some video games. I personally have some experience with building a strategy game (Risk, the classic game of world domination, speaking of geo-politics) and achieving fairly complex behavior in an AI player using just a handful of simple rules.

    I don't have a link, but I believe the Pentagon is doing some work along these lines in an effort to model the behavior of populations in times of crisis.


    A good friend is an operations research analyst and scientific modeler for Headquarters, US Air Force, and is well connected to the current use of modeling by the US military. We've been working on various modeling schemes for years (he does the math, I do the geopolitics) and have mainly reinforced our belief that this kind of system is not appropriate for mathematical modeling. The Pentagon (and the US intelligence community in general) is far less sophisticated and capable in these areas than most people assume (even after recent blunders) and, while they may call things "AI" or "neural net," etc., the level of modeling currently in use by our government is well behind the degree of skill shown by many of the more scientifically-inclined types on The Oil Drum. The problem with any such modeling is that the map is not the territory--geopolitical reality is extraordinarily complex, and any model of it must, necessarily, reduce that complexity. I think that the results of such models can be useful, but I think that the geopolitical situation is, as with other highly chaotic systems, highly dependent on initial values and on minor perturbations generated by the exact complexities that seem to be winnowed out by the model makers.

    I think your point of using rule-based games (essentially agent based modeling) is exactly on target--this is one empirical way to explore possible outcomes, as long as we heed Bart's advice and don't think this gives us accurate predictive power. If we combine rule-based games with red-teaming (a concept that is much overused, but still very valuable), I think we could find even more value...

    I have massive doubts about what agent-based modelling can achieve. To my knowledge, it tends to assume a rational actor model, and if there are variations from that, I don't see how we can model the emotional aspects that effect behaviour.

    Then there is the fact that there are billions of economic agents that effect the system, and without modelling them all, can't deduce accurate emergent collective behaviours.

    I think it could be more likely to mislead us than assist us in understanding our problems.

    Yeh,sure,Jerry.And the Pentagon et al has form on these matters.A little reading of modern history is in order.

    While passing judgement on the Pentagon's limited successfulnesses, please bear in mind the dud hand they've had to play, in terms of being part of a nation bankrupted by years of oil addiction, and with desperate leaders to match.

    To take this further, there are delays in the exploration and development stages that can be attributed to the various geopolitical phenomena.

    Also I expect that you will see a greater number of stoppages/interruptions in the flow of petroleum products due to labor unrest in OECD countries. The workers in the refineries and other choke points are also aware of peak oil. The same thinking across the oil & natural gas service sector.

    The end result of their stoppages/interruptions are similar to those of a geopolitical nature.


    I first met Robert McNamara when he was president of the Ford Motor Company. He had been one of the pentagon "whiz kids" in World War II and had developed great confidence in techniques for separating fact from opinion and judgment. He was like the young Wiggenstein in his faith in the measurable facts, and he indoctrinated those around him with this same point of view to such an extent that it sometimes seemed at the Ford Motor Company that if something was not measurable and expressible in the form of statistics, it did not exist. During his stint as secretary of defense in the Kennedy and Johnson years, McNamara applied this same mental strategy to the task of defining and protecting national security and running the Pentagon.

    Then came the war in Vietnam and the agony it created for McNamara and other men and women of conscience, intelligence, and sensibility. The objectivist strategy utterly failed to give those respnsible for our nation's policies a proper sense of the issues and how to deal with them. It more than failed the test of adequacy. It led to distortions and grotesque parodies of rationality, such as the body count and the village pacification program.

    After the war in Southeast Asia and particularly after the death of his beloved wife, Margaret, McNamara became less fact-driven, more compassionate, more intuitive. He threw himself with total commitment into a crusade based on his judgment that the folly of the nuclear arms race must end. Those who knew him best observed that the change did not represent a basic change of personality: he had always been a caring and committed person. Rather the change was in his mental strategy--his congnitive approach to coping with problems, policies, and issues. He forsook the narrow objectivist strategy that had led him and so many others to develop massive blind spots to areas of life where an exclusive preoccupation with the measurable facts distorted reality and twisted judgment. He did not become a mystic or an irrationalist: his respect for the facts remained intact. But now he had opened his mind to additional forms of knowing. He had not abandoned the discipline of wedding general principles to the irreducible and stubborn facts. But he had abandoned objectivism with its imperialist and arrogant claim to be the only valid form of knowing.

    Daniel Yankelovich, Coming to Public Judgment

    Thanks for that most interesting and wise quote.

    Robert McNamara is one of my favorite personalities of the 20th century. If you haven't yet, I would highly recommend viewing the Errol Morris documentary, The Fog of War. Simply brilliant; something TOD crowd would enjoy.

    I vote for "a misleading appearance of accuracy"

    May I make the suggestion, with all due modesty, that you refresh your memory with a re-reading of "Limits To Growth: The 30 Year Update", or perhaps re-acquaint yourself with the interviews of Dennis Meadows that you yourself have posted on EB.

    Those authors specifically address the issue of "accuracy" and "prediction" and draw a very clear distinction between the precision demanded by the mathematical models used in physics (and other "hard" siences) and the much more aggregated models used to understand the dynamics of complex systems.

    The stated goal of systems dynamics modeling is NOT prediction, nor is the goal high levels of precision. The goal of systems modeling is gaining insight into the overall behavior of complex systems, and to determine the robustness of a given variable (i.e. how much can you change your assumptions about a given quantity or rate before it affects the behavior of the system).

    The stated purpose of these goals is to advance the quality of our "mental models" in such a way that they better reflect the non-linear, and often counter-intuitve behavior of the complex system that is our world.

    Critical policy decisions are being made every day, decisions that will directly determine not only our own well being, but the well being of countless future generations, and these decisions are being made by people who's mental models have little or no grounding in the reality of complex systems.

    I respect and admire your work at EB, Bart, but your suggestion that these stated goals and purposes are a "vain enterprise" lacking in "intellectual modesty" is wildly off the mark, almost to the point of sheer absurdity.


    Hello Jerry,

    I don't disagree with you on the value of systems thinking and models. Most of the people who work on them seem to be aware of their limitations. They usually stress that the results are scenarios rather than predictions.

    The real problem is when the outside world gets hold of the models and the nuances are lost. For example, much of the debate around The Limits to Growth was about 'predictions' which in fact were never made by the authors.

    It's inevitable that people will talk and act as if the results are certain. Emphasizing the uncertainty will at least slow down the process.

    Also, it must be said, people fall in love with their models. Even people trained in science and engineering are vulnerable to self-delusion.

    Yet there is a real value to this sort of excercise. I don't remember where I read it, but a general told his staff to make detailed plans about an upcoming battle... and then tear them up. The process of thinking through the plan educated one about the battle situation and its possibilities. Tearing up the plans insured against a false belief in certainty.

    Energy Bulletin

    I vote for "a misleading appearance of accuracy"

    Systems type thinking can be suggestive, and lead to insight -- as in this essay. But it is a a vain enterprise to believe that one can attain the type of accuracy possible in physics. This is a different intellectual realm than the hard sciences, with ample opportunities for self-delusion

    The various models that people have come up with are just shots in the dark because we don't know how all of this will play out. Right now it appears that we're buying time as producers realize what is on the horizon. All the models go out the window when human factors come into to play.

    Well said,Bart.While articles like Jeff's have value I think that the adverse Black Swan events will carry the day.Human nature is fundamentally unpredictable except in the sense that stupidity is the overwhelming factor.

    Amazing insight! Thanks

    I am sure many readers of TOD have thoughts like this rolling around in their head all the time, but it is an entirely different thing to formalize such a complex system into words. I realize that you went to great lengths to describe this system in theory only, without using data, but I think it would still be instructive to try putting some perspective on these topics. An example that comes to mind is going back a period of time and plotting the b/pd of oil removed from the market from "pipeline attacks" etc. I would imagine that one could easily see the increase in frequency over time, as well as increase in percentage of exported oil.

    One other thing, I think the topic of localized disruptions being handled by force missed an important fact. Just as you describe the "easy demand destruction goes first", I think the "easy localized disruptions" also get solved first. You cannot ignore "spheres of influence" in all of this. What happens when Russia tries to reclaim influence over an old USSR country that now belongs to the EU (just an example)?

    "...'easy localized disruptions' also get solved first." I'm finding that living in a poor, rural, elderly, northern US county is causing us to take on adaptive solutions in advance of our wealthier, urban neighbors. So I agree that localized disruptions (heating oil and propane doubled this summer) present opportunities for solutions in advance of global adaptation. For example, we are piloting solar air heating with 20 homes in the county as we are certain we will have cold people this winter. The manufacturer is located in a small town nearby and we are testing the efficacy of this approach. With our elderly at home during the day, it seems to be a

    Hopefully this will play out with other aspects-- we have ethanol plants and our local gas stations allow us to manually dial in the % ethanol for our tanks. We are piloting mixed perennial prairie biomass at the local university branch campus. Our electricity and telecommunications are provided by small, local member owned cooperatives. The fiber optics on my farm rival those at my metropolitan land grant university office. And I live in a 4 square mile area with no other people but my kids and husband.

    In terms of your theoretical construct, we are in the midst of conducting scenario exercises across the state-- focusing on the year 2050. We are tying some past trends (going back as far as 100 years) and some future predictions-- like our state demographers forcast for our state's population. We are holding two two-day workshops in each region of the state. The purpose of this work is, in part, to come up with adaptive strategies in the face of an uncertain future, but also to build the social capital to confront our uncertain futures. In general, this work has been a great success by all involved-- both community and university faculty. We'll have some publications in the future.

    Likewise, Oildrum and this paper in particular, challenge us to inhabit ideas that could come about. Just as people who have practice fire drills have a much higher likelihood of surviving a fire, spending our brainpower strategizing for any number of future before us prepares us to adapt to those futures.



    I am new to TOD and your writing but what I have seen is first rate. Thanks for your insights.

    Here's my suggestion for integrating models and predictions. Let me suggest that the model and metaphor is the "S" or sigmoid curve. Modeling on an S-curve would enable you to map events without requiring exhaustive data and it would provide an easy to understand graphic. At a time like this the data is just not there and if one were to wait for the data, the model would have moved on with potentially disastrous effects. Specifically, it looks to me like we are at the crossover point between two S-curves, the top of one and the bottom of another. Unfortunately at this place in a lifecycle, some pain will result from the need to step down from the relatively high point of the terminating curve onto the lower end of the new curve. This roughly translates to the transition from fossil based fuels to renewables and the large infrastructure investment required. The S-curve model shows that making the leap early, or at least getting the process started early, makes whatever resulting pain longer term but more bearable. Waiting simply compresses the pain into a shorter time and causes it to spike in unpredictable ways, which in part is what you allude to in this article.

    Thanks again for your insights. Keep writing, we need all the analysis and insight we can get.


    Sorry to pop your balloon but IMO a feedback model is going to have you going around in circles in short order. ;-)

    A feedback model(like EROEI), where you input energy and output $ won't tell you what you want to know.
    Look at the 'success' of the IPCC climate change feedback model which have failed to convince most of the public.

    Right now our system can produce a tremendous amount of dollars from our energy inputs.

    The question is what do we get for those dollars.

    Look at the housing situation--energy is producing dollars which allow McMansions to be built far off in the country, destroying farmland, requiring more infrastructure and more fuel and in the end turning into a money pit for the foolish owner.
    Another example is the development of nuclear weapons or huge militaries, which by their nature must be fed) but which cannot guarrantee the safety they allegedly provide.

    A flawed model will give GIGO.

    It is a fundamental unsustainable misallocation of resources. This is what destroys systems. The marxists call it 'internal contradictions'.

    In natural selection such defects lead to species extinction in the struggle for survival.

    IMO, it would be more useful to compile lists of 'paradoxes' to gain a qualitative perspective.

    Could you try to prove what you are saying or disprove what Jeff Vail is saying with a proof of some sort?


    Thank you. I will reference this reply in the future for some yuks.

    Excellent article. One category of GFL it appears no-one is considering is political stability etc. in consuming / importing regions. Example, an obvious and ridiculous case: At what price of oil does [country 1] determine that it is necessary to put an atomic weapon onto the capital city of competing importer [country 2] in order to basically withdraw all or a significant part of their consumption from the world market? A more useful case is to substitute economic or digital acts of aggression (cutting underseas cables in order to isolate London's exchanges from world markets might be one such)?

    Are such cases any more difficult than mathematically modelling the tipping points of producer nation populations?

    I find Jeff Vail's argument too oil-centric.
    There are other sources of energy. The world is producing enormous amounts of investable capital --again, I defy TOD'ers to identify any reasonable energy, or alternative energy, technology that is suffering from a lack of venture capital, or investment funding. Even problematic ideas, like algae-to-oil, are receiving good funding (and I hope algae-to-oil works).
    Roughly 70 percent of oil is used in transportation. Automakers are already producing much higher mpg cars, or even cars that do not need liquid fuel. It will take several more years to make a dent, but we have the time. I see scooters more often, and I even saw an all-electric scooter yesterday on the streets of Los Angeles. With a cute girl on it. Oddly, she didn't return my wave.
    Consider this: If the average U.S. driver reduces driving by 10 percent, and uses a car that gets get just 10 percent more in mpg, then US gasoline demand will fall by 20 percent. Our refineries would be glutted.
    Seriously, would anybody even notice such minor changes in lifestyle?
    And I find serious flaws in the idea that if the US cuts daily consumption to 10 mbd (which I think is doable) then a disruption of 500,000 bd somewhere will be that much more important. If the US cuts daily consumption to 10 mbd, a disruption of 500,000 somewhere would not be noticed, as world markets will be glutted.
    Also, the article speaks as if peak oil production were a fact; in fact world liquid production has been rising slowly, despite the vast majority of the world's oil being controlled by thug states, such as Russia, Nigeria, Venezuela, Mexico, KSA, Libya, Iraq and Iran, which has reduced production in the last 10 years.
    The price mechanism is imperfect, but in a well-capitalized world, it produces terrific results. Europe, Asia, Japan, and even the thug state sovereign funds are producing huge amounts if investable capital, and there seems to be no end of highly talented people out there.
    In some regards, the future has never been brighter.

    Well Millard,

    It was after all an article discussing disruptions to OIL supply - so perhaps oil-centric is appropriate?

    Your constant harping on "thug states" is tiresome - and if you have to keep mentioning it, why not include the US in the list? Certainly the history of US involvement in the world (most especially recently) would point to some very "thugish" behavior...

    and Mexico is a "thug" state? - I mean, their actions in Chiapas are fairly nasty (nothing to compare how the US treated it's breakaway regions), but the last time they invaded anything was back in the Alamo days (and they were technically "invading" their own territory) - or are they "thugish" because they won't let US companies in to exploit what are, after all their own resources?

    I suppose Venezuala is a "thug state" because of their booting US corps? Do you really consider controlling the natural resources of one's own state "thugish"? Can you name the last country Ven invaded and when it happened? Personally I think invading people and killing them and destroying their infrastructure more "thugish" than booting big oil corps - but that's just me - and isn't the "thugish" Venezuala offering reduced-rate heating oil to US citizens for winter? I don't see the US doing that for it's own people - or since it's not a market solution is it "thugish"?

    you saw a cute girl on an e-scooter and this demonstrates we are doing fine? does this really strike you as a convincing argument?

    "the future has never been brighter" - really? you come here day after day, you read the articles and you believe that? - why waste your time then, I mean, if everything is golden, hanging out with a bunch of peak oilers and doomers would seem to be rather unrewarding

    peak oil IS a fact, the timing is (somewhat) open to debate - interesting that so far 2005 is still holding up, despite all of your "increases" - everytime a new record gets announced, it gets revised down below the May 2005 peak a few months later - I don't see much of an increase, I see a peak plateau...

    your faith in the market to fix everything is touching, in a sort of creepy-religious faith kinda way - nothing I have seen in any of the US's reactions give me much faith of a smooth transition away from oil

    In your talk of thugs, you should have mentioned that the only person ever to start a nuclear war has been US President Truman - and he committed this greatest of all genocidal acts for no other reason than to intimidate all the other nations of the world.
    He makes Hitler rather mild by comparison.

    I guess you aren't the Judge MacDuff who is the subject of my application to the ECtHR, in respect of 35 cheap, not even clever, lies (fluke probability 1 in 3.4 Billion) deployed by judges Truman, MacDuff and McKenna giving corrupt victory to harassing criminals with the eviction of their blameless chronic invalid victim from his home of 17 years. Meanwhile the police are going to allow these "honourables" to continue their professional victimising, pending the irrelevant ECtHR process. So much for uk justice!

    Please don't rewrite history. The 2 bombs dropped on Japan were not genocidal. To invade the home islands would have cost several million allied troops their lives (plus millions of non Japanese civilians plus Japanese lives beyond comprehension).
    Hirohito was nearly overthrown for standing up to the militarists and agreeing to surrender. Saying Hitler was mild by comparison to Truman is absurd. If Truman was as evil as that he could of unleashed hawks like Patton to keep pushing East in mid-late '45 with the use of the bomb to destroy the Soviet armies.

    Sorry but it's you Neal who is rewriting history. I suggest you study the clear rebuttal of the Washington propaganda. For instance
    and/or search pilger hiroshima for more links.

    I stand by every word of my post above. Indeed worse than Hitler.

    The use of the atomic bomb at Hiroshima was a pivotal moment in history, sure.

    But 200,000 dead is a lot less than six million dead any way you slice it.

    Let's say Truman killed 200,000 people just to scare the Russians. That's pretty small beer next to exterminating the Jews of Europe in order to provide a scapegoat to focus nationalistic hatred so you can prosecute a war that kills 50 million more.

    The way I do the maths Hitler was at least 250 times worse than Truman.

    Let's be old school and rank it by body counts.

    Hitler - 50 million
    Mao - 30 million
    Stalin - 20 million
    Pol Pot - 3 million
    Napolean - 2 million.

    ...Truman doesn't even make it to major leagues.

    Gosh this really is off-topic, isn't it? Perhaps because you have to go off on some sort of delusional tangental rant on every second post, eh?

    An in case anyone thinks I am being insulting, I stand by every word of "delusional tangential rant".

    I think Truman would win the "rate of killing" award for most people killed in least amount of time.

    Dear TenThousandNanometers, I didn't need your post to tell me the numerical comparison. The point is that they were both enormous crimes far beyond mere mass-murder, such that the actual numbers are irrelevant, but in the Truman case it was a matter of cheap cynical bullying at vastly reckless cost to future generations, whereas in Hitler's case it was a rather more complex pathology, born of great grievance (however wrong), in which many others shared the guilt.

    Futhermore re the irrelevance of the numbers, the number murdered by Truman was set by the technology. And he wasn't even satisfied with his first crime. If his bombs had been able to murder 7 million a time he'd likely have gone for that instead. Plenty of others are threatening to now thanks to his uniquely evil lead.

    "the actual numbers are irrelevant"

    If you can declare numbers to be irrelevant by fiat, well then, I can declare motives to be irrelevant. So here goes:

    Truman's motives were irrelevant. The fact that he used a dramatic new technology was irrelevant. What matters is the cost in human lives.

    I'm not actually expecting you to responding to logic. I just want people to disregard everything you ever post in future based on the fact that you are the kind of person who thinks that not being "PC" is worse than murdering 50 million people.

    Dear TenThou - I stand by my words as stated in their original context. Rather than declaring the numbers irrelevant merely "by fiat", I explained why I considered those specific numbers were irrelevant in that particular context. You have then just gone on from that first falsehood to arbitrarily and without any reasoning declaring motives and tech constraints to be equally irrelevant.

    Unlike you, I'm not in the business of categorising people as one or other "kind of person". And if, as you claim, I consider that not being PC is worse then murdering 50 million people, then I must have a stupendously low opinion of myself given the huge amount of abuse I have taken over the years for my strong outspokenness against a very real Political Correctness which continues to sow deceit and persecution of the most competent, honest and honourable people in our society. I beg to recommend that you discontinue this public exhibition of yourself asap. And in future keep your ad hominem irrelevances to yourself.

    Millard always uses the term "Thug states" and Iam
    sure realises the word in Urdu or Sanskrit or Hindi
    means literally "thief".
    And when asked if the countries he calls "thug states"
    fit that definition....he declines comment.
    I like the word "troll" in trailing a long line
    with hook and bait behind oneself in order to draw a
    strike from ones quarry.

    (No trollers were gaffed in this dramatization)

    I'll have a more in-depth discussion of demand destruction and elasticity in a forthcoming post, but the key with whether a 500,000 impact has more or less impact on a 10 mbpd consuming US economy is whether the transition from 20 mbpd to 10 mbpd was market-driven demand destruction or a non-market-driven policy push to eliminate the current highest inelasticity demand first. More on that point in a few days.

    I don't claim that a peak in oil production is a fact, though I do think it is extremely likely and logically axiomatic that a finite resource will eventually run out if we keep consuming it. What I said is that geopolitical feedback loops will be a problem to extent that peak oil is a problem. If we find a magical substitute for oil then the peaking of oil production won't generate these GFLs (though something else likely will).

    Jeff - Forget about peak or not. Here's what is a fact, and more important fact. Producers are unable to squeeze out any more (or just a little which will be cancelled out by estimate correction), even despite prices in the 140 range. The amount of expensive oil that can be fantasised in the future is irrelevant to the fact that cheap oil has already come to an end (absent some rabbit pulled from hat magic).

    One comment this is just one of the feedback loops thats kicking in. Export Land itself is a type of feedback loop. We potentially have some very nasty feedbacks between Natural Gas and Oil esp the heavy/sour ones.

    Next on a financial level we have consumers opting to default on debt in order to pay living expenses as cost of living eats into both their disposable income and income used to service debt and they continue to max out credit cards etc. Debt defaults esp on expensive items such as homes and cars and on credit cards used to buy consumer items has such a massive deflationary effect that it dwarfs the direct financial effects of oil.
    The underlying reason is of course a default on a thirty year loan must be written off near the time of default.

    Even simple things like real conservation are not effective since they suffer from the tragedy of the commons effect with one persons conservation allowing continued or increased consumption elsewhere. Real conservation requires fundamental structural changes.

    As you add up these various feedback loops and others that may grow which we don't even realize its fairly obvious that almost all are negative with just a few that are neutral and a vanishing number that are positive. The true positive ones like wind power have long lead times to grow and are undermined in the short term by the tragedy of the commons problem.

    As I said the list is endless but it boils down to recognizing that complex societies collapsed in the past not because are ancestors where stupid but because they refused to recognize the full spectrum and scale of the problem they where facing and worse most of the real solutions require significant short term pain in order to prevent a hypothetical future collapse scenario. This catch 22 should be obvious with the political feedback loop.

    And last but not least it should be increasingly obvious to all that as the situation becomes unstable that propaganda and outright lies by the leaders of nations and the financial system are becoming increasingly common this knee jerk reaction to use hide the truth will only get worse and in general it strips the populace of a chance to make tough decisions that are not only painful for them but worse disrupt the status quo and the relentless concentration of wealth at the top. Our leaders are just as incapable of change as we are.

    If this cycle does indeed begin, what you will see very quickly is governments applying "final solutions" to the elements that are disrupting their energy infrastructure.

    The problem with the analysis is is in the following statement

    In theory, it can, but there are systemic problems to solving the larger system. In general, this is because the "solutions" to the individual problems are actually to overwhelm and repress the root cause locally--something which will become increasingly difficult globally.

    The implicit assumption is status quo response to disruptive elements. The ability for current world super powers to completely exterminate such elements exists (radiation and chemical weapons, tailored plagues, etc), they choose not to use them because the downside political and social repercussions would dwarf any gain.

    as the situation gets more serious, things will trend toward absolute warfare, and all options will be on the table. History has shown us that extreme reactions to revolts and ethnic uprisings ARE successful at suppressing such events at least in the short and medium term(and that is before we have the ability to neutron bomb entire cities and were still carrying out exterminations manually).

    Think about Saadam's suppression of the Kurdish revolt times 1000.

    How did the Romans, Mongols and Persians maintain control over their vast empires? Even the USSR?

    I disagree the underlying problem is a resource war and resource wars have political/military components but they also have a big financial component. You would have to look back into the colonial period up through World War I to look at the geopolitical games that surround resource wars.

    I'd argue that by the time such measures as your talking about would come into play the underlying economies would have collapsed to the point that warfare like this if it happens is outside the scope of our concern.

    A super doomer collapse is not impossible and will be probable to some level for a long time however at that point its certainly every man for himself. Collective action and any sort of response is only possible under more stable circumstances I'm not saying business as usual and in fact I expect things to deteriorate to a fairly hard Depression. But thats not the end of the world and more importantly its the only outcome we could help shape other worse outcomes are simply outside the scope.

    Nothing wrong with tracking the potential for real collapse but its important to recognize that if it happens then all of us are collectively subject to the whims of fate at that point.

    In a lot of ways a large number of potential futures are opening up depending on a incredibly complex set of coupled feedback loops the final outcome is absolutely unknown. Historians are the only ones who will able to chuckle and scoff at our stupidity and write the obvious results of the next few decades.

    We can't do it now neither the super doomers not the cornucopian's nor anyone else can. Everyone that purports to know whats going to happen does not understand the problem.

    Dear Memmel, your post one above the latest gets into some serious muddling of feedback terminology.

    almost all are negative with just a few that are neutral and a vanishing number that are positive.

    Generally speaking, negative feedback is helpful, selfcorrecting, stabilising, like thermostats and steering and so on. And positive feedback is harmful, destabilising. And there is no such thing as neutral feedback.

    To avoid such serious confusing it is important to use terms such as "harmful" and "helpful" instead.

    Excellent historical fallacy from unholyguy:

    How did the Romans, Mongols and Persians maintain control over their vast empires?

    Less than permanently. And more crucially, technology changes everything. In particular (1) the Romans etc did not have to face freedom-fighters' bombs as they hadn't been invented; and (2) they did not have as many techno-vulnerabilities as the modern empires have. The US govt's IT security system consists of persecuting in the courts anyone who hacks into it however benignly.

    Nope not permanently. Where did I say permanently? Only for a few hundred years.

    note in the original post I specified "at least in the short and medium term"

    Reigns of terror tend to end rather dramatically when the oppressed sense significant weakness in the oppressor, revolts spread like wildfire, empire goes bye bye.

    Yes technology changes everything. Whether it changes everything to make it more or less difficult to eradicate subdued populations and instigate reigns of terror is left as an exercise to the reader. Honestly I'm really not sure, good arguments to be made on both sides of that, but I am reasonable sure we are going to find out

    I agree harmful and helpful makes a lot more sense. Positive feedback loop with negative consequences is a pita to type. Maybe PFLNC :) Or better harmful feedback loop ?

    Ohh wait :)

    The blowback from actions of that nature,specifically destruction of large swaths of human population centers would not only be felt from "allies" but those of the initiators themselves.wholesale butchery of populations is not in fashion as it was in the 12th century

    I think we would be way past endgame at the point of which you would see this happen.At least I hope so.

    Snuffy,you have faith.Sorry,but faith just does not cut it anymore.

    Maybe the propaganda and outright lies are becoming increasingly obvious, not more common, as the curtain is inexorably pulled back by debt, geology, and population.

    I don't have a answer but its a natural outcome that as the geopolitical feedback loops strengthen that we will see a move to more propaganda.

    Understand the root reason for propaganda is to convince people that if only this one group or problem was eliminated by any means then nirvana will be just around the corner and the land will again flow with milk and honey like it did in the "old times".

    The critical part of propaganda is to justify any means to accomplish the goal because it is worth and just.
    A perfect example is the invasion of Iraq because of WMD.

    And the second part is to focus on a scapegoat and give justifications as to why this particular group or concept is the cause of all the problems.
    A perfect example for the US is the focus on illegal immigrants as the group thats causing all our problems by taking "our jobs". The fact that we have no desire to work these mundane jobs is not relevant nor is it important that if these jobs paid a living wage supporting a more American lifestyle we could not afford the resulting products or services.

    I just love the fact that propaganda is almost always developed on top of a utterly logically flawed argument. Its amazing how powerful the concept of presenting wrong logic as the truth is.

    I bet with some work you could show that every single type of flawed logical argument that based on impossible propositions is used in propaganda. The favorite of course is the beautiful women or man using or doing X with the implication that if you use or do X your beautiful.

    We have entire industries such as fashion and advertising based on this flawed logic.

    Humans are amazing.

    Shocking piece of pure propaganda b.s. on a bbc R4 prog tonight:
    Blames it all on speculators causing the "high" prices. But don't bother listening, we have better things to do with our time!


    One easy way IMO to support the validity of this theory is to see how the road traffic is now (at current gas prices) vs. the level it was a few months ago when prices were the same (but on the rise).

    It seems to me that traffic (and other economic activity) are much lower now after having gone through the demand-destructive raking that took place when oil prices peaked a few weeks ago.

    I think we are seeing the effect that you describe.

    I must agree with your name, Ignorant! I look down on a major road intersection in the uk, and have not noticed so much as the slightest reduction in traffic over the past year.
    I have on the other hand noticed a catastrophic falling off of customers for a waste skip depot (an obvious follow-on from the housing slump). They have taken to driving out with half-loads presumably to give their drivers something to do rather than just sulk at base over their fate. No sign of demand reduction there.

    Thank you, jeffvail,
    for codifying this nonlinear-response theory. I echo the people above who feel sick at the prospect, but history won't be denied.

    Too often we post here about incremental remediations that could offset our mounting problems, ceteris paribus. But as Murphy observed, "Variables won't; constants aren't." We can certainly count on some global player turning spoiler rather than going down quietly - the only question is who's next.

    Clearly there has to be a limit to a "scale-free" model, given the finite world, but even on a national scale, a state can control information flow in a way that a criminal gang can't, for example. Right now we see, going from the small to the large, the atomizing of families, the terrorizing of neighborhoods by gangs, the collapse of cities like Detroit and Cleveland, and criminal threats to whole nations like Mexico. These are superimposed, not separate threats to civilization, hollowing out the institutions that form the bulwark against external threats.

    When I watch "Cops" I'm amazed by the overwhelming force that's typically brought to bear against one lone knucklehead. How many bad guys does it take to overwhelm a system, and how does that number change as the scale increases? The US doctrine has always held that the military must be able to wage two large wars simultaneously, so how does that system degrade when a third war starts?

    One thing about fractal models: their responses can turn chaotic in an instant.

    Here is the question..

    How long before 8-10 of the "knuckle heads"get together and set a .mil style ambush for the police.What would be the result?

    This is an excellent question...especially when the police start moving up the "food chain" to suppress the middle(and former middle) classes.

    Politically literate and technically competent people, many with military training and leadership skills are "a whole nother slice" from the petty criminals and drug users the police (mostly) limit their depredations to now.

    PDF warning:

  • The ratio of police to population is about 2/1000...thin blue line indeed.

    The amount of oil is set. In places where political unstable, oil production will be throttled -- but in the end it will be exploited. Ten years from now or thirty years, it won't be matter much. I guess you can do this : for each exporters you give a score of fix asset, oil production, consumption, and political stability. People already did a lot of model on the first three variables. The political stability variable will be either a positive feedback or negative feedback: ie it can increase or decrease the production rate (another exponent curve, I guess). I can see in poor countries which need money now like Mexico, Malaysia, the pressure to exploit the resource is quite tremendous. While Norway can afford to slow her throughput to "better manage" her resource.

    Overall, it doesn't change much on the grand-scale but for sure this does greatly affect "Price". If a change of a few percent in oil production can increase price by 30-50% then a lot of players want to catch in on this.

    I think your curve is a bit confusion (the one with blue and red curve). If it's oil production, then the area below the curves should be about the same -- so i would expect a sudden fall but a longer tail. May be a plot of price will better show this political effect.

    I disagree that the area under the blue and red curves will necessarily be the same. It will require the highest technological achievement and utmost engineering effort to fully exploit deepwater GOM or tar sands. The time may come that we just can't build another Thunderhorse, or a plutonium fast breeder in Athabasca. When we're all broke and hungry and at war, that is.

    I think you misunderstand what I wanted to say: I am thinking the black curve has all of those "impossibilities" taken into account while the blue curve is just the black curve convolved with the geopolitical situation. Of course, I don't expect the area of those two curves to be the same but it should be very close unless we talk about total destruction of human civilization before we could exploit that resource (ie w/in the next 50 years) -- of course, that is a possibility.

    Okay, "very close" instead of "the same?"

    Maybe if we count historical total world production, sure. But if we're talking about the oil that's left to be produced, then no, it's not conceivable that the decline of our civilization will prove to be so benign and predictable that we'll be able to maintain the kind of technology, engineering, and program management that are required to render our future low-EROEI petroleum projects feasible. We can't mine the tar sands with pick & shovel if we can't keep the workforce warm and fed. The oil five miles below the sea surface will most likely remain there.

    Law of Diminishing Returns/ Law of Receding Horizons

    unless we talk about total destruction of human civilization before we could exploit that resource

    I think that's roughly what Jeff had in mind with his curve crashing steeply to zero. But it would not need the total destruction of human civilisation to do that. The current technology required to extract oil from most sources is dauntingly complex. It depends on huge expertise, engineering supplies including specialist electronics, and a lot of travelling to bizarre locations and vast investment in uncertain prospects. All those in turn depend on having an adequate electricity supply and liquid fuels supply and functioning money and economic system.

    My personal bet is that it is highly unlikely that all that lot will still be around in 20 years time (or even 10). And then there'll be no-one operating oil wells. AND!!!! By then the market for oil will have collapsed anyway, because nearly no one will be able to afford to use it, or transport it to where it is needed. I for one will be busy enough trying to grow my Lord of the Manor's food without dreaming about stuff that's metres under the ground.

    This is so much the same story as Gail's post of yesterday on the likelihood of electrical grid failing sooner and more erratically than we think. Virtually every infrastructure system is vulnerable to this sort of disruption. When the environment starts hitting limits, all sorts of responses become non-linear and chaotic. Even here at TOD I think we vastly underestimate how much chaos we're in for.

    cfm in Gray, ME

    What else can we do but plan on a linear evolution? Not that I disagree with you, but by definition we won't be able to predict the nature or timing of the chaos. Gotta do something!

    ...the right half of the global oil production curve will not look like the left...

    Yes, for many reasons. 1) The asymmetry of the population and resource consumption graphs; 2) not just ELM and geopolitics, but also simple hoarding (without pejorative connotation -- Saudi King says some should be saved for kids).

    ...if al-Qa'ida successfully destroys the export terminal at Ras Tanura,...

    This is a joke already. See the BBC documetary, "Power of Nightmares". See the David Frost interview with Bhutto (where she says bin Laden is dead). Soon enough, with Russia's revival, US intelligence agencies will no longer need this scarecrow.

    However, it can also be argued that financial turmoil mitigates the geopolitical problems of peak oil by destroying demand and reducing scarcity (though, as mentioned above, this is a double edged sword because it may increase inelasticity of the remaining demand).

    Yes, impoverishing the population reduces demand. But this is why gov'ts need to get ahead of this and assist their populations in adjusting to the new reality. The devastation and suffering caused by "the inelasticity of the remaining demand" can be averted returning people to the land, rebuilding small walkable towns, relocalizing, etc, preceded by many less radical measures on the downslope. (And yes, population has to be addressed globally.)

    This won't happen of course until we've gone some distance down the other road -- the oil consuming nations will (are waging) wage war (against each other, and against oil possessing or pipeline-strategic countries) for control of the remaining oil -- which is really the big geopolitical loop you are talking about.

    I don't know that models can work very well in this whole area. Too chaotic. Of course, you and I come at this from different perspectives. Yours is one looking for ways that this whole thing can be managed within the framework of the current (New?) world order. I think this is the beginning of the end the current world order. I don't know exactly what it's replacement will be like. But the lack of hydrocarbons and energy in anything like the amounts we are accustomed to put constraints on what's possible. Getting there will be a bitch.

    ..if al-Qa'ida successfully destroys the export terminal at Ras Tanura,...
    This is a joke already. See the BBC documetary, "Power of Nightmares".

    Wd be great if it was but you fail to present any credible evidence. As an anti-war activist I watched Power of Nightmares and can confirm it was a masterpiece of propaganda deceit. Falsely making out that Islamic terrorism originated in the 20th century, when in reality it can already be seen put on record in the Qur'an, for instance the opening of chapter 59, "Exile" (i.e ethnic cleansing of peaceful Jewish civilians from Arabia sanctioned by Allah).

    gov'ts need to get ahead [......] returning people to the land, rebuilding small walkable towns, relocalizing, etc,

    Yes but gov'ts won't. The experience of history is that gov'ts are great at causing problems and utterly useless at sorting them. And even with a total relocalisation the sums would not add up, there is simply no way the planet can support more than 1 or 2 billion people without the whopping oil supplies underpinning current food production.

    I think this is the beginning of the end the current world order.

    Most of us here suspect that to be the case, but the point of these discussions is to get beyond such mere assertions, to reasoned arguments of whether they are likely to be true or not. We start with the dodgy "null hypothesis" that things can continue with BAU, then try with increasing difficulty to dismiss challenges to that hypothesis to find a way that they can.

    This arrow system is starting to annoy me. As far as can tell, it is becoming more and more of a popularity contest. Did RPC say something rude? Was there an intent to mislead or lie? Frick's sake people, grow up a bit, eh? (This is not meant to imply I agree with this or other posts, nor that I disagree.)

    On to the content.

    Yes but gov'ts won't.

    Governments are. Some governments, but primarily local governments. Be careful how you paint things. Do I think the collective "they" will do enough? Almost certainly not. History tells us this, or there would be no such things as "accidents," previous collapses, President Bush, etc. While highly pessimistic, I also do know it is *possible.*

    Most of us here suspect that to be the case, but the point of these discussions is to get beyond such mere assertions, to reasoned arguments of whether they are likely to be true or not. We start with the dodgy "null hypothesis" that things can continue with BAU, then try with increasing difficulty to dismiss challenges to that hypothesis to find a way that they can.

    This is an unfair statement. 1. Not everyone has the time, knowledge or resources to do research and write white papers. Some of us can only join the discussion in progress. But this is how all public policy is done. A few do the number crunching, research and experimentation, but many analyze, hypothesize and even draw conclusions. (Most often, even the best hypothesis is not much more than a guess.) Otherwise, you are saying the public has no voice. This is certainly not the case. (Or, shouldn't be.)

    So here are my assertions:

    1. People are part of the natural system.

    2. The world is a complex, chaotic system that does and will experience disruptions (bifurcations).

    3. We now have at least five elements of the system experiencing first, second, third or even fourth level bifurcations: energy (oil) production, socio-political systems, the economic system, climate (most likely well into it's fourth bifurcation, perhaps more, and on the edge of a massive drop into observable chaos), food production (esp. bee die-off)... etc.

    4. It should be expected that attempts to steady the system, much like trying to steady a spinning top, will only lead to greater disturbances.

    5. We are well and truly screwed.

    Support? #1 is a given. #2 is a given. #3 is a given, though the number of bifurcations can be argued. #4 is a given. #5 is highly likely if one accepts the model of chaotic/complex systems at face value. And all the myriad post here/books read/videos watched....

    So, we are now in crisis mitigation mode (or should be). Personally, I am very much in favor of altering the debate on all these points from "If..." to "Let's..."

    But none of this means there is no room for people to speculate and assert.


    ccpo- You're correct that some governments are relocalising etc. But as you say, it is only some local ones. And the most important levers are in the hands of national govts which just about all are not.

    As for your comments on these words of mine:

    Most of us here suspect that to be the case, but the point of these discussions is to get beyond such mere assertions, to reasoned arguments of whether they are likely to be true or not. We start with the dodgy "null hypothesis" that things can continue with BAU, then try with increasing difficulty to dismiss challenges to that hypothesis to find a way that they can.

    I can't see how your comments relate. It looks to me like you have imagined something in there that wasn't! Quite what sentence in there do you disagree with? I in no way wish to exclude anyone from usefully contributing to the discussion with reasoning or evidence or even novel speculative hypotheses. All I was proposing was to get beyond mere routine assertions as cited, regardless of whether they come from Allah herself or even the Venerable Simmons. That's because such mere assertions tend to tell us little and mostly just waste space. On the other hand, novel hypotheses can merit presentation, as food for further research. Anyway, you'll be pleased to know that I don't have the power to shut the asserters up anyway!
    [PeeEss - On further massaging of my remaining braincell I agree with your point that all should be free to state their conclusions; just still I think most readers here will agree that cogent reasoning and evidence are the things that contribute the most to this site and which should be encouraged from all posters.]

    As for my post's plummetting popularity ranking, I think you'll find that that citation of an 'inappropriate' part of the Qur'an had everything to do with it!

    That's because such mere assertions tend to tell us little and mostly just waste space.

    That one pretty much sums it up. Perhaps i am splitting hairs, but I see some Ivory Tower in that statement. As I said, some people really can only add insight via assertion/opinion, but sometimes that insight is dead on. I am loath to simply dismiss such.

    An example that doesn't really fit, but in the broadest sense does, I think: I have an idea for a generator. I am not in any way an engineer or even a tinkerer. I am one of those people that does work primarily in the conceptual plane. I solicited assistance with developing this idea. One of the two people who responded misunderstood one bit of phrasing and promptly refused to examine my ideas any further. Their objection was based on a response to jargon which to them, being far more knowledgeable than I, had a different inference than I intended. But I was summarily dismissed. This is the Ivory Tower in practice.

    I know this for certain because I know the basic concept of at least one of the iterations I dreamed up and badly diagrammed is in development and approaching production. That is, it works. It is different enough in design to be worth at least a little effort to develop, but again, I was dismissed.

    Now, I can't prove my ideas with math or theory. It's just an idea on paper. But there is the happy accident that a company is currently doing essentially the same thing.

    So, suppositions might just be worthwhile even if the person offering them can't take it to the level of rigor you request. Sometimes people just know.

    As you suggest, perhaps I am reading too much in.


    ccpo - I've already agreed [in my PeeEss bit) that there was justification in your comment. In your latest what you are talking about is a hypothesis rather than an assertion (well a proposed invention which amounts to a hypothesis that the invention would be a good idea!). And that IS the valuable sort of thing that contrasts with me saying perhaps just "I think the doomers are right". (In various places you'll see me indicate why I find myself impelled towards the conclusion that the doomers are indeed right.)

    I know the problem you describe of misunderstanding the jargon. It's important that "experts" recognise that just because someone doesn't know the terminology it doesn't follow that they can't make a groundbreaking discovery. In fact most great breakthroughs come from outsiders (myself being a multiple case in pt). But meanwhile, a person with a worthwhile idea should try to do the experts justice by studying their prior work and learning the lingo. And reply to the experts' dismissals to correct the misunderstanding. Though of course all too often the experts don't want to understand a breakthrough from a "non-expert" anyway.

    It doesn't matter a fig how great your idea is if you are not able to communicate it to people with reasoned/evidenced proof - or if you are not willing to put in the huge amount of work required to engage with prior research and learn the terminology and work out clear explanations that others will be able to understand.

    In the absence of this you can't reasonably expect others to just take your assertion as having any value. That's why mere assertions are a waste of space. Ok?

    The fact that someone else is apparently doing the same thing proves zilch, except that those innovators did do that required homework. And they very likely may have had to work out some challenging twirks which you had overlooked - I speak from much experience as a proven inventor myself.

    or if you are not willing to put in the huge amount of work required

    This is where you keep tripping up. "Willing" often has nothing to do with it.


    I agree with this article's basic premise of Peak Oil influencing geopolitics, but assert a major mediating factor has been overlooked. That is the mindset of the G8 leaders, and to a lesser extent the mindset of non-G8 leaders.

    For example, Bush had the mindset of setting a war policy against Iraq without any physical proof of WMD, before or after the invasion, yet maintained the reasons for the invasion were perfectly justified. This infers invasion itself was the primary goal, i.e. for oil. By contrast Gore probably would not have had this predisposed mindset for invasion of Iraq due to his inclination for renewable energy, i.e. he would have been pro-diplomatic.

    Additionally, we can see on the topic of Russia's incursion with Georgia, McCain has been more belacose than Bush, with Obama taking a diplomatic, non-war position.

    Putin has led the incursion into the Republic of Georgia, and thus we can view him as a leader with a militaristic slant.

    We can therefore slot each G8 and non-G8 leader into one of two basic categories of; pro-military or pro-diplomatic in the prospect of, or the direct handling of geopolitical flare ups in relation to Peak Oil. The worst case scenario of course being conflict between two G8 countries headed by pro-military leaders, such as Putin and (potentially) McCain.

    Value factors could be added for the militaristic power of each G8 or non-G8 country in assessing their potential responses.

    Therefore, this awareness of leadership predisposition is critical in assessing the magnitude of geopolitical responses to Peak Oil.

    How does a geopolitical event which disrupts production cause the consumption of oil to increase??? Your red line looks to me to be extremely counter intuitive. Events which shut in production would tend to extend the time it takes to use up current oil in the ground. We are currently pumping crude as fast as we can use it and still can't meet theoretical demand. It is much easier to cut output than it is to increase it. There are several countries where this is occurring such as Nigeria and Iraq. Political incompetence in Iran and Venezuela are stretching out the time when it is no longer economical to pump there. You simply put the red line on the wrong side of the black line. For your theory to hold up there would need to be a mechanism for permanently destroying an oil field. Saddam tried that in Kuwait in 1991 and utterly failed. Rebel forces in Nigeria and Iraq don't aim to permanently destroy oil production but want to slow it enough to bring the governments to negotiate an equitable distribution of profits. In a sense there is no good news as far as oil is concerned. Geopolitical forces make oil more expensive than it would otherwise be and stretch out the current production plateau. Peace and competence in those countries would lower prices and make the drop in future production even steeper and mitigation more difficult.

    I don't see any reason why a field needs to be permanently destroyed--the reason why the red line is inside the black line is because the amount of disruption, in aggregate, increases in a positive-feedback manner. The fields in Nigeria aren't permanently destroyed, but that doesn't make the oil any more recoverable at present. The assumption you're making is that the conflict will be resolved at some point--if that happens, and if the global economy is still capable of performing present herculean feats of engineering and construction to extract that oil, then the production curve may be stretched out. However, I don't see any reason why the amount of oil shut in by present geopolitical disturbances will go down--the topic of this post is why it will generally go up, resulting in ever more oil effectively shut in by geopolitics. I think you're generally correct that militants in Nigeria, Iraq, and elsewhere don't want to destroy the oil but rather want to use it for their own ends. The problem, as I discussed above, is that there are multiple divergent and mutually exclusive outcomes sought by competing groups that fundamentally can't be resolved to meet the minimum demands of all sides. For this reason, while the oil may still be there, our ability to extract it will disappear faster than geology alone dictates, resulting in the red line (very) roughly where I placed it. If, at some point in the future, we resolve all our arguments and everyone suddenly decides to cooperate, then the red line could again cross above the black line. I'm not holding my breath...

    Jeff, fascinating contribution -- food for lots of thought. Thanks.

    However, Tomas Deplume's logic is unassailable: if geopolitical turmoil prevents us from having our jam today, the bright side is that that means that it will still be available tomorrow (or in 100 years' time).

    But my back of the envelope calculation suggests that the total quantity of reserves under your red line (URR-RED) is at least 20% less than the total quantity under your black line (URR-BLACK). Therefore your hypothesis is based on the assumption that geopolitical factors will somehow destroy or render permanently inaccessible at least one fifth of all ultimately recoverable oil.

    You acknowledge:

    If, at some point in the future, we resolve all our arguments and everyone suddenly decides to cooperate, then the red line could again cross above the black line.


    No. Even if geopolitical turmoil persists, there will always be some interlude during which 'high-hanging fossil fruits' will be accessible to at least some of the players. The red line will inevitably cross the black line unless human knowledge itself is permanently destroyed.

    I think a camel's back curve, or twin peaks curve, or reverse S curve followed by a low plateau would be a better fit. At any rate by default the total quantity under both curves should be identical.

    I'm not convinced that the red line will inevitably cross the black line, even without destruction of human knowledge.

    The first issue is that, regardless of what's geologically available, the shut in oil is only ever available if the geopolitical tensions subside enough. While it's certainly possible that these geopolitical tensions are short-lived, I think there's at least as good an argument to the contrary--that they will exist in perpetuity and never allow that red line to cross above the black line. The "inevitability" of the red line crossing the black line is predicated on the assumption that the geopolitical tensions preventing recovery go away--I don't see it as inevitable that this happens.

    The second issue, to me, seems to be EROEI and civilizational complexity required to exploit, say, deepwater offshore oil reserves. You need a large amount of surplus energy up front to invest in the infrastructure required to start pulling oil out of the difficult reserves. You need a vastly complex economic system in place to build the massively complex machinery required for the task. If either 1) civilizational EROEI falls below that required to build up sufficient surplus energy to complete the project, or 2) civilizational complexity falls below the threshold to coordinate such an undertaking, then that oil is stranded.

    That said, I'm not intending to argue with you just for the sake of it--it is very possible that the end result of near-term geopolitical turmoil is precisely as you suggest, that we have more oil in the distant future to rebuild, retool, and establish a more sustainable civilization. I really don't know where the threshold for EROEI and economic complexity is that will permanently strand oil, and I really don't know if, some decades in the future, we'll figure out how to resolve the root causes of geopolitical strife allowing us to access these reserves. I'm not sure this really helps the present situtation, but I'm certainly not against locating silver linings where they may exist...

    Just a footnote and a reference to a book "Globalization and the Race for Resources", Bunker & Ciccantell, Johns Hopkins UP. 2005.
    Industrialization arose as an iterative process in the context of competition between trading States achieving successive dominance.
    It is not possible to summarize the above historical review (it takes in Japan post WWII but stops short of recent China, and it looks as though Bunker died before completing his update), but I think it has relevance to modeling geopolitical elements.
    This iterative globalizing process is still happening (for example see the extraordinary way that China has been able to improvise competitive methods for accessing resources, including its own). However, we can assume that some resources (carbon fuel) must give way to new resources (eg solar). This next transition therefore appears highly likely to shrink the current total global industry and associated trade. Whether China can competitively skip from the carbon foot to a solar foot (given constraints on global access to other raw materials) will presumably determine the future. Alliances allowing rapid technology transfer could be the name of the game. China / Japan / Russia will presumably maximize their mutual trade and technological & organizational innovation and investment. Whether they can aspire to American majority mass lifestyles, however, seems dubious to me. One guesses that latter model of consumption is a dead-end, but as memmel said ... "Everyone that purports to know whats going to happen does not understand the problem.."
    Quote from Bunker:

    In order to implement thse economies of scale, nations competing for trade dominance developed new and more powerful technologies, financial and state systems domestically.

    However, Tomas Deplume's logic is unassailable: if geopolitical turmoil prevents us from having our jam today, the bright side is that that means that it will still be available tomorrow (or in 100 years' time).

    Not so. It means it will still be there under the ground (etc), but for it to be actually available would require the existence of the vast complex system that supports the existing oil supply industry. And that's highly unlikely as people keep saying here.

    The red line will inevitably cross the black line unless human knowledge itself is permanently destroyed.

    Same fallacy, the presence of the oil and the knowledge is insufficient on its own, as explained above.

    Agree. A possible analogy might be the hydrocarbons that we know are on Titan. Just because we know they are there and can even imagine how to obtain them does not mean that, in a time of decreasing energy availability, that we will ever be able to do so. Receding horizons is a very important concept.


    An interesting (?synchronous/related?) article:

    My feeling is that it approaches the same subject from a slightly different point of view, but the message is basically the (?)same(?); namely, how we consume the product now affects the way we will be able to comsume that product later.

    Needless to say -- an interesting article. What would be important is to push this further : We "have" this fix asset -- we can only take a certain amount per year and use it to "advance" humanity (the value curve). Imagine we just have the peak-oil curve -- the "value" curve won't be falling off when oil is peaked. There will be some lag time -- may be 20-30 years after oil production is peaked. Now, put in geopolitical mess in, I think, then we get the black/red curve you have. War and geopolitical will change the shape of oil output but not too much on the final number --- what really matter is the wasteful use of the resource that will decrease the "value" of that resource for the future generations. The "black" curve is not great but the "red" one is just terrible and that the path we are heading if we take the Georgian crisis as a guide.

    I guess for every country you can do a model of this value curve -- but how do you place a value? Is working 8hrs per day cranking out trucks and SUVs a good use of that resource -- we in the industrialized countries tend to think so. Whatever it's -- nature know how much she has, it's up to us to use it wisely.

    I believe that one strong argument to support a possibility of an accelerated collapse is coming from thermodynamics. Once there will not be a sufficient energy supply to keep lower entropy under control and once a system (our civilization) will start to slowly disintegrate it will be impossible to bring it back to lower entropy stage. A positive feedback loop will be controlling path and it will be accelerating run rate
    Lets take as an example all those huge drilling projects and any other highly complex industrial activities. They represent very low entropy. Once they will be (even temporary) abandoned there will not be enough energy to re-started them, there will not be enough energy to lower entropy. And it will be amplified and accelerated by positive feedback. A lot of oil, which appears to us nowadays as accessible will stay underground. I can imagine for example that an oil production in Nigeria will be relatively soon stopped and never resumed.

    Dead right. Let's all smile that at least the krappy kultyure of mickey mouse, coke, mcdumbolds and motorthugs will be gone for ever and ever more.

    The simplest way to get something to drive into the ground as in Vail's figure (curve in red) is to generate a differential equation:
    d2P(t)/dt2 = c - a3*Integral(P(t))
    The solution to this is:
    P(t) = InitialValue + c*(e-at-eat/2(cos(K*a*t/2)-K*sin(K*a*t/2))/(K*a)2

    What this does is show a quadratic growth of P(t) (kind of like acceleration due to gravity) followed by a suppressive effect caused by the integrated value of P. However, the reason this gets driven into the ground is that people start giving up on production. In terms of the math, it is actually a kind of negative feedback.

    So if you don't believe this happens, then use the Dispersive Discovery model, where the pressure on discovery and production continues to increase, but we get diminishing returns. This leads to the black curve in Jeff Vail's chart.

    Kudos to Jeff for raising the subject, because it is fascinating to ponder (and quite disconcerting) which way it will turn. I kind of doubt that people will give up that quickly on production, for many of the reasons that Jeff raises, for examples you might see things such as "causing a decrease in domestic consumption (acting to re-establish equilibrium)" -- which would cause some positive feedback once the negative feedback hits. Such is the psychology of consumerism.

    Curve fitting?
    What a lame joke.
    I'll make a reference of it for future yuks.

    We must assume that majorian has a mind able to calculate the result of differential equations from initial conditions and input stimuli, and therefore visualize everything w/o having to put pen to paper. Quite a talent you have there.

    Hello JeffVail,

    Thxs for this well-crafted keypost. I suggest an important decline metric to track is shrinking global grain reserves, and shrinking individual country grain reserves. Job specialization is dependent upon food surpluses, and when this basic network fails: the onset of rapid decline soon follows. As Nobel Prize Winner Borlaug states: "Without I-NPK, it's Over".

    The former breadbasket of Zimbabwe and Mugabe's idiotic policies of gutting his most productive farmers quickly led to broad societal decline. If aid imports of immediate foodstuffs and farming inputs such as grains, I-NPK, etc, had not occurred: the collapse would have been much, much faster, and the cascading blowbacks into the surrounding ecosystem much, much worse.

    But collapse it will as Entropy rules all. The question is if Zim can aim for Optimal Decline where the ecosystem is soundly protected to facilitate the postPeak establishment of new paradigm shifting networks. So far, their track record is not very good with the continued harvesting of bushmeat, stoning elephants, sewage overflows into housing and water supplies, shutdown of their native I/O-NPK sources...

    Contrast this real outcome vs if instead, Mugabe had gone to full-on Peak Outreach [which includes birth control]. Alas, the Zimbabwe Embassy never responded to my email sent years ago.

    If Mugabe had politically recast himself as a 'benevolent dictator' for Optimal Decline; not to the Zim Overshoot, but to the long term goal of a max sustainable Zim ecosystem, then his strategies and tactics would have been radically different due to the massive, mutual, non-coerced, societal cooperation towards this end.

    Imagine the ideas of Alan Drake, JHKunstler, and other leading mitigators, applied full force to Zimbabwe: ZPG, full-on O-NPK recycling, stockpiling of I-NPK to ease the transition to relocalized permaculture, establishment of large forests and other habitats for specie protection, SpiderWebRiding infrastructure to avert reversion to Nuahtl Tlameme backpacking schemes, voluntary Euthanasia, plus countless more ideas posted by other TODers on this forum....

    The 'predictive collapse and directed decline' end goal of Asimov's Foundations was to strive for an [understandably messy] Optimal Decline Phase to minimize the resulting extended timeline of Undershoot; the dire period of maximum resource decimation, tight feedback enviro-loops, knowledge destruction, and numerous extinctions before the next cycle of regrowth and civilizational change [if at all possible]. In short: accepting a measure of pain now for much less total pain in the future. Thru the Bottleneck we and the other species must go--but it can flow relatively smoothly if we choose not to line the exit with the whirling turbulence generated by countless blades of machete' moshpits.

    Recall my earlier posts on a hypothetical full-on Peak Outreached global culture gladly willing to gradually self lop off their fingers in relation to elevating extinction rates. This reducing digit countdown can serve as a constant reminder [and becomes self-limiting over time, too], to spur further non-violent Optimal decline to ourselves and the remaining species plus help accelerate the transformation to the next lifestyle.

    I would gladly volunteer to join Putin & Bush in the first globally televised [digitized?] Pinky Revolution! But I bet they don't have the 'nads for this; they would rather let billions remain ignorant of Malthus & Hubbert, then kill them, plus let this little blue marble go down in the worst ways imaginable.

    The prevailing, delusional, global mindset is that lobsters bearing fresh bananas in their uplifted claws will forever march endlessly across the deserts, mountain ranges, and other landscapes to our dinner tables. Obviously, this mindset needs to change if we hope to optimize the Thermo/Gene Collision path ahead.

    Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

    "Without I-NPK, it's Over"

    What's I-NPK? Seems to be important...

    I-NPK = Inorganic fertiliser. It has indeed been very important. Its disappearance in the next decade or two will be even more important, reducing the food supply to at best a level that can only feed a small fraction of the existing 6 billion. Malthus was right after all. Yet another genius of this unique-in-history sceptred isle.

    Right on,Bob Shaw and you,at least are smarter than yeast.Unfortunately,Mugabe is Reagan Revisited,with a vengeance.
    Fair bugger,that alzeihmers.

    Let's think the world. It would be interesting, if one could even roughly model the following:

    1. Oil production broken down based on API and sulfur content
    2. Crude Oil Export trends (ELM)
    3. Distillation losses due to changes in API/sulfur mix and the results for diesel, gasoline, kerosene, heating oil, bunker fuel, etc.

    After these three major effects were all applied, we could get a rough idea of total available volumetric flow of usable oil liquid end use products. Additional losses may then appear in petrochemical industries that take crude oil as inputs.

    I'm guessing that the picture after applying all three fixes would be significantly more serious than any of the three considered alone.

    Anyone up for the task? Is approx data even available for such a calculation?

    And does anyone know are the new heavy-sour refineries coming onstream anytime soon (enough)?

    Good posting. And a good initiative to think about the many factors that will influence the "post peak world". The problem is that there are so many that they make the whole system extremely complex (that is: chaotic), which will make predictions practically impossible.
    For example the effects of the (anticipated) "demand destruction" that is happening right now. Who can tell its timing, effects etc.? Demand destruction might go much deeper than it does now. For example in the industrialized countries about half of all travelling is for leisure and holidays. So if recession and inflation bites really deep people might draw their fun rides to a sudden halt and stay at home as they did half a century ago. People still would survive without fun travels, but the tourism industry would disappear (like for example in Colombia, when the violence discouraged overland travels) - which again is a very important employer in many countries...
    The demand destruction might even cause (temporary) oil production overcapacities, which again discourages the oil producers from new investments (that's also what for example OPEC is saying).
    It would be very interesting to learn more about price elasticity: I don't think that it is just a linear function, but depends very much on the complex behaviour of a heterogeneous mass of global consumers. There may be even "tipping points" like what is expected in climate modelling: Maybe you know the of the US traffic volume trendlines
    (e.g. (page 9)). Until recently, with petrol prices per gallon at about $4, there was a fairly steady rise. A closer look at the annual changes of mileage shows more irregularities - and the beginning of a continuous mileage decline in 2005. Maybe the price of $2 per gallon was a psychological trigger? Or maybe there completely different factors (overall economy, demography,...?) made the Americans decide to break the trend of driving more and more.
    And there is generally a delay before price signals take effect, which can be seen for example on page 78 of the Clingendael study
    This study also has an interesting explanation of price evolution: When there is a real scarcety (+ a delay until new supply or alternatives arrive) the price isn't determined by the (highest) production cost but by the amount the (highest) bidder pays. Maybe one day oil will only be available for the rich...

    The only thing, which I think is for sure is that "the other side of the Hubbert curve" won't be as smooth and steady as the rising side was.


    The Clingendael report is excellent. Thanks for the link. I see things pretty much as you do except for the "Maybe one day oil will only be available for the rich...". Maybe you're just teasing. If you look at it from the perspective of the majority of the world oil is already only affordable for the "rich". I suppose that definition depends on your check book balance. I've worked in parts of the world where $30 oil was only for the "rich".

    But the report and your remarks highlight some thoughts I've been pondering for a while. We saw how demand destruction of the early 80's and the subsequent competition of oil exporters eventually drove prices down to $10/bbl in 1986. Whether we see the same level of DD (15% global consumption decline)this time might not be as critical a factor in future oil pricing. I use Mexico with their accelerating production decline as the best example. Should DD significant lower export demand would the Mexican gov’t start selling their obviously diminishing asset at bargain basement prices? Given the dependence upon oil sales to fund their society there would be some pressure to do so. But they also readily see themselves sliding quickly down the backside of their production curve. As you say, somethings defy a confident prediction. But consider what they’ve seen in the last year: Mexico, like all of OPEC, has seen their income for the first 6 months of 2008 nearly exceed their total income for all of 2007. All of OPEC, except the KSA, admits they’ve reached their own PO or are very close to it. We’ve seen oil prices drop recently but can it be attributed to various exporters competing for market share or was it due to other factors?

    Back to a key point made in the report: In the near future oil pricing may not be controlled as much by normal supply/demand factors but by the ability of the purchasers to accommodate the sellers price. In other words, if OPEC can truly function as a viable cartel, could they set oil prices at a level sufficient to maximize income while not destroying so much of the world economies that it would force competition upon the exporters once more. Simply put: if DD ultimately reaches the same level it did in the 80’s perhaps the exporters can still generate an adequate income on the lower volume. Consider where we are right now. If the exporters were to reduce their volumes by 50% tomorrow their 2008 incomes would still greatly exceed their 2007 incomes WITHOUT an increase in oil prices above current levels. I doubt any exported had anticipated this years income level. And then assume (unrealistically) that oil prices don’t increase with such a production reduction. It would force an unprecedented involuntary DD. Only those economies wealthy enough to out bid others would be able to maintain themselves. So, of course, prices would rise.

    Granted, this is an extreme case. But that doesn’t mean it can’t represent, to some lesser degree, the new paradigm the report speaks of.

    a detail question. You wrote:
    "All of OPEC, except the KSA, admits they’ve reached their own PO or are very close to it."
    I know only a few OPEC confessions. If you have more details could you mail them to me? Thanks!


    Very thoughtful, as usual. I have a quick comment about the interaction of points 2 (Are Geopolitical Disruptions Feedback Loops?) and point 6 ( Is the System of Geopolitical Feedback Loops Solvable?). I agree that geopolitical disruptions are feedback loops and that they are probably not solvable. But it seems, intuitively, that a lot of us are waiting for the system to "fail," with some expectation that this will be ultimately a good thing. I don't know if I exactly see glee on the faces of TOD readers when the price of oil climbs, but there is an element of this, and it seems somewhat rational. E. g. if oil is $200 / barrel and unemployment is 20% (or your favorite disaster scenario here), maybe the country will wake up and mandate conservation, railroads, and wind turbines (or your favorite approach here).

    In other words, disruptions weaken the existing system of doing things, which at some point will allow a new system to replace it. This is sort of the "Russian Revolution" model of social change. In this case it is the very impossibility of solving the problem of geopolitical feedback loops which creates a political collapse that allows it to be solved. The fact that the disruptions occur earlier than would be predicted (the red line is under the black line in your graph) means that we'll have a slight cushion of resources to make the transition. Just a thought.



    I think you raise a good point--that geopolitics compounding the problems of geological depletion may actually facilitate change, and may (eventually) be a good thing. I've thought a lot about collapse, the desirability of collapse, etc. I'm not yearning for it, but I think collapse will present humanity with a huge opportunity to restructure--one which we could seize and make things better (if only when viewed from a very long-term perspective) or one which we could fail to seize and end up much, much worse. Still, given two futures, one where things are inevitably worse, and one where things may be much worse or somewhat better based on our actions, I'll pick the latter. There is a lot of criticism of this--while I don't really consider my self a "classic doomer" (I think we're most likely in for a "slow crash" over the next several decades that may actually lead to higher quality of life in the end, while likely also much worse quality of life for most in the interim), I think the point you raise is critical: we can change, and we can make things better, and a peak oil/geopolitically-driven collapse may be just the jump start that we need to do so. My concern is that I think large-scale reactions will be disastrous. Just looking at how prior revolutions played out, I think that on the Nation-State level we'll take very reactionary measures, instigate more conflict, find and persecute scapegoats, etc. However, I think there is a golden opportunity on the personal, community, and possibly regional level to seize the turmoil to come as a means to develop a better future. I'm just wary of any state-level revolution that hopes to accomplish this, though I'd love to be proven wrong there.

    On the red line/black line issue, I think that a greater resource cushion will be very helpful. As I've expressed above, I doubt that we'll be able to recover much of the oil and gas that is theoretically stranded by geopolitical disruptions. So, when talking strictly about oil, gas, other resources that are extremely challenging to recover today, I don't think we'll see the red line rise above the black line. Where I think that geopolitical disruptions have the potential to really create a resource cushion for future solutions to leverage is in environmental and intellectual resources. A faster crash in oil production may conserve some inorganic fertilizers (see Totonelia's comment on this above), may minimize the impact on global climate, may conserve water resources, conserve ecosystem, forests, species, and minimize persistent pollution. A faster crash may also preserve our access to accumulated human knowledge (a point that John Michael Greer made a few months ago). Of course, this may come at the expense of thousands, millions, or even billions of lives. I find it hard to root for a scenario that includes such a cost, though it may make the very long-run impact lower than it otherwise would be--utilitarian and anti-utilitarian philosophers should be having a field day with this debate!

    Jeff as I try to work out this problem the one thing that is clear is that we almost certainly will see the formation of energy rich technical enclaves that maintain a fairly advanced civilization. With modern weaponry they should be able to defend themselves agianst the starving hordes. These enclaves may clash but it seems certain they will form. Monasteries represent this sort of enclave in the middle ages and sea side trading cities another larger one. A modern society needs a fair amount of technical specialists so it would be a larger group then in the past but regardless of the scenario you use these seem to form.

    Most cornucopians are really people that recognize that you can form these sorts of enclaves what they fail to do is recognize the number of people that will take part in this post oil modern society will be far lower then the total global population. What happens next is really going to depend on how these enclaves interact with the large population of poor people.

    Memm I think your comparison with Medieval (more to the point, Dark Ages) monasteries is very useful mainly because it is so wrong!

    The thing is that those monasteries were extremely self-sufficient and resourced within their locality. Consider for instance the great St Bede who invented footnotes and the idea of numbering years from a particular year (2008 AD etc) and so on. Yet he never travelled more than walking distance from his monastery (at where Newcastle-on-Tyne now is of all places!).

    Dark Ages (and Medieval) monasteries grew all their own food locally. They had a vastly less hi-tech support system that your envisaged enclaves. They had a very modest lifestyle with little need to fear invasion by the poor -indeed they were committed to aiding the poor. They had a very strong ethos of community cooperation rather than of hostile fortress mentality.

    Another most important characteristic of the Dark Ages monasteries is their extreme remoteness, for instance the islands of Iona and to a latter extent Lindisfarne. This would make them less amenable to encounters with bandits (though both the above did get massacred at some time).

    Your concept of energy-rich technical enclaves is obviously very different. I find it improbable that that hi-tech would be sustainable for very long in the absence of the globalised capitalist-corporatist system that has been required for it so far. And the notion of a community that can be deeply cooperative within itself and yet ruthlessly hostile towards outsiders is one that only a special minority of sufficiently cooperative people could find a worthwhile basis for going on living.

    That enclave would have to include a large area of food-growing land. It would have to be more like a small nation than an enclave.

    A better model might be the medieval city-states of (non-British) southern Europe. But I don't think they existed in the Dark Ages which is the equivalent of where we'll be in coming decades (rather than the medieval which was actually an age of renewed civilisation, great cathedral-building etc.).

    I regret my knowledge of the relevant history is too sketchy; can anyone else add anything useful?

    ...mainly because it is so wrong!

    I can add only that you are,a t times, entirely to nit-picky. Your take on memmel's post is too literal. He didn't say they *would be.* It was a rough parallel that your critique doesn't really take away from. I think we are all capable of seeing how, given modern tech and organization, there would be material differences.


    entirely to[o] nit-picky. Your take on memmel's post is too literal. He didn't say they *would be.* It was a rough parallel

    Is he paying you to write this ;~}}?
    I didn't say he said that. And yet he did write pretty much that: - "almost certainly will see the formation of energy rich technical enclaves ..." etc etc ... "Monasteries represent this sort of enclave in the middle ages...."

    I tried to make a constructive follow-on and invited likewise. And I do so again!

    Robin, all you did was repeat what had already been said and make yourself look as if you didn't understand the original. Also, "sort of" there is important. It implies a rough equivalence rather than specific.


    Best Hopes For Shorter Ivory Towers,



    Memmel rightly addresses the maintenance of specialist knowledge needed by technologically advanced societies and speculates on the ratio of self-sustainable advanced enclaves to 'the others'. I like his, to me novel, understanding of the current Cornucopian position.

    Just as a thought, when I was working in regulation of biotecnology associated with plant breeding a dozen years ago, it was recognized that global 'seeds' technology was increasingly becoming proprietary and privatized. There was an increasing vertical integration (down to farmer seed producers) under 'higher food-chain' organizations, firstly chemical companies, then pharmaceutical companies.
    I wonder more generally though how much such advanced enclaves could suffer from loss of the economies of scale that currently underpin so much of our technologies? Silicon chips R&D and manufacture makes better sense if produced by the 100s of million I presume.

    Minor point, I acknowledge with RobinPC that specific past historical ratios offer only roughest comparisons with any future. The ratio of agricultural workers in early mediaeval Europe to direct employees of the Church might have been 5:1 or more. The great monastery of St Martin at Tours apparently had 25,000 tied-workers (serfs; one-up on 'slave')at the time of Charlemagne when he appointed Alcuin of York as Abbott. (The latter was a Saxon from England who had earlier gathered from Europe a valuable library at York before working for the Emperor as theorist, educationalist and diplomat.) One needs to be reminded that this period saw a massive loss of what we would understand as knowledge compared with the Classical era, in addition to the collapses in international trade and urban populations.

    I'd be very wary of comparing the coming age with the time/place of Charlemagne. A marginally less worse comparison would be Britain 300-400 years earlier, the first 2 centuries following the collapse of the Roman Empire:

    it is very difficult archaeologically to see what happened as far as settlement, farming and so on are concerned. There is hardly any written evidence from this time... In most of Britain, people stopped using and making pottery, ceased producing and using coins, built in wood (which has rotted away) rather than stone....

    And yet, I would paint the picture substantially more starkly than that. That is because we have at least two major new disadvantages compared to those Dark Age-ers.

    (1) In those days, due to lack of transport means, almost all people had long lived very locally, with the result that there were genuine strong communities in existence when the darkness fell. By contrast, throughout the UK and US there is now a huge mixup of harshly conflicting "diversity", competing "communities" sharing same streets and cities, and few people knowing most of their local neighbours. That gives a tremendously reduced social capital of trust on which to build.
    (2) There were a lot of people who knew how to do things in a low tech way. There wasn't an energy crisis-breakdown in 410 AD. Local people not only knew how to source food etc locally, they actually were up and running doing it, with the equipment already at hand. By contrast nowadays there has been the most stupendous loss of such basic survival knowledge (and required resources) among most "civilised" people.
    It follows that we are not going back to the Dark Ages, more like something more primitive than the Stone Age.

    I think a re-reading of Asimov's Foundation series is in order. The sort of modelling you are attempting is only possible on a very large and crude scale. In addition, you cannot gather and process the data fast enough to provide anything but an interesting historical interpretation.