Back from the future collapse

With his book "Reinventing Collapse", Dmitry Orlov reports to us from a collapse that he has actually experienced with the fall of the Soviet Union. Russia's past is our future and Orlov's book is a time machine to there.

Back in the mid 1990s, during the darkest time of the Russian economic crisis, the vagaries of my job of university researcher took me several times to Russia. Once, I came out of a train station in Moscow to face a long line of people standing along the wall of the building. Each one had something on sale in his or her hands: a pair of shoes, a shirt, a bottle of vodka, or something like that.

In any town, it is easy to see wretched people; especially rich cities seem to have more than the average share of beggars. But that line in Moscow was something different. These people were not bums coming out of the local skid row. They were ordinary Russians, the kind of people you saw normally taking the subway every morning to go to work; spending their time in front of a computer screen in an office; and, in the evening, back to the subway to go back home to watch TV. And now they had to stand on a line in front of the train station selling an old shirt of theirs. It wasn't just a question of people having to sell their old shoes; Russia was in shambles: no money, no salaries, empty shops, little food.

At that time, I was completely baffled; what the hell was going on? The Russians themselves couldn't understand. Mostly, there was some vague talk that all problems could be solved by adopting free market and democracy. That was being tried, but it didn't seem to help.

What had happened became clear to me only much later, when I understood that, in Russia, I was looking to my own future. It was Douglas Reynolds, American economist, who explained it to me when he came to my university and he gave a talk on the Soviet collapse. The Soviet Union had not collapsed because it lacked democracy or free markets, even though, surely, the bloated bureaucracy and the mad military expenses had helped. It had collapsed because of peak oil. Soviet Oil production had peaked in 1987, together with the crash of oil prices in the world market. Without the revenue coming from oil exports, the Soviet Union simply went bankrupt and disappeared.

Later on, things changed again. Having reduced its military expenses and having cut on bureaucracy, Russia could invest considerable resources in upgrading the old oil fields. With oil production picking up again, the Russian economy started to recover. In Moscow, money came back, first it created an entire new class of super-rich, but eventually it flowed also to the pockets of ordinary people. Restaurants opened, the shops started selling goods again and you wouldn't see any more lines of people selling old shoes in front of the train station.

Today, the dark years of the Russian economic collapse seem to be almost forgotten. Yet, it is a story that can still teach us something. If the collapse was a consequence of the Soviet peak oil, it was basically unavoidable. Then, it is unavoidable also for the whole world, as the global peak oil is approaching. Right now, in September of 2008, the turmoil that is taking place in the financial markets may be the first signs of the impending global collapse.

Several people have recognized the consequences of peak oil and have tried to imagine the future worldwide collapse. Among many others, Howard Kunstler has told us of the long emergency; Jay Hanson saw the global "dieoff" and Richard Duncan gave us the "Olduvai scenario", that is the return to stone age. But none of those who are talking about collapse have actually lived through a real one. Except one: Dmitry Orlov. Born and raised in Russia, Orlov reports to us in his book "Reinventing Collapse" his view of someone who has really been there, as opposed to that of someone who has just heard of it.

The basic thesis of "Reinventing Collapse" is that the Soviet Union and the United States are similar organizations that are following identical paths, although shifted in time of a few decades. Sure, there were many obvious differences in the way things were managed in the two superpowers. But the bottom line was that they were two empires whose power was based on mineral resources - mainly crude oil. With the local peak oil in 1987, the Soviet Union had to close shop and disappear. The US saw its national peak oil in 1970, but managed to keep running by taking control of the Middle Eastern oil. However, that was just postponing the unavoidable. The destinies of the two countries are the same and now it is time for the US to experience collapse.

The book by Orlov is impressive in its details and its deep insight. I found it completely convincing on the basis of my own experience in Russia and Ukraine. The book is like a time machine, with Orlov coming back from the future and telling you all the details of it; including what you are going to eat, how you are going to take a shower, how you'll find to find shelter and how to travel. That is, of course, if you'll be able to do that; all these things are not at all granted during a collapse. But Orlov gives you plenty of useful tips on how to survive and even be - moderately - happy. Look at what is around you and ask yourself, "will it survive the collapse?" If it won't; then start thinking how you can do without it. Then, be flexible and try to adapt. If you know what to expect, at least you won't suffer of depression.

One last comment about this book is relevant to the members of the Western "peak oil movement". According to Orlov, there was something similar in the Soviet Union. It was a clandestine movement which, nevertheless, managed to gain a good understanding of what was going to happen and to publish it in the "samizdats", home printed documents; the only way to bypass the official information circle before the internet era. Those people got everything right but, of course, they were ignored. After the collapse, they were ignored as well. In a world where collapse had already occurred, there was no more interest in knowing exactly why it had occurred. So, if you are in the peak oil movement, don't worry too much. Whatever you do or say, it won't change a thing. So, take it easy!

Gail the Actuary has also reviewed Orlov's book on The Oil Drum . Note also Dmitry Orlov's blog "ClubOrlov" . You can find Orlov's book here Reinventing collapse

So, if you are in the peak oil movement, don't worry too much. Whatever you do or say, it won't change a thing. So, take it easy!

This is probabaly right however it gives me no comfort to hear it even three years after becoming peak aware. We cannot stop peak oil or it's awful consequences but we can prepare ourselves to avoid what is described in the post as the personal depression which will haunt many of those who really won't understand waht happened.

To that end, spreading the word through TOD and other websites, personal talks to friends and family, becoming part of a local community movement and having the courage to drop-out early from the industrial-consumer treadmill, may make the transition at least a little more secure. The greater the number of peak aware in your local community, the less likely you are to see violent outbreaks in the serach for scape-goats.

So, if you are in the peak oil movement, don't worry too much. Whatever you do or say, it won't change a thing. So, take it easy!

The real estate/mortgage market inthe US is beginning to 'price in' peak oil. Most of the foreclosures have taken place in the 'edge cities' and exurbs that require two and three hour auto commutes.

I suspect the Soviet Union was a mess long before the collapse. I recall an article written by a US military officer who went to Moscow as a part of an arms treaty negotiation. He had to meet an official outside of the city. He noted that the road to the meeting place was a single lane dirt road. He remarked that the US fear of 'Soviet Might' was misplaced; the USSR was a third world country.

The best place to experience the post- peak world ... and get drunk too ... is to visit New Orleans. Some parts are nice ... some parts are really hellish. It's a peak oil study, too. When the 1980's Gulf of Mexico oil boom ended, that's when NO went into terminal decline.

As for our current economic crisis ... I don't think it has an oil component, more of a 'long- term return on investment' component.

Don't read my blog!

hi Steve,
It's a deal ...... you don't read Orlov, and I won't read your
advertized blog.

That way we'll both remain ignorant and can continue with undocumented hearsay like:
*He had to meet an official outside of the city. He noted that the road to the meeting place was a single lane dirt road. He remarked that the US fear of 'Soviet Might' was misplaced; the USSR was a third world country.*

Whether "we" should continue to choose our "fear" targets by means of the guidance of the US military is doubtful ... given the high cost and low return of so doing in the recent past.

Fair enough, nobody knows everything. Ignorance is relative.

I don't think much of US military policy but that doesn't mean individuals who are in the employ of it have no senses. Official US policy up until 1989 made the USSR into an all- powerful bogieman.

Reports from the Soviet Union - by a lot of other individuals - usually remarked on shortages of basic items, such as food. They also mentioned a social order that was defined by alcoholism and paranoia. Development in the USSR was well known to be shoddy and unimaginative. The economies of the Soviet republics were undeveloped. The remark that best dercribed Soviet- style economics was, "We pretend to work and they pretend to pay us." The Ruble did not trade and exchange outside of the USSR was an outflow of military hardware and inflows of commodities such as wheat. If a country can't feed itself, it has problems, no matter how many nuclear weapons it has.

The Soviet balance of payments was effected by low oil prices in the 1980s, but their command economy was bankrupt long before. Because the ruble didn't trade, there was no way to measure, so the Soviets could maintain the illusion of solvency.

The Soviet government was fatally affected by the debacle in Afghanistan. The satellite states of the Empire, particularly Poland, the Baltic states and Czechoslovakia, noted that the invincible USSR could be defeated on the battlefield by small forces and simple weapons. The Red Army was demonstrably a hollow force. For an empire held together by arms and the secret police, the failure in Afghanistan was the end of the USSR.

A second great failure of the USSR was Chernobyl. The reactor failed because it was a poor design and the management idiotic. The lack of accountability in the Soviet government was exposed as a weakness. None of this had anything to do with oil prices.

As for the roads ... things don't seem to have changed much:

If someone wants to claim that the Soviet collapse was PARTLY peak oil episode, I'll agree to a point, but the context of that failure is important. Many of the same social ussues exist in Russia; rampant alcoholism, a non- productive economy (outside of energy) and a thinly traded currency. Their government's exercise of military force in Georgia is troubling. It makes them unpredictable. The next step is unreliable. Russia could fall into serious trouble, still possessing considerable petroleum resources.

Finally, the American financial crisis has little to do with Peak Oil. It is the cumulation of decades of small return on investment. This has reduced the savings rate to zero and made investors into gamblers. Right now, the speculative CDS market is pushing down the values of underlying securities - the mortgage based bonds that are corroding bank balance sheets. Intermediation speculation (swaps between banks) is doing the same thing to money markets.

This is my opinion and should not be the basis of investment decisions.

The thing is though, as an individual it can take years to prepare for peak oil. Part of it is that it takes time to eliminate debt, part is that it takes time to mentally prepare. It takes time to get yourself in a position where your transportation needs are minimized. It goes on and on..

Yet the world is still filled with people who are still on that treadmill.

Slightly OT, but I think that all Americans should send a strong signal to our elected leaders that we don't want this so-called Bailout for big fat cats on Wall-mart St. by calling our respective Parties and telling them that we will vote for an independent candidate this year if any of them go along with this utter travesty. Let's start a poll here on TOD to determine who we could all agree to write-in on election day and actually change something! To me this all stinks of just another "Creature from Jekyll Island". I am now having serious doubts about not only McCain, Biden and Palin but Obama as well. We can not just sit back and allow this to happen.

I have been trying to alert and prepare people for about seven years. I first heard of peak oil on the afternoon of Sep 11 2001, when by chance I picked up a book by Deffeyes in a bookstore in Berkeley (a date that I remember very well). I did some work on that, I think: setting up ASPO-Italy, publishing more than 500 articles and posts (most in italian), participating, I think, to at least a hundred meeting and conferences, appearing in TV (in Italy) dozens of times.

Very often, all that work was personally rewarding but, apart from my personal satisfaction, it was mostly useless. The concept of peak oil just doesn't "stick" in people's minds. We had 10 years, at least, to prepare; from the time when Campbell and Laherrere published their first article on peak oil in Scientific American; in 1998. And we are still moving blithely onwards. What is being done is too little and too late. At this point, I think that collapse is unavoidable, we can't avoid it. We can only try to cushion its effects, as individuals and as members of local communities. But it is still a shame, it is an epochal failure because we had been warned well in advance and we could have avoided it. But nothing was done, it is like one of those nightmares where you are chased by a monster but you can't run away.

What I can suggest is to read Orlov's book. I read it twice. It is very rare that I find a book so good and so interesting that I want to read it twice in a row, from cover to cover. But it had on me an effect similar to that of that first book by Deffeyes that I read in 2001. People say that wisdom comes from experience, and we have no experience of an actual collapse. But that book tells you of a collapse that really happened. That knowledge comes from experience and that is the way to gain a little wisdom. We'll badly need it in the future.

The concept of peak oil just doesn't "stick" in people's minds.

I first brought it up in 1988 in high school. We were having a physics lesson all about the internal combustion engine. The teacher said there were 500 million cars or something in the world. I said, "But they all burn oil."
"What happens when it runs out?"
"We can use hydrogen."
"Where do we get the hydrogen from?"
"Natural gas."
"Why wouldn't we just burn the natural gas? Why bother making it into hydrogen? And what about when the natural gas runs out?"
"Well, we can electrolyse hydrogen and oxygen from water, but that's a chemistry lesson. Anyway the oil will last for centuries."
"Will it? How much do we have?"
"I don't know."
"If you don't know how much we have, how do you know we have enough for centuries?"
"We have to get back to the class."

It stuck with me. Only this year did I get a driver's license - a condition of having a family, unfortunately. It always seemed a terrible waste to me.

Likewise, three years ago I was talking to a friend about his huge mortgage, and he said, "but that's okay, because prices always go up, so if it gets too much we can sell."
"What if prices drop?"
"What? Prices can't drop."
"Why not? The price of other things goes up, goes down, that's how an economy works. And they can't jump up forever, they used to be three years' wages, now ten, where to from here? Twenty years' wages? Fifty? Eventually the one richest guy in Australia will own every house in the country, nobody else will be able to afford them. So at some point the price will drop."
"But they can't drop."
"Why not?"
"Because then we'd be fucked."

Now, they've not dropped in Australia the way they have in the US, but in many places they've plateaued and in others dropped slightly. Where we used to see 75% sell after 30 days on the market, now we see 40% sell after 90 days. So the only reason prices aren't dropping heaps is that people just aren't selling.

Things like climate change and ozone depletion, these are not really foreseeable to a layman. You have to know the science. But things like having a debt 300% your GDP and eventually going bust, housing bubbles bursting, resource depletion - these are all common sense.

But people don't like to talk about them. A thought I had recently was the people saying, "well of course the Federal Reserve Chairman has to say these positive things, if he said negative things that could hurt the economy." The thing is, if the economy really were strong and stable it wouldn't matter what anybody said about it. I mean, if someone walks up to my tomatoes growing brightly on the vine and says, "they're doing badly" - that person's words have no effect on the actual growth. The only reason I need to fear their words is if they're true.

So people think that the economy is weak, and if we speak about that it'll burst the bubble and everything will fall apart. What we have then is an implicit agreement to pretend everything's okay and we can go on like this forever. We have to go on with the class, and things can't change because then we'd be fucked.

"Lalalalala I can't hear you!"

I'm not sure I agree with the conclusion that a lack of a natural resource, like oil necessarily means collapse. Obviously though every country must have something to offer for a price that moves currency with their economy. In the Soviet Union they apparently relied too heavily on oil. However numerous countries do not export oil and they do just fine. Japan is a great example of a country that imports almost everything, yet they're in the black every year. Why? Because they are extremely competitive producers of various electronic equipment and automobiles to name a few. They bring stuff in (import) change it to make things (manufacture) and then they send it somewhere else (export) to make tons of mullah.

The problem the US is having is the same historical problem Great Britain and the Dutch had, and that is borrowing huge sums of money against the wealth of the country while losing manufacturing. The US has steadily lost manufacturing businesses and high paying jobs along with those losses for years. Why? Because the Republicans adore the CEO's of the Corporations (because of campaign contributions to their party) and those CEO's make more money if the manufacturing goes overseas.

Wake up and stop letting these people sell you on voting for them based on guns, religion, the flag and any other distraction they can muster, and start voting in people that do things to encourage manufacturing here at home, and responsible regulations for the mortgage industry and this country can do well again.

But we need to focus on helping middle America, not the super wealthiest CEO's. Those guys will always do well no matter what.

About 3/4ths of the Economy of Japan is in the service industry - "Banking, insurance, real estate, retailing, transportation, and telecommunications." If they had oil they'd be relying on it unduly, Russia's example should come as no surprise, nor will Mexico's.

It pays to view the world as a whole and think of it as a city. Japan are in the big business district, they of course also cover parts of industrial zoning, which is almost entirely where the OPEC nations reside, albeit with a component which has offices in the skyscrapers. Most of the populace lives in really run down slums.

I wonder if US neocons saw how Japan was getting by and concluded that control, not ownership, of resources was the vital ingredient. Rather than regime change on other countries the Japanese did it by means of minority shareholdings, long term contracts, soft loans and vertical integration of production and processing. But what happens when those resources that cannot be piped or transmitted need difficult physical shipment?

I also wonder if the media has a 'collapse filter'. The rule seems to be don't show closeups of ageing celebrities and don't interview stockbrokers who may never work again.

Boof, control of resources is just as good as actual ownership especially when coupled with control over any tiresome restrictions such as wages or safety... Many countries have done this in the past either by colonising or threatening to take over and some are still trying this route.

Difficult physical shipment was done before the age of steel ships and oil but obviously to a much lesser extent. IMHO as oil, thus transport, becomes increasingly expensive then more "stuff" will be made locally (already happening to a small extent e.g. steel). There will be less discretionay/junk stuff shipped half way round the world.

I think your media 'collapse filter' is basically a "what sells filter", ideally for the media lots of young celebrities tragically cut down in their prime. can i say it's been done for the last couple of thousand years??

Control versus sovereignity:

Was the British exploitation of India more profitable under the East India Company, which controlled everything profitable but left the rajahs with the unprofitable hassle of governance, or under the Raj, which had to take responsibility for everything? I'm betting on the Company. Now of course the Company's racket proved unsustainable: the Mutiny happened because people could see who their true oppressor was, and some of the rajahs joined in.

So it's good while it lasts.

I don't know much about Russia and its collapse - I was only a tangential witness. However, almost every time I bring up TOD, I can see a Russian beauty at the top left of the screen with a link to

I find that very positive. It seems that collapse has a good side to it after all. :=)

Sorry,Alfred,that Russian beauty wants to sell herself to some mug Western male,the wealthier the better and get citizenship in a wealthy mug Western country.The way things are going she could be jumping out of the kettle into the fire.

However,it is a bit of an oversimplification to blame the Russian decline solely on lack of oil revenues.It was a very big ask to convert the USSR from a command economy in crisis to a functioning Russian Federation,nominally democratic, while many of the SSR's opted out,without chaos and suffering.

Neither Gorbachev or Yeltsin was up to the task.The same could be said of most of our leadership in the West at the moment.

Hey hey Cslater8,

I'm not sure I agree with the conclusion that a lack of a natural resource, like oil necessarily means collapse.

I agree. Resource constraints are a huge factor, but not the determining factor. It is a societies ability to adapt to the changes that determines its success. I find it surprising that Jared Diamond's book Collapse, How Societies Choose to Fail or Succeed, isn't mentioned anywhere in the thread. I do think that the US will choose to fail, but I'm not so sure about other oil dependent countries.


As John Michael Greer points out in a recent interview, the significant thing about Diamond's example cultures - the Greenland Norse, the Easter Islanders, and so on - is that they were all very small (less than 50,000 people) and very isolated cultures. So their collapses when they came were fairly rapid, over a few years - and correspondingly violent and unpleasant.

Would larger cultures be different? Surely - they have more resilience, more connections with other cultures to help them out. The historical examples of larger cultures of tens or hundreds of millions of people - the various Chinese empires, the Roman Empire, the Mayans and so on - took a century or more. Rather than everything falling apart over a year or two, it was 20-30 years of troubles and collapse, followed by another 20-30 years of stability and partial recovery, and so on.

What that means is that even if the US chooses to fail, it won't be overnight - and after today's failures, tomorrow may bring partial recovery.

It seems that the USA's main export is dollars. The real and imminent danger is not going to be lack of dollars but that nobody will want them.

It's all about resources and not money. Money has no intrinsic value. It merely represents our agreements amongst ourselves. Imagine, for example, Hoover Dam. It was built of scads of concrete, huge amounts of energy, gaggles of labor and cost beaucoup dollars. Which of these could be eliminated, and yet the dam still be built? Only the dollars. Take away the limestone or energy needed to cook it into concrete or the labor or (yes, again) energy needed to mold it all into a structure, and it couldn't be done. Take away the dollars and it could all still be done. We swim in a paradigm of dollars such that we cannot see that they ultimately have no real value. Sure, I know, you can shoot back at me - "Well, try to get by without money." Since we have constructed such a paradigm, it is difficult, but everything we do could be done without money. But none of it could be done without energy, no matter how much money was available.

I concur clifman. Dollars, euros, rubles, pesos or coconut shells, all the same thing thing. What they represent is an an entitlement to "spend" energy. Now whether we choose to invest that energy into something that will reap more energy - like growing food or we piss it away on pleasure cruising in hotted up cars, is the essential crux of free market economics.

its why the $700 Bn to bail out the banks is just nonsense. All it is going to do is move numbers around from one balance sheeet to another. It won't do anything to unwind the massive consumer binge in the US (and other western countries) which is just an energy black hole. There isn't really $700 billion in anyones bank account,it is just going to be written into existence, but it won't produce any more energy in the economy which is waht is really needed. Injecting that energy into the economy is going to be the real challenge for the next administration. No amount of funny money is going to make that happen. It will take radical measures and a New(er) Deal to make that happen.

I have been reading in the last few days"Since Yesterday" by Frederick Lewis Allen, which is about the Great Depression and it is striking how President Hoover simply couldn't get the economy working again. It took 3 years of very hard times to prepare the American people for the New Deal that FDR brought with him.

We haven't even gone through the Panic stage yet, but we are getting closer. I fear that whoever the next president is going to end up being a Hoover like figure, putting out fires for the next four years after which the American people may be ready for a serious strongman to come in and push them around.

You don't think Bush (and McSame) = Hoover?

Dmitry, once again, is spot on.

Reading Orlovs latest I'm struck with the thought that Paulsons move with this “Mother of all bailouts” is perhaps an attempt to counter the expatriation of US assets by the major $ holding Countries.

But then again I’ve probably read too many who done it’s in my life and am reading too much into this.

Hi The Oil Drum,

I emailed you a while ago but never heard back, can you please email me so we can discuss my proposal.


He remarked that the US fear of 'Soviet Might' was misplaced; the USSR was a third world country.

You can not ignore them but I suspect the danger was over blown as both sides had enough to do each other away. All the various military plans by the US ( Minuteman, MRV etc) was just more fancy gadgets to keep the funding going. It was creating jobs, was probable partly the rational.

What Orlov says is fine and dandy except that Russians have a longer history of self reliance. Self reliance has been beat out of the gene pool in the US for sure. What ever you need is in the store, no?

I doubt that self reliance has been beat out of the American gene pool. It has only been beat out of the culture.

Even posters at TOD want to discourage self reliance if it interferes with their world view. The anti ethanol view which predominates is clearly against self reliance IMO.

In fact many posters think we should sacrifice our own self reliance by not using ethanol so that that foreigners can become reliant on us for food instead of on themselves thereby compounding dependency for both of us.

The culture has become so distorted that self reliance is equated with crimes against humanity in the minds of some.

I'm not sure what you are getting at. When arguments are made against ethanol-from-crops it is based on EROEI, not a matter of self reliance. The argument is that producing ethanol consumes nearly as much, if not more, fuel than it produces and is therefore pointless. You can debate the calculations but being for or against the use of ethanol is not a matter of ideology, or whatever it is you are promoting.

Here in the southern Appalachian Mountains we have had self-reliant folks making their own ethanol for centuries! ;-)

A very large part of American crops are imported from Russia, Trinidad, and Saudi Arabia in the form of ammonium nitrate. Essentially we import our biofuels from the same countries we import our oil from.

"It [the Soviet Union] had collapsed because of peak oil. Soviet Oil production had peaked in 1987, together with the crash of oil prices in the world market. Without the revenue coming from oil exports, the Soviet Union simply went bankrupt and disappeared."

I can say that of all the radical, odd, strange, and narrowly fanatic ideas I have ever read, this one takes the cake. If any thinking person even in the peak oil community can accept the above theory as anyway supportable by historic evidence, they should present such evidence, and given the radical nature of the contention above as given it should be the strongest possible evidence.

Outside of the peak oil community I can tell you without doubt that the contention that "peak oil" (which has been demostrated not to have been the peak in any form that M. King Hubbert would have defined it) is what brought down the Soviet Union will be seen as nothing more than a fanatic desire to tie anything and EVERYTHING that has ever happened in history to peak oil. The idea will carry all of the scientific weight of those who believe that aliens in UFO's assisted the ancient Egyptians in the design and building of the Pyramids. I am sorry to have to be so direct, and I probably would have been better off not to comment on this post at all, but there are times when someone must speak up and ask, "Did you really think about what your saying? Is that really what you want to say? Do you really want to go on record with that?"

I beg folks to remember that this board and the issue of oil depletion and energy production are now central topics in every advanced nation. These debates are now public. The problems and dangers are real. People new to this issue come here to learn. Is the above contention by Ugo Bardi the type of intellectual rigor we want to present to the world without any questioning or counter argument? Others here will have to decide that one.

Now you can give me all the down arrows you want to, I will take them gladly if my post causes anyone to actually THINK, QUESTION, ASK.


Hmmm ... Soviet oil production did actually peak, and their economy did actually collapse.

Availability of excess affordable energy comes before any economic growth.

Their subsequent recovery to more affordable oil following investment proves that production peaks have nothing to do with reserves - peaking is about oil that is both profitable and affordable.

There has to be an excess of affordable energy for economies to grow, in the case of Russia new investment led to increased affordable production for a while - they were not at the limits of technology/debt at their first peak.

You should not assume that the world can produce ever more affordable oil and still make a profit forever - it is mathematically impossible and Russia currently seems to be an example proving that fact. (As well as the UK , Mexico, Norway etc who use the best technology available!)

Soviet oil production did actually peak, and their economy did actually collapse.

Post hoc ergo propter hoc fallacy.

The USSR had serious economic troubles years before their oil production peaked, and internal political troubles intensified shortly before then as well. See here for an introduction.

Another appropriate thing to note here is that correlation does not imply causation. It's entirely plausible that the two events - peaking of Soviet oil production and collapse of the Soviet Union - occurred in proximity because they shared the same underlying causes of economic and political trouble.

You should not assume that the world can produce ever more affordable oil

He's not. You seem to have missed his main point, which was absolutely true, so I'll repeat it:

Outside of the peak oil community I can tell you without doubt that the contention that "peak oil" what brought down the Soviet Union will be seen as nothing more than a fanatic desire to tie anything and EVERYTHING that has ever happened in history to peak oil.

World oil production will peak; that does not mean that peak oil explains every bad thing that has ever happened. It absolutely does look like blind fanaticism to shout "peak oil!!" as the answer to every question, and blind fanatics are not effective educators.

As usual you have deliberately infered something I didn't say, and I certainly didn't say that everything in history is caused by peak oil.

I did not say that their peaking caused the economic slowdown, but both events happened and they ARE linked.

Less affordable energy can cause an economic slowdown or a slowdown from some other cause can result in less affordable energy. That is why on TOD finance and oil are both discussed.

In the case of the Soviet Union, production of oil peaked several years before the collapse in 1991, importantly, 'peak lite' would have been several years before the ~1985 peak. The peaking phenomenon is caused by oil becoming less proftable/affordable, so it seems more than plausible that less affordable energy was the prime cause of a cascade of events that led to the economic slowdown and political collapse. If the ultimate cause of the Soviet collapse was indeed their peak oil then the USA would do well to watch and learn from the disintegration of their Federation.

Also Russia is, like the UK, a classic example of ELM in action, their exports halved in 5 years or so.

Importantly, you won't be able to tell the difference between a recession caused by peak oil and a normal downturn for several years.

When we do get an economic downturn that is caused by world Peak Oil it will likely be very serious for importing nations, so you would do well to learn from Dmitry Orlov's experiences, it might save your life.

Asserting that Peak Oil isn't the cause of our current economic problems and thus it must be something else is possibly wrong, leading to totally inappropriate solutions. We have had world 'peak lite' for nearly ten years now, the economic failure has come in just the last two.

Clearly the peak of Russia's oil output wasn't their final peak, but after much investment, you should not assume that their current production will ever get back to the levels seen in the mid 1980's or that the 2005 peak in world 'net exports' is only temporary.

Correlation is not causation. Repeat that three times and then look up the definition of post hoc ergo propter hoc complete with some silly examples. There were many reasons that the Soviet Union failed; the number one reason was Karl Marx's economic theories are pure BS and central planning for everything in a society doesn't work.(Peak oil did not cause the chronic shortages of damn near everything in Soviet Society.) The Chinese Communists have discovered this and are fast becoming just another dictatorship with an elite class while embracing capitalism and still giving a bit of lip service to "scientific socialism."

Here is a good one for you. I spent a lot of time in Arizona when I was young. (A long time ago.) A number of tribes still faithfully preformed a rain dance as they had done so for god knows how many years. The rainy season always followed the rain dances.

Soviet oil production did actually peak, and their economy did actually collapse.

That statement is absolutely irrefutable. Its context made it perfectly clear that Xeroid was suggesting that perhaps there could be a connection. He was not assuming that because the two events correlated that there was necessarily causation. You have stood post hoc ergo propter hoc on its head and are using as little more than a rhetorical device.

Your assertion that the cause of the collapse was Karl Marx's economic theory is just as subject to charges of post hoc ergo propter hoc as is Xeroid's statement (actually more, since he does not specifically make the correlation, whereas you do). In any case, your assertion doesn't explain why Marxism survived 70 years and only failed when oil prices collapsed.

Another appropriate thing to note here is that correlation does not imply causation.

So what! I for one am getting a little tired of seeing this supposed logical rationale trotted out as if it explains or rufutes anything heretofore opined.

xeroid (and others) have as much good reason to believe there is a correlation of causation in this matter that not only implies but leads them to conclude it relevant.

These inane truisms of Logic, that Pitt the Elder is so fond of repeating, does not at all mean they are the be all and end all of knowing and settling anything! Sometimes common sense is exactly that -- and often such expressions do not need logic based reason to know they are (or could well be more) right than any other alleged rationale!

If one disagrees with someone else's expressed beliefs and care to dispute them, fine. But using this trite truism ad nauseum only makes me think (and FEEL in my heart!) that whatever air of *reasonable & oh-so-logical* authority they've hoped to establish is pure pontifical BS. It's nauseating!

Yeah, if the facts don't fit the theory, discard the facts.

These inane truisms of Logic...does not at all mean they are the be all and end all of knowing and settling anything!

Of course not, but they are in general a pretty good guide.

Being aware of fallacies like "post hoc", that correlation is not causation, and so on is important because those are common ways of coming to faulty conclusions. Everyone is at risk of coming to faulty conclusions, so being aware of common causes and carefully watching out for them is something everyone should do.

Sometimes common sense is exactly that -- and often such expressions do not need logic based reason to know they are (or could well be more) right than any other alleged rationale!

Intuition is a great way of finding the truth, but is largely useless for communicating, and that is why evidence and logic has been so much more successful.

Anyone can disagree with your intuition and there's nothing you can do about that; if your argument is based on evidence, though, you have more than just your opinion. Anyone can look at that evidence for themselves, follow your argument, and come to their own conclusions. And, if that evidence is any good, their conclusions will likely be similar to yours.

That is why evidence-based arguments are superior to opinion-based ones - instead of brow-beating people into accepting your decision, you allow people to come to their own decision, but show them why they want to make the same decision you did.

whatever air of *reasonable & oh-so-logical* authority

If you're going by airs of authority, you're missing the entire point of arguments based on evidence and logic. Whatever you feel about a person has zero relevance to the validity of their argument.

Evidence and logic are not popularity contests. Nobody cares how you "feel" about data.

So present your counter-argument, rather than just complaining about the lack of one.

gregorach, it seems that a lot of folks jumped in on this one before I could reply to you, but you asked for counter arguments from me, so here's mine, and a bit of propaganda on my part at the finish:

Counter arguments to the contention that “peak oil” caused the collapse of the Soviet Union:
First, the easy ones:

1. Comparisons to other nations. It is easy to point out to nations that have grown throughout the postwar period with no home oil or gas resources whatsoever. Japan comes to mind, as does Hong Kong, and any number of European nations, such as Austria or Switzerland. The argument can be made that they have survived and grown by way of importing oil and gas, but in that case, it could as easily be argued that the Soviet Union could have done the same had it’s leadership permitted it and been savvy enough to make the deals. There seems to have been no shortage of oil to buy in the period given as the “Soviet collapse” if a nation had the money. Thus an argument can be made that “peak money” caused the collapse of the Soviet Union, but then we are back at mismanagement and an outdated economy unable to produce quality goods as the real cause of the collapse and not peak oil. This by the way is the greatest danger to the United States, and in that respect, Orlov is to be studied, and Ugo Bardi may be correct that the U.S. future will be much like the U.S.S.R’s past, but not because of peak oil but because of horrific financial management.

2.Comparison to the United States peak: The U.S. peaked on crude oil production in approximately 1970. It goes without saying that the decade that followed was very difficult. But the United States did not disappear or break to pieces. The argument has been made that this is because we became dependant on Middle Eastern oil to fill in the short fall but again, one could ask why the Russians could not have pursued a similar course of action. One reason the U.S. was able to avoid greater catastrophe was because we made a dash to natural gas in electric energy production. In those days the U.S. had plenty of clean cheap natural gas. But guess who had even more? That’s right, the Soviet Union. One can curse the U.S. all it wants to, if we assume that collapse in oil production (“they peaked”) is what broke the U.S.S.R., we can only praise the American management of the 1970 peak in U.S. production as brilliant, even nation saving.

3.The often forgotten side of the equation: Russia’s consumption went down long before its production did. This is not often noticed, but let us use a chart to indicate this: It is to be noticed that that the green bar in the chart indicates the high year. It should also be noticed that 1982 was Russia’s high year for consumption, but it did not reach the high year for production was 1988. Note that this is all before the breakup of the U.S.S.R. when both production and consumption drop almost off the charts. Logic tells us that a growing nation does not normally drop in oil consumption in the 1980’s. But production was climbing while consumption was declining, the sure sign of an economic downturn. But if “peak oil caused the downturn, why was Russian oil consumption declining years before the peak in production? The first person to cause me to see this was Matthew Simmons in one of his original white papers on “Revisiting the Club of Rome”. Simmons pointed out that had Russian consumption continued to grow as it had in the post war period up to the 1980’s, the world might already be at peak oil or several years into it. It was a brilliant observation, and a great refutation to those who claim that Hubbert missed the call on peak in 2010 or so. The collapse of the Soviet Union bought the world some time as consumption collapsed before and more than production did in the Soviet Union.

4.If a decline in Russian oil exports broke the Soviet Union, then it surely was the fastest acting crisis in history. A chart from our own at The Oil Drum indicates this: The official end of the U.S.S.R. came in 1991, but Russia was still increasing its export of oil right up to 1988. Russia withdrew from Afghanistan in 1989.

5.Now for the long view: We can see that if the decline in oil production ended the Soviet Union, then Saudi Arabia, Iran and the U.S. should have been gone before the U.S.S.R ever collapsed. In fact, the world should have been gone, if a steep decline in oil production for a period of 3 to 5 years ends it, if we note the famous charts from the peak oil community: Note the “big valley from 1978 to approx. 1984. Why did this decline in oil production not end the existence of the nations of the world?

The truth about the Soviet decline is that it had began long before any “peak oil” event occurred:

The U.S.S.R was in a steep decline (Toffler sources an essay by a Russian economist predicting it’s collapse as early as 1980 in his book “The Third Wave”) and a combination of defeat in Afghanistan, unrest by the Soviet member states and the Eastern bloc client states no longer wanting to trade with the Soviet Union exclusively and by duress led to even greater decline, which led to a collapse in Russian oil consumption and thus production as prices fell around the world. No one at home needed as much oil in the decline, and no one abroad would pay high prices for it. But the mold was cast long before the oil production declines came. They were just one more nail in the coffin.

This in no way undercuts the value of Dmitry Orlov’s book “Reinventing Collapse”. If one makes the argument, as I have, that mismanagement , stagnation and corruption and not peak oil destroyed the Soviet Union, then the parallel to the situation in the United States may be even closer than we assume if we blame peak oil. The U.S. has been warned for years by our own intellectuals that our educational system was declining, that our debt was growing out of control and that the oligarchy we call corporations and CEO’s were bleeding the economy to death. But America, like the late Soviet Union, does not pay much attention to its own dissident intellectuals.

There is no doubt that peak oil will occur. The consensus seems to be growing that if it is not here already, it will not be many years away, and the time to prepare is growing short. There is also no doubt that humanity is swimming daily in a sea of energy, energy that can be made usable if we have the will and the skill to do it. But we are renouncing education once again, spitting in the face of technical advance, and many are dreaming of a simpler time, an imagined golden age of bliss back on the farm. They are prescribing a future of serfdom, slavery to the nations and people who are not going to go gladly back into some Gothic dreamland. If allowed to they would seal the doom of a once great culture, and bequeath to their children and grandchildren, and ours, a short life of suffering,servitude and localized xenophobia.

But there are many who will resist this horrific fate to their dying breath, and attempt to leave to the world the future that it should have, one of clean decentralized and democratic energy production and use, of technology so elegant and efficient that it will be hard to imagine a world as filthy, as dictatorial, as noisy, as inhumane as that which we tolerated in the once revered “oil age”. If we had a brain in our head, we must have known that oil was a short and nasty stage we had to pass through to get to something much better. It was a primitive way to make power, no better than burning sticks in a heap, no advance over the days of the Neanderthal. We must have known that it had to end, and it would be a good thing when it did, as we moved to the next stage of technical development.

The time to move to the next stage has arrived. Only those who refuse to accept the next stage consider it a collapse. Like Brezhnev and Andropov, old men who wanted to hold back the tide of change and retain some dream of a great Communist age, so the last of the fossil fuel believers dream of holding on to an age that technology and culture have already shown to be unfit for humane existence. Just as in the U.S.S.R, if we allow those who cling to a dream past rule us, control us, we shall suffer.

It is the stagnation of refusal to change that broke the Soviet Union, and it is the greatest threat now to the United States, far greater than the threat that is called “peak oil” can ever hold. The most disgraceful words, “Whatever you do or say, it won't change a thing. So, take it easy!” The truth is, we may not be able to change the world, it is for them to decide. America is becoming a smaller and smaller influence, as we consume less and less of the total oil consumed in the world. But we can save ourselves if we so choose. Europe can save itself if it so chooses. Japan can save itself if it so chooses. Each nation can save itself, if it so chooses. We are each obliged to bring order to own house first. Dmitri Orlov gives us words and advice to consider. He does not give us a pre-ordained future. The Soviet Union is gone, may she rest in peace. She had nothing to teach us, except what not to do. And declining oil production was only the last dying rattle of her long decline, not the cause of it. She had choices, she simply refused to take them, and she died. As so many other nations who were going through the same situation did not, we must assume there were alternatives. There still are.
Thank you for your time, Roger Conner Jr.

But there are many who will resist this horrific fate to their dying breath, and attempt to leave to the world the future that it should have, one of clean decentralized and democratic energy production and use, of technology so elegant and efficient that it will be hard to imagine a world as filthy, as dictatorial, as noisy, as inhumane as that which we tolerated in the once revered “oil age”.

I am moved by your passion. Thank you. Please expand on you vision and lay out the course.

thatsitimout: In genral, excellent analysis, fully agree.

But America, like the late Soviet Union, does not pay much attention to its own dissident intellectuals.

bears repeating, as most of your post does, esp.

But we are renouncing education once again, spitting in the face of technical advance, and many are dreaming of a simpler time, an imagined golden age of bliss back on the farm. They are prescribing a future of serfdom, slavery to the nations and people who are not going to go gladly back into some Gothic dreamland. If allowed to they would seal the doom of a once great culture, and bequeath to their children and grandchildren, and ours, a short life of suffering,servitude and localized xenophobia.

Absolutely. Bequething to our children's children a reverted feudal society where everyone voluntarily attaches themselves as serfs to a local baron in order to oppose the forces of lawlessness will be among the worst crimes of the doomers.

Renouncing education and revaluing agriculture are hardly even remotely synonymous. As for the rest, yes, repressive warlords like Thomas Jefferson, who dreamed of a nation of independent farmers are the big bad bully here ;-P.


Oh, so it is going to be the doomer's fault that society collapses?

My, oh, my! I had no idea we were so powerful!

On a more serious note, did you actually mean what you wrote?

Excellent reply. Many people, myself included, don't have the energy, time, and the intellectual wherewithal to state your point so clearly and precisely. Good job!

Roger,we will all try for a better world.The cruelest irony of death is not knowing how the story ends...

Roger, I really hope that you are right, that there is still the time, the forethought, the will, the leftover energy to move in a utopian "free green energy for everybody" direction.

But, just in case you are wrong, I am teaching my kids how to grow our own food, how to harvest and set some aside for the winter, how to let some of the crop go to seed for next year. Call us serfs if you want, but we own our land. I'd rather my children be the people who own the land than be the people working for somebody who owns the land. That's my definition of serfdom.

When the power goes out and the Wal-Mart shelves are empty, talk to me again about the great next phase of human evolution.

Father, Farmer, Doomer, Engineer, Drummer.

Call us serfs if you want, but we own our land. I'd rather my children be the people who own the land than be the people working for somebody who owns the land.

What does "owning" means?
Rules, judiciary, law enforcement, where do you find that in, say, Somalia as of today?
And Somalia did not even fully collapsed, only the state collapsed.

If people think that they own their land they are in for a rude awakening.
an example: my wifes family owns several apartment buildings in Cairo. Nasser in the early 60s reduced and froze the rents. today the family still gets the same 6 pounds a month rent (a little over a dollar).
So when we travel to Egypt we have to rent on the open market (a thousand pounds/month) or stay in hotels.
You might say that example doesn't apply to you as you live in a first world democracy. Not true.
Currently I live in a rented house in Australia on land that was resumed by the government during the grat depression (my great grand-father owned half the suburb plus 15 other tracts of land). The compensation paid on enough land to have 11 streets named after relatives would today pay a few months rent on a single house (and the compensation was only paid after an 8 year wait).
My father went from riding in a carraige on another of the family estates (from a 1600 acre estate to a private paddock next to a train station) to being fostered out with relatives for the later depression years.
A bigger great depression is coming and more land will be siezed by TPTB.
I'm about finished in paying off any debts and have socked away gold and silver coins for the coming long emergency.

In the 1970's and early 80's The Russian communist economy was in such shambles that that Russian government became dependent on high oil revenues to buy basic goods--like food-- from the outside world. Remember the grain deals with the US? I can attest having spent a year in Russia in 1988-89 that everything from tea to soap mostly came from India. Everything from clothes to food was shoddily made and in short supply. When the oil price collapsed in the late eighties Russia lost it's ability to buy whatever it lacked from abroad and that led to their collapse. So oil was a factor but not the cause like Richard Conner says. In fact, if oil prices stayed higher communism would have lasted longer. If the the North Sea and Alaska never came on line perhaps Russia would still be a Communist country today.

This was exactly the post I was going to make!-)
Except, of course, in 1989 I was not in Russia but suffering from the collapse of the oil business in Ohio.

Cheers, Dom

Did you read this post? Russia: There Is Life After Peak Oil

Also see the early comments where this was discussed. I can't say I'm totally convinced but wouldn't call it a "radical, odd, strange, and narrowly fanatic idea".

Also see the early comments where this was discussed.

Go back and read it more carefully. Those comments, particularly those by the author agree with his skepticism:

"First, Doug Reynolds and I never said in our papers that the Soviet economic decline was chiefly due to the oil production slump - at the very end of the USSR's existence, the military was appropriating something like 85% of the country's budget....The country had to dissolve due to its military expenditures sooner or later, as well as to other inefficiencies like the inability to produce an adequate amount of food."

There was much, much more to the collapse of the Soviet Union than their level of oil production.

So true, the Soviet Union had a chronic shortage of wheat. As a result bread and flour were always in short supply and rationed. Most food stuffs followed this model, too. Prior to the revolution Russia had exported wheat and shortly after the collapse all wheat products were readily available.

I will say that much Carter era strategic planning was focussed on the Soviet Union making a grab for Middle Eastern oil, not to deprive the West of oil, but to make up for falling Soviet production.

This is why so much material was prepositioned and infrastructure created in places like Oman and KSA.

Basically, Saddam Hussein did not realize that by invading Kuwait, he was involving himself in a major part of the planning for World War III - from cruise missiles and stealth fighters to state of the art airbases.

Peak oil may not be part of the framework of military strategic thinking - but the effects of depriving your opponent of oil were discussed theoretically before World War II, and those theories then tested against what actually occurred to Germany and Japan.

Use it or lose it.

I have often wondered if the Russian people had known in 1989 what was coming under capitalism, would they have pushed the button instead? I also felt in 1990 that Saddam Hussein was in an untenable situation just holding Kuwait; he had to go for eastern Saudi Arabia before the US destroyed all his tanks.

I guess that this is like the saying "If you strike the king, strike to kill." We're the king. We get second chances for a while, but any other country dependent on its oil faces eventual decline, so it must make a power play that topples the old king.

On the other hand, Germany in 1914 had no reason to hurry; its growing power relied on superior education and quality manufactures, and as long as it wasn't running out of coal it could wait for old King Britain to decline.

Germany was growing faster than Britain, but Russia was growing faster than Germany in terms of economics, manpower, and military railroads.

a fanatic desire to tie anything and EVERYTHING that has ever happened in history to peak oil


Don't fret about the down arrows.
It's just a poll by likely voters of the moment.

You forget the natural inclination of the human brain to seek out a convenient narrative (or a narrative fallacy as Nassim Talib of "Black Swan" fame would call it).

So the story that appeals to the mob depends on which mob you're talking to.

1) If we were all Republicans then the correct narrative would be that the Soviet Union collapsed because our wise and sage leader spoke magic words, "Mr. Gorbachev, tear down that wall."

2) If we were all employed by the US military-industrial complex then the correct narrative would be that the Soviet Union collapsed because we out-spent them in our desire to build an unworkable system called "brilliant pebbles".

3) If we were all members of MADD then the correct narrative would be that the Soviet Union collapsed because they drank too much vodka.

4) But the fashionable truth of the moment is that we are all TODders and therefore the Soviet Union collapsed because of one simple minded story: oil. (Just as Rome collapsed because of one simple minded story: wood.)

...all TODders and therefore the Soviet Union collapsed because of one simple minded story: oil.

Did you actually read Reinventing Collapse?

"brilliant pebbles" most definitely worked. Not in the beginning, but later on. Successful tests were performed. I think that they were actually made public but I'm not sure on that.

The star wars system using 2004 technology was successfull at destroying one missile that was using 1980 technology.

wkwillis - you can characterize it that way if you wish but the reality of the situation is that we were able to identify a launch, plot/track the trajectory, launch a counter-missile, adjust trajectory, discriminate the mirv warhead from the dummy warheads, adjust trajectory, close on missile, detonate close enough to disable missile. All that at incredible intercept speeds. Now you're right that icbm/mirv technology has been enhanced since 1980 but you don't really think the gov. lets you know all the results of all the tests do you? Its always a cat and mouse game. 1 side enhances their abilities, the other side devises counter measures, other side devises counter measures to their counter measures...


RC - The collapse of the world oil price, as a result of the Saudis opening up the oil spigot, was a central factor in the collapse of the Soviet Union. I agree with your contention that that is dis-similar to the notion of Peak Oil. However, Orlov contended that oil was the linchpin in the Soviet Economy, when that oil production peaked (1987) the EROI equation of the Former Soviet Union couldn't compete because their cost of production exceeded world price.

With the invasion of disaster capitalism in the 90's selling off the means of production to the highest bidder made a lot of Russians rich. It did little however for the average citizen. As the price of oil has risen tenfold so have the fortunes of the Russian Empire, making a comeback, which has benefited Russians in a kind of trickle-down effect.

You need to remember a couple of things about TOD. The posters here do so without research grants or underwriting. These posts are not meant to be scientifically academic. The comments that posters make in response to these free posts are as much a part of the inquiry as the actual post itself, like a catalyst. Just as your comment was thoughtfully considered in an egalitarian fashion.

The informality of this site is what makes it alive and relevant.


And on that note joemike,I don't think I know of many places where the conversation is as good,or the posted material is of as high of quality.This is one of my prime news/opinion nodes on the net.Should I ever want analysis of a problem or a idea ,this would be where I would bring it for evaluation,as we do have some very bright folks around here

I can say that of all the radical, odd, strange, and narrowly fanatic ideas I have ever read, this one takes the cake.

Sweet Jeebus, talk about hyperbole. The idea that the proximate cause of the demise of the USSR was the sudden collapse of money from oil is more far out than Velikovsky's origin of the solar system, Scientology, or alien abductions is one of the most absurd over-statements I've ever read.

What is so odd about the idea that the corrupt and inefficient Soviet economy could limp along for 70 years so long as it had something to prop it up (war, loot from Eastern Europe, oil revenues) and then finally collapsed when its support collapsed? Or are you one of those Americans who believe it was the Great and Glorious Ronald Reagan, who stared down the Commie Juggernaut and told them to "Tear down that wall!", who was responsible for the collapse?

As someone who had studied the Soviet collapse, I remain unconvinced by the theory that it was all about "peak oil". Gorbachev came to power in 1985, well before the decline in oil production, with a clear program of reform, and there was a high level of support within the soviet elite for such reforms (evidenced by the fact that no resistance came until the 1991 coup). They felt that things were stuck and had to change; the Soviet economy was very dynamic from WWII but by the 1970s growth slowed down, there was a strong feeling of dis-satisfaction among the elite and intelligentsia.

The reforms backfired, for a variety of reasons, and evnetually in the late 1980s you had a chaotic situation of local governments competing with a central government that lost legitimacy and power. In such a situation it is not surprising that oil production plummeted - everything seemed to be disintegrating including food trade (within the USSR) so why would the oil industry be any different. I am not denying the USSR peaked in the 1980s, I just think the decline did not have to be so sharp - as the Russian later recovery proves.

Admittedly when I studied the USSR collapse in university we did not talk at all about the energy situation, and that was an oversight. It would be interesting to factor in 1980s peak-oil and low oil price to all this. Perhaps, if times were different and oil was a bit more expensive, Gorbachev's government would have had sufficient cash to allow a slower and more controlled transformation. Perhaps there would have been no reforms. What is clear to me is that reducing the whole story to oil depletion is very questionable and requires stronger reasoning.

To be fair to Orlov, the latter says:
"[In the superpower contest]... we will probably never know for certain why the Soviet fighter chose to take a dive in the fourth round, because that certainly did not look like a proper knock-out."
It does look something like a slide in system-confidence (collapse of legitimacy).
In the case of the US,with regard to the link between finance and oil, Orlov assumes that the value of the US dollar over recent decades is largely because it is the currency most of the world uses when buying oil (value maintained in the face of ever larger US trade and fiscal imbalances). See also the question posed by puntaldia this thread.
To quote Orlov again; "Perhaps most importantly, America's national mythology makes it anathema to think of collective failure."

I think it is an overstatement to say that Orlov flatly claims that the Soviet Union collapsed because of peak oil. What Orlov says is that energy was a major factor - but not the only one, any more than energy will be the only factor in the crash of the US.

That said, I think it is a mistake not to look at energy as a multifaceted impact - for example, Yegor Gaidar who held the reins for a bit during the collapse wrote a book not long ago in which he argued from a fairly inside perspective that ultimately the crash of the Soviet Union came down to a shortage of food and farmers - too many farmers were moved off the land to support the populace, which was not a problem as long as the SU had ample oil to power equipment, and to buy wheat on the world markets. But as soon as the energy and income supplies contracted, the populace simply couldn't be controlled.

Sounds vaguely familiar to me. There are a lot of prognosticators out there, and a lot of smart people thinking about PO, but Orlov has my bet for best PO book ever, and closest understanding of the subject.

Sharon Astyk

too many farmers were moved off the land to support the populace, which was not a problem as long as the SU had ample oil to power equipment, and to buy wheat on the world markets. But as soon as the energy and income supplies contracted, the populace simply couldn't be controlled.

That has little or nothing to do with "peak oil", though.

What you've just said is, essentially, the USSR was fine until it ran out of money. The fact that most of its money had come from oil is largely irrelevant to the situation - if most of its money had come from diamonds, we wouldn't be blaming their finances on "peak diamonds", but on poor management of a narrow and vulnerable economy which was overly reliant on sales of a single product.

If this hypothetical narrow diamond-based economy had collapsed because their diamond-extraction-for-export-for-dollars capacity had reached a peak and gone into a steep decline, I'd be inclined to put at least a decent-sized slug of the blame on "peak diamonds".

Actually, I'm pretty sure if all their money came from diamonds and they suddenly pretty much discovered they no longer had enough diamonds to support their economy, it would be fairly accurate to describe the problem as "peak diamonds." Money comes from somewhere, even in this corrupt days ;-) - it is not simply a product of printing presses, but linked to resources, among them energy. The Soviets (and us) use energy to substitute for something - in this case, people growing food and to make things (food, money). When the thing that substitutes for something necessary, like food, disappears, it is necessary to rapidly stop substituting, which can be disruptive.

The thing about energy is that all economies that are moved by energy are over-reliant on it, because to a large degree, both the amount of available energy and the quality of the use of it determine the size and functionality of the economy. Saying an economy is over-reliant on energy is like saying it is over-reliant on money - not very helpful.


Actually, I'm pretty sure if all their money came from diamonds and they suddenly pretty much discovered they no longer had enough diamonds to support their economy, it would be fairly accurate to describe the problem as "peak diamonds."

Or rather, if they suddenly discovered that everyone else was producing heaps more diamonds and the price of diamonds collapsed...

It was an oil glut, not peak oil, which ruined Russia. See my comment below. OPEC overproduced, the price dropped, and the money to be made from exporting oil dropped. Since oil was about the only thing the USSR exported apart from AK-47s, they were in the poo.

An analogous situation for the US would be... today. The USA's major export is debt, US Treasury bonds. However, there's an oversupply of US debt, so its price has dropped a lot. This puts the US in the poo. Just as the world had more oil than it needed in 1989, so too does the world have more US debt than it needs today in 2008.

the USSR was fine until it ran out of money.

Exactly. The USSR was economically fine until it was not any longer economically fine. Period.

The fact that the price of crude on the world market caused the "not any longer" has nothing to do with peak oil and everything to do with SA and Kuwait flooding the world market, driving down the price (to their own disadvantage, obviously. Every wonder why they did it?). Notable also, in the analysis, is that 1) Russia lacked the might to force them to stop doing so and 2) the action also tended to make other oil exporters, such as Iraq, VERY upset.

Well, that's the thing. The book's not made it Down Under yet so I've not read it, but my understanding is that Orlov presents the Soviet collapse as like many others of countries and empires in history - not from any single cause but a combination.

For example, in the US the financial sector collapsed and there was the Depression, but it wasn't until the Dust Bowl came along that people went hungry. Of all the crises we can have, there are

- environmental
- financial
- military
- social
- government

No single crisis will knock a country on its arse. It needs two or more in combination to make people go hungry or take to the streets, and three or more to make the empire die.

I'm no expert on Soviet history. But I wonder: wasn't imperial overstretch in Afghanistan a key factor in Russia's collapse, both as a financial and a national-confidence issue ?

Losing wars you started with great confidence never helps, that's quite correct.

The reforms backfired, for a variety of reasons, and evnetually in the late 1980s you had a chaotic situation of local governments competing with a central government that lost legitimacy and power. In such a situation it is not surprising that oil production plummeted - everything seemed to be disintegrating including food trade (within the USSR) so why would the oil industry be any different.

Why should the oil industry be any different? Indeed, however the coal and gas industries were different. Why would oil be different to coal and gas if it was just a case of everything disintegrating?

The Soviet Union experienced peak oil first hand—a 43% decline in domestic oil production between 1987 and 1996. This crisis caused Soviet society to fall into devastating economic impoverishment. Can this be proven? Yes. Here is the quick story: The oil decline in the Soviet Union preceded the GDP decline. A statistical test, Granger causality, shows this. Oil decline did not follow the GDP decline, it was ahead of it, and therefore it caused it. However, Granger causality is not always sufficient proof; more evidence is needed.


But, Soviet coal production declined after GDP started declining. How could this internal chaos have caused reductions only in oil production but none in coal production prior to the GDP decline? If you argue that Cold War military expansion precluded oil sector spending to keep oil production high, then why would not it have also precluded coal sector spending at the same time? Also, natural gas production was not affected during the Soviet collapse. Again, why would internal chaos arbitrarily affect oil before the collapse, but not natural gas? Thus it was scarcity of oil and not internal inefficiency that caused the oil to decline.

These are good points, however I would like to see more evidence for various claims made by Reynolds. My instinct would be to suggest that the coal industry demanded less in terms of infrastarcture upkeep and thus suffered less. Also there is the question of how important were oil export revenues to GDP - I simply don't know and no figures are provided here. To be fair I only red Ugo Bardi's posts and not the Orlov book which sounds a good read.

Why would oil be different to coal and gas if it was just a case of everything disintegrating?

That's a question worth asking, rather than simply assuming the answer.

Looking at the EIA's yearly production data for oil, coal, and gas, I think Reynolds is relying on very weak evidence.

Oil production started dropping rapidly after 1988, before the 1991 breakup. In 1989, though, coal production dropped more than oil production (-4.1% vs. -3.2%). This is even more striking when you consider that its average growth rate over the previous years had been higher: 1.8% for coal vs. 0.2% for oil, for a relative drop of 5.9% vs. 3.4%. Even natural gas had a larger relative drop that year: 3.4% growth vs. 7.5% average growth, or -4.1% relative drop.

So it's pretty clear that coal and gas were both affected by something at the same time as oil started declining. Using 1988 as the baseline, the one-year, three-year, and five-year relative decline rates are very similar for each of the three resources, and oil's relative decline rate is generally the lowest of the three.

That also provides a simple answer to your rhetorical question: oil was not different. It only looks different because coal and especially gas were growing much faster before the disruptions started in the late 80s, so they had more momentum (projects under construction, etc.).

Relative to their performance over the previous 5 years, oil, coal, and gas all saw the same size of disruption start at the same time. It is simply false to say they weren't affected.

Thanks for this. The "was oil different?" question wasn't mine but Kolodzij's and Reynolds'. They say oil declined where coal didn't thus proving it was scarcity of oil rather than poor internal efficiency. Your numbers seems to show a fundamental flaw in this position. My first impression on reading this was that there wasn't the evidence that scarcity caused Russian oil decline.

Hi Yair,

I think that is a valid comment. It is almost a chicken and egg scenario - which comes first - societal/economic collapse or falling oil 'production' (which can be driven by depletion or lack of investment or both). I think Cuba which was on the end of the Soviet oil supply chain is the best example in some ways of the 'Peak Oil' driven collapse as their social structures remained relatively intact (see: The Power of Community), while they lost most if not all of their imported oil supply, and more importantly - fertilizer and pesticide.

Interesting study nonetheless on what happens to those caught in the matrix of industrial society when it all goes wrong...


Right now, in September of 2008, the turmoil that is taking place in the financial markets may be the first signs of the impending global collapse.

This is a statement which I often read here at TOD. But I never understood why the current financial crisis would be related to PO.
My (rudimentary) understanding of the current financial mess is that it's a consequence of the busting house price bubble together with virtual financial markets where everyone has lost sight of the systemic risks.
So how does PO come into the picture? Expensive gas which makes people move out of suburbia? Has this driven down the housing prices in the first place (I don't think so).
Thanks for any insight you might provide!

Re Russian peak oil in the late 1980s, probably more of an infrastructure collapse than a peaking of exploitable reserves - obvious given the snap back in production on the last decade. Russia was chronically short food stuffs in the 1980s and used the post-Iranian Revolution oil spike to gain foreign exchange with which to buy grains in the world market. (In addition, some foreign exchange was used to import basic consumer goods to keep the populace somewhat happy.) When the Saudis opened the valves in 1986 to punish OPEC cheaters, oil prices plunged, as did the Soviet economy. Although the CIA had concluded in the late 1970s the USSR was rather falling apart internally based on data for infant mortality, food production and other stats, the Iranian Revolution price spike kept the Soviet ball of wax glued together for roughly a half-a-decade, then the bottom fell out. (In my book, the Saudis, not Reagan, "defeated" communism; Soviet military spending did not increase in the Reagan years in response to Star Wars and other acts of US militarism, the US did not bankrupt the USSR in an accelerated arms race.) What happened in the Soviet oil sector was a total breakdown of maintenance - basic items like pumping stations failed and so forth. The ability to move oil around the country slowly fell apart, hence lower output, not a constraint related to lack of petroleum resources in the ground.

Let me try to summarize as I understand it, feel free to correct:

Approaching peak oil caused the huge oil price increase since 2002.
The average American Joe's wages have been stagnant since 2000.
The economy was rigged such that it needed to grow to be stable.
Increased energy costs reduced Joe's spending power, cutting in to growth.
Joe used home equity to keep spending for a while longer.
Housing bubble finally popped. Credit crisis ensues.

George Mobus, who has posted here on TOD, has written some interesting things on the ties between the economy and energy. Think in terms of global energy production. One barrel of oil is about 50,000 hours of human labor (IIRC). How can the economy keep growing indefinitely when the total energy going into the system is decreasing.

This is oversimplified, but I hope it gets you started on finding your own answers.


The general picture is that an economy (or business) based on the infinite growth paradigm (neoclassical economics) and using an interest-bearing debt-based currency can exist in two modes, either with exponential growth, or economic collapse and backrupcy.

The "economic" (GNP/GDP) growth of industrial economies is almost completely derived from increasing energy consumption (one estimated correlation is 99%). As peak oil approaches rates of return on investments suffer, and more deregulation and financial speculation is encouraged in an effort to sustain previous levels of profits. Wealth has to be extracted increasingly from naive investors/savers rather than generated by growth. The housing bubble is just the latest method. The debt burden has increased to unmanagable levels as people try to hang on to middle-class lifestyles without the income to support it.

Whether or not financial crises are deliberately planned, insiders position themselves to profit from them. In the US (and probably UK) a currency collapse will be the main outcome. A recent article by Dave Lindorff (here or here) compares the FSU and prospects for the USA:

The US will be left behind, a smoking ruin, with Americans, like Weimar Germans before them, going shopping with wheelbarrows full of worthless green paper to exchange for a few days’ groceries.

The "economic" (GNP/GDP) growth of industrial economies is almost completely derived from increasing energy consumption (one estimated correlation is 99%).

That may be one estimate, but it's not a very common one.

As has been discussed here before, increased use of exergy is much more strongly correlated with economic growth than increased use of raw energy. Exergy takes into account efficiency gains in terms of utilizing energy, including energy-switching (e.g., electric lights vs. kerosene). Several papers on this topic by Ayres have been discussed here previously, and a google scholar search on his name is probably as good a place to start as any.

Wealth has to be extracted increasingly from naive investors/savers rather than generated by growth

This does not appear to be what happened during the last oil crisis; why is it different this time?

A recent article by Dave Lindorff (here or here) compares the FSU and prospects for the USA:

Long on rhetoric and emotional appeals, utterly lacking on evidence or relevant knowledge of economics.

For a reasoned (although not necessarily favourable!) assessment of the current economic situation, a reader would be much better served by Econbrowser, Economist's View, or Paul Krugman's blog, each of which is written by an economics professor.

Their articles usually aren't as exciting as impassioned rhetoric about "smoking ruins" and "wheelbarrows of money", but they're a lot more informative.

Well, one part of the link between PO and the financial situation is the rising cost of nearly everything - especially food and energy. Remember, 70% of the economy rests on consumer spending - if consumers shift their spending to buy less stuff, the economy begins to teeter. Despite the constant narrative that the whole problem is falling housing values in the rich world, I personally think we've dramatically underestimated the impact of rising food prices, especially in the poor world - growth was fastest in the emerging economies, and some authorities are to be believed, China is teetering pretty seriously. Other nations that were growing are retreating back to poverty quite rapidly - much of the economic growth of the last decades came as the world's poor moved out of poverty - and the combination of rising energy and fertilizer prices and the move to biofuels have sent them back to poverty - they aren't buying cell phones and bicycles anymore, because they have to buy rice and fertilizer to grow rice.

There are other, less direct connections, but most of them, I think come down to energy - or rather, food. Now we do use oil to grow food, and so you could call energy the defining factor, but I'm not sure that the reverse isn't also true - food is energy in a host of ways, and it drives economic activity in deep ways.


Thanks for any insight ... I never understood why the current financial crisis would be related to PO.

Dear Punta,

Here you were being polite and all, and yet the inner mongo in me was reaching for the down arrow. I was going to crush your question down just like another piece of junk paper.

No. Your question is a fair and good one. So I refrained from an instantaneous down vote.

But let's rephrase your question slightly:

... I never understood why the current [American] financial crisis would be related to [American] PO.

If you look back at some older American history books, they brag about how America's industrial might was based on placing our steel mills conveniently adjacent to our abundant iron ore mines and our coal mines. There were certain economic efficiencies to be had by placing the means of production adjacent to the resource sites, adjacent to shipping ports, and exporting our finished goods to all over the world.

And the same was true for placing American oil refineries adjacent to our biggest oil fields, in Texas and shipping (well no, piping) the finished good to all over America and to the rest of the world. Everything got big and rich in Texas. Why we could do anything and everything, including having a guns and butter economy and making repeat trips to the Moon according to LBJ (US president from Texas).

Then came American Peak Oil around 1971 and American might faltered. More and more "wealth" was no longer pouring into our country. We stopped going to the Moon. Our will to fight foreign wars of conquest (Vietnam) stumbled. It was the beginning of a slow and long hollowing out of American power. One by one, our core industries collapsed: steel mills, automobile manufacturing, tool and die, semiconductor fabrication, ... we became a nation of "service" providers instead of a nation that actually produced the physical real stuff. We no longer shipped finished goods to the rest of the world. The flow was reversing. The Emperor no longer wore any clothing. But that's OK, said our illustrious Bill Clinton, because this is the "new" information age and we are the kings of information. Funny how on 9/11, we didn't seem to have any advanced information. And how the knocking down of just two buildings in a nation this big and powerful, could cripple our powerful "economy" so much.

But the truth is that by 9/11/2001 we no longer had a powerful economy. Sure we lied to ourselves and said we can take anybody on anywhere in the world. Our then wise and sage president, GWB, said "bring it on". He didn't realize we were already a collapsing economy. More and more of our oil was coming from "them who don't like us very much" and we still didn't understand what that meant. One turn of the valve and our life blood stops. We die on the spot.

Fast forward to just a few weeks ago when crude oil was trading north of $120/bbl. What that really said was that the American dollar was no longer worth much. Couple that with rising unemployment (because where is the average American Joe to work if there are no more steel mills, no more auto factories, no more construction jobs, etc.?) and you start to see the recipe for final collapse. The average American Joe pays his mortgage from the money he makes at his average American job, except there is none because the oil is over there and not over here. So the average American Joe defaults on his mortgage. And suddenly banks all over America are holding junk paper. Do you see?

Hi Puntaldia,

For an insight into this issues, check out Gail the Actuary's The Connection Between Financial Markets and Energy - Open Thread

In actual fact we (humanity) are caught in a triple whammy of economic, energy and environmental 'peaks': peak debt, peak cheap energy, and peak environment. The lack of a credible finance system will put in jeopardy any attempts to discover new sources of energy and/or mitigate the decline in current energy sources. The high probability of 'resource' depletion - soil erosion/water scarcity/mineral depletion and climate change look set to make things even worse.

Its not just the one straw that breaks the donkeys back, but all those other straws that have been piling up for decades...


Puntaldia: Let me be honest up front,Iam not sure your question is sincere, if it is, I will try and clarify for you. First you must forget all you think you know about economics, at least in so much as you learned from the media or schools of higher education.
I will demonstrate the above sentence thusly....A chimp like looking president informs his nation that tax cuts to the wealthiest, will make them richer and thus trickle down to the poorest classes....tradgedy stikes (read 9/11) and the chimp lookalike president informs the masses of the poor, "go shopping" or else the richest folks might lose money.

Did you catch the contradiction? At first it was presented that the wealthiest drove the market "when it was beneficial to portray such" and the next second it was offered that the poorer and average folks, were the driving force behind the markets and economies, again when it was convienent? OR was it the truth in the latters case?

Of course it was known by youself all along. You mentioned people losing their homes....surely you didnt mean the uber rich lost their homes, did you?
You mentioned the average joe in suburbia being squeezed by higher fuel costs...surely you didnt imply the rich couldnt afford $5.00 a gal gas! and had to move because the house was foreclosed on.

Puntaldia stating "(I don't think so)" really isnt a plausible argument or evidence of your position. It matters little what you think about gravity, jump out at 30,000 without a parachute and mull that over.
OH that thingy the Roadrunner always did when you try it..okay?

Dear Nephilim,
First: Sure, my question was sincere. And I don't understand why you or "step back" (see above) would be offended by it ...
I usually come to TOD to learn from this community about things where I am not an expert and where I perceive that folks around here are knowledgeable. I'm not an oil expert nor an economist, so it seemed natural to ask about the connection in this particular case.
Sure, any kid knows that oil supply/prices and GDP/economy are closely related. But still, I have problems seeing in this particular case (the financial meltdown due to worthless "assets") the connection.
And sorry, but your answer didn't bring me closer ...

I don't understand why you or "step back" (see above) would be offended

Speaking for myself, I wasn't offended by anything you said. I was disappointed in my own reaction, namely that I was glibly going to hit the down rating button. Why was I going to hit the down button? Because it didn't make sense in my head how someone like you could not see the connection between PO and financial meltdown. But you asked a sincere question and it deserved an answer (or obviously, a few answers).

Let me try to explain my answer in another way:

I was at my doctor recently. He was bragging to me how he wasn't worried about the financial situation because people would always need medical services. Thus his job was "safe".

"But, but," I said, "how are your patients going to pay you?"

He didn't seem to get it. Maybe because that reply blows his whole theory to smithereens about being "safe" and immune from the calamities that strike those about him. A person whose job security depends on a falsehood is highly unlikely to be able to see the truth.

None of us are islands. We're all interconnected.

So take the guys on Wall Street who sell "paper". How are they interconnected to the average Joe who took a mortgage out on his house? Well, as long as average Joe can keep paying the monthly mortgage amount, the "paper" that the Wall Street guys sliced and diced and sold has "value" because it is backed by a revenue stream.

But now PO enters the picture. Average Joe is spending more and more of his limited monthly take home pay on gasoline; and he has to because there is no other way to get to work.

But that's not all. Average Joe is finding things at the grocery store more and more expensive because the truckers that truck that stuff to the store are paying higher and higher prices for diesel. If ti comes down to paying the monthly mortgage versus not eating and not having gasoline, average Joe has to pick the not paying your mortgage option.

And then as the squeeze continues, average Joe gets laid off. He can't get another job. There are no factories to work at because they have been "off-shored". There are no construction jobs because housing starts are collapsing because average folk are too insecure to think about buying a new house. Multiply the one average Joe's story a million times and you see the big step back picture:

The revenue streams from the pieces of "paper" that the Wall Street guys created and trade with each other are drying up. So the paper is not worth much anymore. And the Wall Street guys know it. So they won't buy junk paper from each other. They no longer believe in the "paper". So now Uncle Sam is going to step in and buy the paper to perpetuate the belief that the paper is worth something. (Yeah right, ha, ha. In GWB we trust. God help us.)

The paper was worth something only as long as we all had "cheap oil" and could tool around this big country in our SUV's and semi-trailers and keep the suburbia myth going. Now finally, TSHTF. Financial meltdown begins. This is only the beginning of the story not the middle or the end. Sorry to be such a gloom & doom messenger here.

P.S. On a lighter note, I heard that John McCain put on his Super Man costume and "flew" to Wash. D.C. to save the day. Left Letterman fuming in his dust. Hurray. Now we're saved.

Hey hey Puntaldia,

I think that peak oil caused this financial crisis. Peak oil certainly would cause a financial crisis, but it is entirely possible for the banks to do themselves even when energy supplies are growing like they did in The Great Depression.

Others have explained why in greater depth, but in short, credit is a claim against the future production. As long as the the future continues to grow those debts are paid back. Post peak, the future would not be able to make good on the debts it owes and the defaults would cripple the financial sector.

This credit crisis is due to willfully blind financial choices, not willfully blind energy choices. The greatest growth in the US economy for the last few years has be in financing and housing. Essentially, loans of ever greater size were given to borrowers with ever decreasing credit worthiness. Prices shot up to unrealistic levels and demand cooled. Once the houses stopped appreciating then creditworthiness became important again. It happened in Japan in the 90's as oil production was growing in volume and declining in price.

The reason everyone is so worked up about this crisis is not because peak oil caused it, but because it will 'hide' peak oil by reducing demand. It will also removes funding and incentives to increase oil production or alternatives at a crucial time. While no one knows exactly when the peak will occur it is widely believed that we are at or near peak. The present financial catastrophe effectively guarantees that we are now at peak because the global slow down will reduce the development of new oil. Meaning that when the world recovers from is recession it will not be riding an undulating plateau or at the onset of a gentle decline, it will run smack into an advanced depletion rate.

This credit crisis is due to willfully blind financial choices, not willfully blind energy choices.

Maybe I'm a bit of a conspiracy theorist, but I suspect that the reason many of these downright criminal financial choices were made was that the very well-informed heads of these organizations knew exactly what was coming (PO) and wanted to make a bundle before the house of cards came tumbling down. Hey, if it's gonna crash anyway, why shouldn't I skim a few mil for me and mine?

My 2 bits.

Father, Farmer, Doomer, Engineer, Drummer.

I never understood why the current financial crisis would be related to PO.

For a thought experiment, try to imagine a scenario where declining energy would NOT cause a widespread economic and financial crisis. Then look at how many fundamental parameters you had to change to make that work. Taleb in "Black Swan" points out how it's far, far easier to know when something is wrong than when something is right. It seems really obvious to me that Peak Oil is a critical part of the financial meltdown - the arguments about energy, work and the resulting economy from physics and thermodynamics are too strong - but it's not so obvious when one tries to pin down the direct cause. The size of the slice of the economic pie that has to go to energy increases markedly - that might be the easiest way to see it. Except that so much of our economy is off the books buried in "environmental services".

Without cheaper energy - energy that takes smaller and smaller slices of the economic pie - roughly how might we recover from this meltdown? I don't see it. And if the powers that be have reached a point where they don't see it either, then they will make no more loans but focus instead on grabbing everything they can. Putting a quarter of the American people into the fields will keep them alive, but it won't look like an "economic recovery" by any standard measure except maybe employment.

I can see a lot of posts questioning relations between a fiancial problems and an oil. Of course it is not possible to find and prove such direct connection. There is no direct conection. However there is a correlation and a flow of concequences from oil (energy) into our civilization.

Think about a pot with a stew on a stove. It is really very complex what is going inside the pot. There is a lot of relations between water, meat, noodles, vegetable, seazoning etc. It takes a lot of knowhow from an insider who is living in the pot to understand all those relations and figure out what will happen with a particular piece of carot or one nudle in the next few minutes. It is indeed complicated science. Same as for example fanacial sector is.
But like it or not - all those details and events in the pot are driven how much and how fast you deliver the heat from the stove. It is a bottom line.

Energy is driving our civilization and all of many of those recent and coming problems are related to declinig of energy availablity (ammount) and accesibilty (EROEI).


More like Terry Gilliam's movie

I've seen Orlovs presentation and he has humour in what must have been dire circumstances for the Average Russian. I cannot imagine the average American being so stoic but I guess time will tell.

Any comments on the following idea:

"the move from manufactured goods to a service industry economy is a little like the move from Gold to Fiat currency in that it enables a dramatic upswing in the ability for the society to generate wealth. However the downside is that the additional 'leverage' generated comes at the expense of a system that is inherently more unstable in that it relies to a much greater extent on confidence within the society..."

-The relevance is that I am trying to formulate an analogy between what recently happened in the credit/financial markets and what may happen in largely service based economies once PO / confidence in the future begins to ebb...

Regards, Nick.

I could never understand why people would take out those crazy loans in the first place. I guess it was economic ignorance. I remember a co worker telling me in 2002 about an interest only loan at less than 2% but it could reset higher BUT his ability to refi at a fixed rate blah blah blah, well they took out that loan, then took out 70K in equity to do some home improvements and pay down some credit cards, well they refied and took out more money never did the home improvements have high credit card balances and no equity today and owe 170K more than when they bought their home 15 years ago and probably would break even, oh the guy is now 60YO. Peak oil has nothing to do with american home prices, its his situation multipied 1,000s of times all over america. Didn't anyone ever understand balloon loans?? Dummies.

Yes, there are a lot of intertwined threads running through here. The lottery mentality has been common. I was just talking with someone yesterday about these lavish weddings that people throw - I made the observation that a lot of people probably threw these types of lavish affairs because they could use a HELOC to finance the whole thing, but those days are now over...

Unfortunately we can't pick the Peak Oil thread out of the knot and study that in isolation from all of the others.

Who's the dummy? He had 170K worth of fun he'll never pay for.

Speaking of books, I see most of the oil-drum community is ignorant of two brilliant books that have recently been released.

1) Sustainable energy - Without hot air (by Prof David McKay) : Does all the number crunching on how much energy each of the methods of energy production can actually produce, and what are the corresponding requirements on land, raw materials etc. A very interesting primer. This book details several energy plans, including a completely renewable energy plan.

2) Prescription for the planet - The painless remedy to the energy and environmental crises (by Tom Blees) : Champions the Integral Fast Reactor project, and delves in some detail about the technology, and the reasons behind the killing of the project by the Clinton administration. It explains the solutions in lucid detail, in a very friendly manner for general audience. It explains clearly how 4th generation nuclear power is fundamentally different from 2nd generation nuclear power that we currently have, and how it solves the problems of nuclear waste, nuclear safety and proliferation.

We talked a little about Prof McKay's book a couple of months ago when the pre-publication draft was available online. It is indeed a good approach, very informative.

I looked up on Google about where peak-oilers have discussed Mackay's book. It is just over a couple of comments. Please correct me if this is wrong. This book merits an individual post and a review.

And I think so is also the case with the other book by Tom Blees. 4th generation nuclear power is crucial to any discussion on sustainable energy.

Is anybody building 4th generation nukes in the US? Does anyone plan to? How do you see the financial collapse going on now affecting funding of the building of these 4th gen nukes in the US? Do you see the NIMBY effect possibly preventing the construction of new plants in the US?

The reason that many who visit here are doomers in not because they are unaware of possible solutions to our problems (Alan Drake's electrical rail plan, huge solar arrays in the Mojave, wind from the Dakotas to Texas and offshore etc etc.) - it's that we don't think that the US will make these choices on the way down

when I see power & money grabs like that going on in DC as we speak, I become further convinced that we are unlikely to make good choices...

I have mentioned here before - but I think you may not have been around. Last year I attended a lecture at UCLA by a leading fusion researcher - his conclussion (after a very in-depth look at the problems with fossil fuels, renewables and present fision reactors) - was that non-existant fusion reactors using isotopes available only on the moon would solve our energy problems
I left very depressed needless to say....

There is another type of fusion which is being explored, the concept was conceived by the same man who invented the 1st practical electronic television. Philo Farnsworth, here's a link with an overview:

An improved variant of this was designed and debugged if you understand physics check out this video - entitled should google go nuclear?

its a much smaller device and much simpler, and hence much cheaper, the Navy is paying for testing on the final design, if it proves feasible (and were talking about a few million dollars for testing, not the hundreds or thousands of millions that have been "invested" in standard fusion) it can be commercialized and plugged into the power grid, fairly quickly - say 5 years or so.

Its a very clever design. The Fusor google it.

believe me, if ANYBODY solves the fusion problem(s), I will be first in line to cast my vote for a Noble prize - lord knows, I enjoy a lot of the conveniences of modern industrial society (my Bodum coffe maker brewing freshly ground coffee beans imported from Ethiopia this morning for an example) - and something that keeps it going gets my vote.

But I remain dubious - when I see a working fusion reactor of any kind (Tokamak, Bussard, Farnsworth) - putting out a sustainable reaction without destroying the containment vessel over time - I will shout "we're saved!" and leave and forget my doomer vision...

But I've talked to some of the leading fusion researchers in the US - and while I could be surprised, I remain doubtful that any of the designs out there will solve the energy problem any time soon.

macduff, black_gold

Fusion power is science fiction. It is atleast several decades, if not centuries away.

4th generation nuclear fission power is right here. If only the stringent political opposition to nuclear power is toned down a little, these reactors will appear before us. Try reading the book of Tom Blees.

Hypothetically speaking, even if fusion power becomes practical, it might be disadvantageous to fission due to several reasons.

The comment by urbanteacher56 about his 60 year-old friend who has mortgaged himself to the hilt is best understood by reading this book:

A World of Chance

This book turns upside-down the economists' standard figure - the Economic man or Homo economicus

Essentially, people behave in funny ways once they get past 50-60 years old and when they perceive that they have not made it

From Orlov's book, the biggest differences I got between the FSU and the U.S. were:

  • they had universal healthcare - in one conversation I had someone downplayed that because they thought that Russians were afraid to see their doctor because the quality was poor; a quick, informal poll of some Russian friends indicated that they did indeed visit the doctor during the collapse regardless of their opinion of their quality
  • extensive public transportation - the combination of centrally planned towns and a not-very-rich society meant that towns of an appreciable size had trolleys, etc. In other words, even during the collapse Russians could move around
  • state-owned housing - since Russians did not own their homes, they weren't kicked out of them when people lost their jobs and could no longer pay the mortgage
  • culture of kitchen gardens - the grandmothers typically already grew vegetables to supplement the household's calories
  • concentrated families, often in the same house - because housing was difficult to get, family members often lived together and pooled their money and talents to support each other

In the U.S. virtually none of these factors are present and so I think Orlov makes the case quite well that we are in for a very much rougher time than Russia went through. The dispersed families in particular are going to make it hard for family members to pool their resources even if they are on good terms with each other.

Europe has some elements going for it, particularly more developed public transportation, universal healthcare and I would argue a more collaborative approach to their problems (at least toward the end of the 20th century).

Canada has universal healthcare and the big cities generally in my experience have better public transportation than most U.S. cities, but it still suffers from the threat of people being kicked out of their homes when they can't pay the mortgage. It has a more developed collaborative approach to its problems, too (I lived there for 29 years and in the U.S. for the last nine years).

I'm not saying any of the above can't be added to the U.S., by the way, but it will take time to develop, certainly decades for items like electric trolleys.

Well at least the US is moving towards state-owned-housing these days...

Is there seriously any alternative to state-funded shelter in what is about to occur?

There are millions being foreclosed out of "their" homes in the US. There may be various ways to deal with this, but what TPTB seem to want to do is for the fed guv to buy the "nonperforming" mortgages (at your expense, and mine). Assuming the guv cannot "sell" those mortgages, and the "homeowners" cannot pay, what will the guv do? It can evict them (some will end up squatting - that's already happening), or let them stay (squatting with permission), or make them pay rent. Any which way, this is state-funded shelter, no?

I am not sure from your comment whether you agree with this or not.

But what happens if those McMansions are not viable habitations due to lack of nearby jobs?

Some may say the “peak oil theory” is one of deceit and based on conspiracy to create an illusion that we are running out of oil. Why? Well with this perception oil companies and those who collude under the table can establish higher prices and justify there reasoning based on basic supply and demand, which is easily translated in the minds of the consumer. On the other hand with the notion of peak oil, this has also triggered a response of many to establish an alternative energy future. In either case Orlov’s contrast to what occurred in Russia to that of the States is still very valid. It also indicates the high level of dependence we have on the black gold, and from the war in Iraq it indicates just how hungry we are. The recent off-shore ban lift is just a start combined with the new tax law placed on Oil companies to contribute to the funding of an alternative energy future. As I have shared I am very animate about learning the proper ins and outs of valuing such companies and I believe it’s imperative that we all do the same. Without understanding the fundamentals of a company especially companies in this industry, is just as good as placing a bet at a Casino. I’ve been reading posts by this guy in Canada, by the name of Ian Campbell, and he fully supports view of the importance of valuation. I read his post today on valuing mining companies and its worth a read. Apparently it’s a 17 part series and so far I’ve gone through about 4 of them. If this of interest to any of you bloggers the link is

The mid 90s were the result of the shock therapy monetarist voodoo "economics" that the Yeltsin regime imposed on the country. Jungle capitalism and the associated gangster warfare was in full swing in the mid 90s in Russia. So it is strange to claim that the line of people selling their trifles was due to lack of free markets. Things were not great in the late 1980s thanks to Gorbachev's messed up perestroika, that actually led to a blooming of corruption through pseudo-privatization of state assets (i.e. insiders gained, everyone else lost), but they were still better than the super-depression of the 1990s.

I remember all the media stories about Russian shops filling up with goods in the 1990s. Yeah, if most people can't afford to buy then there will be no shortages (there were two massive inflation periods that destroyed people's savings). When there were shortages, somehow most people got the scarce goods. The communist system was failing by the late 70s but the social experiments of Gorbachev and especially Yeltsin (via Gaidar, Nemtsov, Chubais and other clowns) made things much, much worse. Contrast to China, where the transition to capitalism has been a net increase of economic activity and standard of living. It is only the last nine years that the Russian economy has been on a solid recovery trajectory. This was the result of the failure of Yeltsin's GKO pyramid scheme and laissez-faire policies in 1998. Prime minister Primakov threw out the shock therapy witch doctors and their "medicine" and subsequent leaders have been following his lead. Laissez-faire and financial games are not real economics policy or practice, they have created the current US mess as well.

It disgusts me to read sentences like Whatever you do or say, it won't change a thing. That is simply not true. It took the elite a hundred+ years to build their control grid. It might take a hundred years to dismantle it too. But it can be done. It will only be accomplished in a series of very small seemingly insignificant steps. If you possess knowledge useful and necessary to the human race, then you have to work twice as hard to get that information past the control grid. You have to take more time to work, study, and teach. You get more serious about life and have a much stronger sense of purpose. In the long run, it is people like that who build nations.

I know where this pacifist/defeatist attitude comes from. It is highly pervasive in Europe and especially Eastern Europe and the Caucasus. As most people who study freemasonry know, America was an occult experiment, ostensibly undertaken to see what would happen when you attracted all sorts of explorer / independent / entrepreneurial type thinkers to one region. The Teutonic / Hanseatic branch of freemasonry set this whole thing in motion in the belief that if they could lure all these types of people into one area, they could then gain control over them as a group and destroy them. Then what was left over would be a passive, highly pliant population subjectible to feudal rule. That's why America is at the center of this "attack" on the human mind and spirit, and why Americans are so controlled and enslaved by things such as television and water fluoridation. They knew that Americans must be kept under strict control, or else the industrial revolution would have exploded into something they would have lost total control over. The European branch of freemasons never intended America to be as successful as it has been in the past. And they've been working very hard over the past century to undermine it. They've done a pretty good job of it too! But I believe that if America could just unplug from the damn television sets for just one month, there would be a mass awakening. And the whole country would understand what has been done to them. That's the big problem... people just cannot comprehend the sheer size and scope of the war being waged... but I believe that America will figure it out before any other country does. Our collective "breeding" gives us that advantage. Nothing short of a Hitlerian style holocaust will prevent the people from being awoken, once the television mind control weapon is disarmed. That's why they're doing everything that they can to keep the tvs on until the very final moments before total collapse. Their goal is to be able to move everyone from the pale blue-lit living rooms straight into the gas chambers before anyone has a chance to wake up. Knowing all this, I understand that whatever happens in the US is not going to be anything like what happened in Russia.

In my opinion a lot of that is nonsense (freemasons occult experiment? mind control via fluoride?), but the TV thing I've been wondering about: will they really turn off analog TV broadcasting in the US this coming February as planned? What will keep "the masses" under control then? They ARE handing out $40 coupons to subsidize the buying of digital-to-analog conversion boxes, but still? How will the Official Truth be disseminated when those pale screens go "psst"?

Most viewers are on cable, which will continue to work with the old sets. Those who are only viewing over the air broadcast will pick up their free converter using the voucher just like a junkie would pick up free dope.

Depends on what era of Russian history you speak of. The Soviet collapse of recent history or 1917 and the
Bolsheviks revolution was pretty grim. Historians cant agree if it was 40 million or 60 million that were killed during that era. Hey! whats a few ten million amongst comrades anyway? I wont quible about tens of millions but it was huge to say the least.

Could it happen here in America? WHY NOT? I say it could, and is more probable then not. Why might I say that? Well...taking a look around at the situation I can say without hesitation that America is the most violent and extreem super power in the history of mankind. Without the need to post facts and figures that are so generously offered by the American gov no less ( I will gladly enter the data and sources if asked) its a matter of American culture in so much as our music, cinema, literature, the entire she-bang reeks of it and always has. One would fail if they tried to deny the ruthless violent war hungry nature of the USA as a whole. Its indelibly etched into the American fabric to the point that mothers dress newborn infants in military camo and the first toys many toddlers posess are military plastic weapons of such realism, cops shoot kids who are holding them.

Sad? yes...true? sure....Does it hurt to say or admit it? oh my certainly. Is it dangerous to speak of it?
Ask the Quakers who were investigated for private meetings concerning peace or any others of millions under investigation in the good ole USA for simply seeking peacefull relations with Iraq or Iran. Investigated by CIA, FBI, NSA, SS, and who knows what other acronyms. I can give dot gov sites to prove everything Ive said above if asked.

To begin with I have long believed that ideological extremist policies are doomed to eventually fail. The Soviet ideology against private enterprise meant a lack of available consumer goods other than borsht and vodka. The workers had nothing they could buy if they worked harder or better.

The same could be said about extreme capitalist policies. Union busting and a flood of cheap manufactured goods means fewer and fewer people can afford to keep buying those goods as well as keep buying more and more expensive energy products. Health Care is becoming less affordable as well as education. When one spouse had a good paying job with good benefits the other spouse could accept a minimum wage job with no benefits or simply stay out of the job market. But when that good job was exported to Chindia meant that neither spouse had health care benefits and neither spouse had the option of staying out of the job market. With more workers competing for fewer jobs employers have no reason to pay more than minimum wage or offer benefits. The couple who were credit worthy when they got that mortgage are no longer able to meet the monthly payments. For quite a while Wall St has found these conditions to be profitable. Now that commodity prices are rising, with energy prices leading the way, the construction industry took a big hit. Construction workers now face the prospect of mortgage foreclosure. They no longer can buy those big SUVs and the auto industry takes a hit. Former auto workers now face foreclosure. People no longer can afford that summer vacation trip and the hospitality industry takes a hit. Falling real estate prices mean schools and local governments take a hit and lay off employees. Now even more folks face foreclosure. The cycle goes around and around and eventually those on Wall St start feeling the pain working families have felt for decades. After decades of chipping away at the bottom of the economic pyramid the upper levels start sliding down and they start demanding the government rescue them after opposing the rescue of the construction workers, the auto workers, our public schools, our local and state governments, etc. Part of me says let them drown in the sea of cutbacks they have demanded everyone else suffer with. The problem is they will drag everyone else to the bottom with them. Help for them should only be only be a part of a comprehensive restructuring of the entire economy into a mixture of private enterprise with adequate taxation to pay for health care for everyone and educating the workforce for a switch to renewables and efficiency. Throw in trade policies that take the difference in manufacturing wages between countries and different environmental standards.

Can the American Empire avoid a collapse like the Soviet Empire did? I doubt we will make the necessary reforms to avoid it.

I made a little poem for you all.
It is in three languages; feel free to translate to any other language.
If you've got better words, please let us know
By the way, the story of the Roman collapses is interesting and informative: the western empire rolled over and died in a few years, while the Byzantine bit grew quite large before collapsing slowly over three hundred years or so, before being replaced by a muslim version of the same thing. Ever since Augustus, all emperors (and thereupon sultans) have been lacking in some way, most were cruel, narrow-minded and often downright stupid.
May this temper your feelings toward present and future administrations

The Constantinople - Istambul feeling.
The conscience of subsisting in the rotting ruins of a fabulous fabrication.
When paint bladders, plaster molders,
When wood withers, and iron bloats and crusts like meat in hot oil,
When fires dampen, tongues go silent,
When dead eyed houses look at wreck strewn streets
We will know what it is to have been.

Byzance, Constantinople, Istamboul.
La conscience de roder sur les ruines fœtides d'une fabuleuse fabrication.
Quand les fards s'effueillent, le plâtre moisit, les bois dépérissent,
Quand le fer enfle et croûte comme chair en huile chaude,
Quand les feus refroidissent et les langues s'éteignent,
Quand les maisons, les yeux vides regardent les rues remplies d'épaves,
On saura comment il est d'avoir été.

Het Constantinopel-Istambul gevoel.
Het geweten te teren op de rottende ruines van een roekeloze roem.
Als de verven bladderen, als het plaaster schimmelt, en het hout kwijnt,
en het ijzer zwelt en korst als vlees in hete olie,
Als de vuren verkillen, als talen verstillen,
Als de huizen met lede ogen kijken naar straten vol wrakken,
Zullen we weten wat het is om geweest te zijn

Peak oil did not destroy the USSR, an oil glut did

Or at least partly.

The USSR did not run short of oil money because they were running short of oil - peak oil - but because the Arab countries overproduced and depressed the oil price.

Had world oil peaked in 1985, the price of oil would have risen, and the USSR would have been quite happy. The USSR ran short of money not because of peak oil, but because of an oil glut.


In 1989 when things began falling apart for the Soviet empire, they produced about 11 million barrels of oil a day and could sell them for $10 each - $110 million a day.

Now that the world is at or around peak oil, they're producing around 9 million barrels of oil a day and can sell them for $100 each - $900 million a day.

Peak oil is extremely profitable for oil exporters. An oil glut ruins them. The USSR did not run out of money because it was running short of oil, it ran out of money because everyone else was producing so much oil. Peak oil did not destroy the USSR.

Peak oil is good for oil exporters, and ruins oil importers. An oil glut is bad for oil exporters, and good for oil importers.

I've always thought of peak oil as having results like the Soviet collapse (though I am also skeptical that peak oil was a major factor there - I think we can get a little too materialistic and forget that a collapse can be primarily cultural... after all, Russia in 1993 was still better off on average than China in 1993).

Two of my cousins went to Russia in '89 and '91 respectively, and they both married Russians. When I was over there in '98 for one of their weddings, we went to his wife's family's dacha outside of Moscow. Her father had been a plant worker, and the plant owned a small colony of bungalows with tiny gardens - about 1/10 of an acre in size. They'd survived several years of the collapse by extremely clever and intense gardening on this tiny plot of land in a very short growing season. They could do this because although they lived in Moscow, this satellite community was reachable by train. They also were very good at preserving things.

One of the things I thought was remarkable about this was, because the Soviet economy was never particularly good they never lost these skills - they simply accelerated them in the collapse - and people who were Moscow intelligensia who I talked to, who were on their way to be wealthy, still had some working knowledge of all of this. Most of the cars I saw were some kind of Soviet beater that never worked well but could always be made to go again, with something at hand. People were always forced to do some bartering or scrounging for basics - think of the black market in jeans that we always heard so much about in the west.

Finally, there were an incredible number of people with technical skills - doctors and engineers, and I still see the impact of that today (if you download warez you likely get them from Russian crackers, and my current boss at a dotcom is an emigre.)

So my takeway from this is that were something similar to happen to the US, your average American is not nearly as tough as the stoic Soviet person who had been suffering through things like their experience of WWII and reigns of terror, nor are they nearly as skilled at survival. That's probably the most frightening element here - everything that happened there is going to be far worse for people who have never lived without feeling entitled to SUV's and Ipods.