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Impact of Credit Crisis on the Energy Industry - Where Are We Now?
Posted by Gail the Actuary on December 1, 2008 - 9:56am
I recently looked through news articles to see which energy sectors were being affected by the credit crisis. I was amazed at how widespread and how devastating the impact is.
There are really two closely related problems. One is reduced access to credit, making new borrowing difficult for nearly every business that requires debt. Prices for all commodities have been dropping as well. At least part of the reason for this price decline is the lack of availability of credit—many of the less credit-worth buyers drop out of the market. This leaves fewer buyers and almost the same number of sellers, so the price drops.
In this post, I examine how reduced access to credit and the concomitant decline in commodity prices is affecting energy companies.
The impact I am seeing across a wide range of energy companies is a decline in new investment and a stretched-out timeframe for new projects. In addition, many of the weaker companies in the energy supply chain are likely to be forced out of business by the credit crisis.
When energy production is viewed for all companies combined, the below analysis suggests the credit crisis will cause the production of virtually all fuels to be in decline, relative to what they otherwise would have been. I expect production of oil will decline (in absolute terms, not just relative terms) in the years ahead. Since oil production was already on a plateau, this decline is expected to bring about "peak oil". Because of long lead times, uranium production seems likely to fall short of what is needed by nuclear power plants, within the next few years.
The long-term implications of declines in energy production are very serious. Research shows that standards of living are closely tied to energy consumption. With less energy available, standards of living are likely to decline.
Oil and Natural Gas
The oil and natural gas industry has a very long supply chain, including many small players. In order to operate smoothly, each player in the chain must either have cash or credit to buy the goods and services it needs. The bigger companies with good cash flow and a low cost of production are in a much better position than smaller more highly leveraged companies.
The credit squeeze has already put some of these smaller players out of business. For example, a shipping company, Svithoid Tankers, went into liquidation after facing an immediate liquidity shortage and a natural gas marketing company, Catalyst Energy Group Inc., filed for Chapter 11 bankruptcy, after its credit line was ended, indirectly as a result of the failure of Lehman Brothers.
Many other companies are still operating but are encountering a cash crunch, because others don’t want to do business with them, or because the credit that is available is very expensive. These players are often willing to offer discounted rates for their services, in the hopes that they will be able to keep cash flow up.
Petrobas in Brazil recently ran into a problem with suppliers who promised more than they could deliver when it awarded contracts for building 20 deep-water drilling rigs to Brazilian firms with little experience in deep-water drilling. Many of these firms were not able to borrow the money they needed to finish the oilrigs they had promised. Now Petrobas has the choice of advancing these contractors the additional funds they need, or delaying the project by finding other contractors at a much higher price.
We are now hearing about companies trying to use the lower prices available from some contractors to their advantage. In Saudi Arabia, Saudi Aramco is reportedly renegotiating contracts on its $15 billion Manifa project that was originally scheduled to add 900,000 barrels per day in oil production in mid-2011. This action is intended to reduce Saudi Aramco costs, but will increase the likelihood of bankruptcy of its subcontractors and will delay the start date of new production.
Because of the credit squeeze, many oil and gas companies are finding it necessary to limit their investments to what they can finance with cash flow. In the Canadian oil sands, both Suncor and Petro-Canada have pushed back plans to purchase “upgraders,” at least partly because of cash flow considerations. US natural gas producer Chesapeake Energy cut its spending plans three times within a month.
A few companies have found ways to work around their inability to find credit in ordinary markets. Russian oil company Rosneft reached an agreement with Chinese energy company CNPC Sinopec to lend it funds for a pipeline in return for a guarantee of oil from the pipeline. This arrangement gives China a long-term guarantee of the product it needs, locking others out of the market. (Note: It seems like there were later changes to this.) LUKoil, another Russian oil company, has asked the Russian Development Bank for a $1.8 billion loan to refinance its foreign debt.
Another approach for getting around the credit squeeze is merger with a better-funded partner. While few mergers have taken place to date, the oil majors would seem to be in a position where they can buy some companies with credit problems, if they choose to.
Can the credit squeeze be expected to have an impact on capital expenditure going forward? Yes, for two reasons. First, without outside sources of credit, companies are under pressure to keep capital expenditures within the funds that are generated by cash flow. Second, since the credit squeeze keeps the price of oil and natural gas low, there is no point in extracting oil and gas if the market price is too low to provide a reasonable return on investment. Because of this second limitation, the projects that are eliminated are the projects that require a higher oil or natural gas price to be profitable.
In the case of oil, the projects that become non-economic are the newer fields that are more expensive to extract, such as the Canadian oil sands, Petrobas’ new deep offshore Brazilian oil, oil in the Bakken formation in the US, and oil near the Arctic Circle. In the case of natural gas, the more expensive fields are various types of unconventional gas production, such as Barnett Shale in Texas.
Other types of capital expenditure that are not directly related to production are also likely to come under pressure. For example, it is likely to be difficult to get funding for new pipelines (including the proposed natural gas pipeline from Alaska), if these have not yet been funded. In the UK, plans had been made for additional underground natural gas storage beneath Portland, Dorset, so as to have more ability to store extra gas for winter and prevent price spikes. This has now been suspended, for lack of funding.
The net impact of all these issues is that oil production has already started to decline. Plans for future investment have been cut back, so it is likely that oil production will stay low for quite some time. Even if prices should rebound, lack of credit will limit the ability of the oil supply chain to increase production. For these reasons, world oil production is likely past its peak.
Natural gas production and distribution is based more on local markets than an international market, but it too will start seeing more problems. In places where natural gas production was forecast to increase, these increases are likely to be less than previously forecast. In places where production was expected to decrease, the decreases are likely to be greater than planned. In the United States, natural gas tends to be produced by smaller, highly leveraged companies. These companies are likely to be disproportionately affected by the credit crisis. While US natural gas production has recently been increasing, future production is likely to be flatter. If credit problems persist for another two or three years, production may even start to decline, because of the rapid decline rates of unconventional gas wells, and the difficulty in funding enough new wells.
Coal
The coal industry is in many ways similar to the oil and natural gas industry. The companies that can be expected to fare best in the credit crunch are large companies, with low-cost mines and significant cash flow from current operations. These companies will be able to use their cash flow to finance future capital expenditures. Companies that depend heavily on debt and smaller service companies will have difficulty obtaining credit. Some of these companies may seek to merge with major coal companies.
As with oil and natural gas, the price of coal has dropped recently as a result of reduced demand associated with the credit crisis. The lower price will make new investments less profitable than they would otherwise have been. This will act as a deterrent to opening new mines, particularly in higher-cost areas.
The infrastructure used for transporting coal is primarily railroads and barges, plus some trucks. With the credit crisis, it is likely to be difficult to obtain funding to upgrade this infrastructure. The lack of new infrastructure will act as another deterrent to growth of the coal industry.
Prior to the recent credit crisis, there were about a dozen Coal-to-Liquid (CTL) plants in some stage of the planning process. The products made at these plants were intended to compete with gasoline or diesel. Now these plans are being re-evaluated because at an oil price of $60 barrel or less, the cost of CTL is no longer competitive.
Ethanol and other Biofuels
Ethanol is another product intended to compete with gasoline. When oil prices were high, and adequate subsidies were in place, ethanol producers did well. Now that both oil and corn prices are down, both farmers and ethanol producers are having difficulties.
The US’s largest ethanol producer, Verasun, recently sought bankruptcy protection, and there are a number of smaller companies near bankruptcy. The New York Times reports, “The industry should be consolidated — I think everybody believes that,” said Mr. Horowitz of Soleil. “But who is going to finance anything right now, let alone a very low-margin business that doesn’t look like it’s going to get better in the near term?”
Ethanol in Brazil is encountering difficulties as well. The sector is highly leveraged. Projects which already have been funded will continue, but there is a question whether funds for new investment can be found, especially in light of the low price for gasoline. Mergers may occur because the credit crisis makes some of the projects easy takeover targets.
Ethanol from non-food sources (called cellulosic ethanol) is not at this point cost-competitive with corn or sugar based ethanol. Producers have been hopeful that additional funding for their research might become available, so as to try to lower production costs. This is looking less and less likely, with the credit crisis. In the US, President-Elect Barack Obama has indicated that some of his plans for energy investment may have to be scaled back, because of the $700 billion bailout of financial markets. Lower prices for gasoline make cellulosic ethanol even less cost competitive, discouraging new investment.
In the European Union, biofuel goals were recently pared back, so it is not as clear how much of the lessened growth in production is lowered goals, and how much is the impact of the credit crisis. Last year, the goal for biofuel production was set at 10% by 2020, but in September 2008 this was pared back to 5% of transport fuels by 2015. There is still a goal of 10% by 2020, but this is to be reviewed in 2014 depending on scientific progress.
Wind, Solar, and Geothermal
Wind, solar, and geothermal are all renewable sources of electricity. They are intended to be replacements for electricity generated by fossil fuels, partly because of climate change issues and partly to foster energy independence. Since these are long-term goals, cost is also an issue. When the price of oil and natural gas was high, there appeared to be cost savings, but these disappear when fossil fuel prices drop.
These renewable energy companies have been hit very hard by the credit crisis. Most used considerable leverage and were growing rapidly before the crisis. The credit crisis has dried up funding drying up, so new projects are off substantially.
One of the issues is that in Europe, investment in wind and solar was pushed along by climate change legislation. Now, with the financial crisis, countries are backpedalling on their promises. Back in March 2007, the European Union members pledged to cut greenhouse-gas emissions 20% below 1990 levels by 2020. Now that the costs are clearer, and the economies are running into financial difficulties, both Germany and Italy are saying that these goals are unrealistic.
In Great Britain, climate-change goals have recently been raised. Large projects backed by the larger utilities seem to be safe, but more speculative projects are running into trouble, because of the difficulty in obtaining financing. The Times quotes Ian Whitlock, a partner of Ernst & Young specializing in utilities as saying, “The market has definitely tightened up. The lending rates over Libor and the covenants on renewable energy deals in particular are being toughened up.”
In the US, wind energy has been hit very hard. Prior to the credit crisis, the top financers of wind energy included Lehman Brothers, AIG, JP Morgan, and GE Energy Financial. As a result of the credit crisis, these organizations are less able to lend. Congress recently extended a 2.1 cents per kilowatt hour tax credit, but this doesn’t seem to be working, partly because the banks who would normally invest in wind energy are not themselves very profitable, so get little benefit from the tax credit, and partly because of concern that the wind energy will not be very profitable, and therefore have difficulty paying back the loans.
The situation in the US for solar and geothermal is similar to that for wind. German solar-power company Schott Solar AG, for example, called off a $900 million initial public offering earlier this month, citing poor market conditions. While the US Congress extended solar tax credit for eight years rather than one, it is of limited benefit to banks and other investors who are currently not profitable.
According to Forbes, “While the good news is that solar technology is poised to continue its impressive growth streak, the bad news is that a perfect storm is on the horizon as a wave of supply converges with diminishing government subsidies and a very chilly credit market. This will require solar manufacturers to reduce prices to compete and could spell trouble for smaller module makers or companies overly reliant on credit to operate.”
Nuclear
Even nuclear seems to be hitting headwinds with the current credit crisis.
First, with the credit crisis, it is more difficult to finance new nuclear power plants and other infrastructure. We read, “Funding ‘Iffy’ for Uranium Enrichment Plant”. The article indicates that US’s only provider of enriched uranium, USEC Inc., wants to build a new $3.5 billion facility, but cannot get public marketing financing, given the current market situation. It is hoping to get a Department of Energy loan guarantee.
Second, the spot price of uranium has dropped by more than half. While most production is sold on long-term contracts, rather than in spot markets, this, together with the lack of credit, is inhibiting new investment. Cameco, the largest uranium producer in the world, reports, “Growth will take place but at a slower and more measured pace. We will look for opportunities to reduce costs and defer projects that cannot be funded internally.”
One new South African mine, which was still in pre-commercial production, has recently closed, partly due to declining uranium prices and rising costs of inputs. The company said it could not raise the required capital to fund development and subsequent production at the mine because of the global credit squeeze.
In the next few years, it is likely that uranium production will fall short of the amount needed by operating nuclear power plants worldwide. Currently, nuclear warheads are being processed, but the treaty covering this will expire in 2013, and will probably not be renewed. In addition, several mines will be reaching the ends of their lives in about the same timeframe, and new production requires eight to ten year lead times. At this point, it is likely already too late to bring enough production on to meet uranium needs in the 2013 to 2015 timeframe. The credit crisis will only make the situation worse.
I wrote this post about three weeks ago, and I don't think things have gotten much better since then. According to Merrill Lynch, the average junk bond yield is now greater than 20%. A recent Wall Street Journal article (behind pay wall) says, "The junk bond market has closed the door." The article indicates that in November, no new junk bonds were issued. It also indicates that about half of US corporations have below-investment-grade credit, and thus are being locked out of the market. It seems likely that quite a number of these companies are in the energy field.
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The long-term implications of declines in energy production are very serious. Research shows that standards of living are closely tied to energy consumption. With less energy available, standards of living are likely to decline.
Riiiight. And the average Dane comsumes HALF the energy of what the average American does, and we all know what kind of abject poverty Denmark is in. It's a rotting hellhole of misery. They're so poor they have babies just to eat them. Yep - cut your energy consumption in half and the next thing you know, it's dogs and cats living together, it's an endless parade of HELL where all you eat is GRUEL for breakfast and lunch, because there is no dinner; it's just one ongoing tragedy - an endless trainwreck of drudgery and weepy madness over there in Denmark because they consume half the energy Americans do.
What? The Danes are rated as the happiest people on earth? How can that BE? They only consume HALF the energy of the average American! They must be delusional! Surely they don't have the THINGS we NEED to make our crappy lives keep going??? I mean, like the interweb thingie! They... uh what? Oh... on average they have better and faster internet than the average american? Hmmmm. Well, WE HAVE LOTS OF CARS!!!! They... what? Oh. They live longer?
Geee. I guess this whole "more energy == better life" thing is a bit more nuanced than I thought. I figured that for sure, if the Danes consume half the amount of energy an american does, they'd be miserable. Well. Wuddya know... learn sumpthin' new every day. Like how to read through peak oil scare mongering and propaganda.
The fact(s) of energy depletion are scary enough. But card stacking like that is inexcusable at this point. We all got the meme - even the CIA gets the meme. Now, your point being?
Even Britain has the same energy consumption as Denmark. Happiness research has to be taken with a grain of salt as there's still a lot to be done on the matter. How people describe themselves depends on the culture they are from, the style and format of the questionnaire. Happiness means different things to different people. I've seen similar country by country comparisons where Bhutan was number one and in some cases so was Nigeria. Problems with happiness research also include the fact that happiness is difficult to quantify and can not be comparable. My euphoria might well be someone else's normal state of affairs. Secondly people themselves do not know if they are happy or not according to Dan Gilbert's book stumbling on happiness, our memories are biased and highly alterable and selective. There was one particular study where Asian Americans, Latinos and Caucasians were asked multiple times during the day on their happiness levels with a remote device on a scale of 1-10 I believe.
It turns out that while Asian Americans were on the whole according to their responses, happier than their Caucasian and Latino counterparts, when asked at the end of two weeks how happy they felt. They tended to report that they felt LOWER levels of satisfaction than either group over the past fortnight. Latinos on the other hand reported lower levels of happiness compared to their Asian and Caucasian counterparts during the day but at the end of two weeks reported the highest level of satisfaction if I recall correctly. Showing the impact of culture and time on happiness.
Another question which arises is how to measure happiness levels across time? While money may not bring significant happiness, the lack of it creates a lot of suffering!
Denmark might be happier than lets say America or the UK because of greater income equality but to generally say they are number one is a conclusion made in haste. A lot more research needs to occur before we can conclusively say what happiness is in fact and what causes it.
It may be true that Danes consume half as much energy, and it is certainly true that Americans went hog-wild over the past few years. But give the devil his due and acknowledge that Denmark is a postage stamp sized country with a milder overall climate. A fairer comparison might be Manhattan or downtown Chicago. The Americans have cut back enough on energy consumption to drop the price of oil by $100. Notwithstanding Black Friday shopping stampedes that kill Walmart workers, their overall consumer consumption has dropped to the point that foreign manufacturers are suffering. So the Americans are changing.
Canada is often listed as an energy hog, but unlike Denmark we have real winters that kill people, and our country is wider than the Atlantic, so we spend more on transportation. From Calgary it is 250 km to the nearest same-size city (Edmonton) and 600 km to the cities after that (Regina or Vancouver). We have cattle ranches and traplines bigger than Denmark.
The high population density and small size of Europe have made it easier for them to use public transit and compact cities. Yes, we have suburban sprawl, of which Calgary is a shining example, but we also have compact downtown cores. But Europe can't feed itself, and as the North Sea petroleum runs out, won't be able to heat itself.
We'll all go together when we go.
Some areas of Europe like Britain can't feed themselves, but overall Europe can very easily.
There are also huge relatively unexploited areas such as the Ukraine.
Life will be a lot more difficult with oil shortages, of course, but there seems no reason to think that they won't be able to continue to do so, perhaps eating rather less meat.
"But Europe can't feed itself,"
The European Union pays farmers money to *not* grow food on land they own. Europe produces more food than it consumes and the export of its subsidized food actually harms farmers in Africa.
"and as the North Sea petroleum runs out, won't be able to heat itself."
well, the coming shortage of nat gas is a serious problem (mainly a political one as we will be at Putins mercy...), but mostly to electricity generation. Heating can be done with coal, of which we have plenty, while Germany, for instance, moves more and more towards housing insulation standards that require houses to need little to *no energy at all* for heating ("Passivhaus").
"But give the devil his due and acknowledge that Denmark is a postage stamp sized country ."
Europe as a whole isn't really that much smaller than NA. Germany certainly isnt "postage stamp sized", uses no more energy than Denmark and its climate is not milder than the USA. Sweden, whose population density and climate ought to be really similiar to Canada, even plans to use zero oil by 2020. They can do this precisely because of the low pop density! (i.e. enormous forests to turn to use for producing energy biomass for not so many people). Canada could probly do something siniliar. From what I know, however, Canadas apperent energy use is only so high because of all the energy intensive resource production going on (tar sands ...), otherwise it wouldnt be that bad.
While I agree we are all in the same boat in this, there sure are differences of degree as to the severity of the problem and the progess done towards solving it. High gas and energy taxes, heavy public investment in renewables, a well working public transportation system are what makes europeans consume only half as much oil as north americans and certainly will go a long way towards making coming oil shortages less socially disruptive.
I "Up-Arrowed" you, inasmuch as I, generally, agree with your statements. That being said, however, I do think Europe has a problem coming down the pike as regards "Diesel."
As the rest of the world, and especially the U.S., replaces more, and more, of it's gasoline with ethanol Diesel supply is going to get shorter, and more expensive. The price "spread" has widened in my area from 57% to 62% in just the last couple of weeks.
It looks to this Mississippian that you guys really need to start working on the Veg oil/biodiesel thing pretty quick. Jes Sayin. :)
I dont think ethanol is a viable option in substituting oil outside of warm countries like Brazil. This has been discussed a lot here on the Oil Drum.
As for the Biodiesel, you can now buy this here in many gas stations. There is also working pilot plants converting any biomass to synthetic diesel. Look here: http://www.choren.com/en/
http://www.choren.com/en/choren_industries/information_press/press_relea...
I even know a guy who owns block of apartment houses in the city and powers both the heating and the electricty needs of these houses with a rape seed oil fueled generator in the basement.
However, Central Europe can not produce enough Biofuls to replace all motor fuel because of too little land for too many cars and people. The United States and Canada should do better on this, at least if they give up EROI-negative ethanol production and go for second generation biofuels.
The U.S. will blend 10% Ethanol in 2009. per the EPA
The operative phrase, here, is "all motor fuel." The goal probably should be something like 20% bio. It looks to me like the oil companies have managed to tie some European countries up in knots with some "environmental" red herrings as regards imported biodiesel. I think this could end up costing you, greatly. I could be wrong, however; it IS a long drive from Memphis to Madrid. :)
"The U.S. will blend 10% Ethanol in 2009. per the EPA"
Sure, i am not arguing you cant mandate such an amount or even produce it, but given the low EROI of ethanol production in the US, how much oil will you have displaced? According to many analysis here on TOD and elsewhere, probably very little.
Actually, quite lot, Old One. It takes about 8 gallons of diesel to produce 154 bushels of corn (462 gallons of ethanol.)
The ethanol coming from an "average" newer refinery has about 30,000 btus of nat gas, from fertilizer, drying, and refining, embedded in it; but, by using This technology that can be lowered to about 2, or 3,000 btus (for a gal of ethanol that can replace 116,000 btus of gasoline in the proper blend/engine.
Of course, you could add in THIS Technology and be down to NO nat gas, diesel, and electricity embedded in the ethanol. The DDGS, at 8400 btus/lb (17.5 lbs/bu) would more than cover all energy used.
Personally, it seems to me that "cost of production" is a much better metric than trying to ascertain eroei. Although you, or I, might miss an energy input the guy that supplies the inputs Won't. :)
http://www.neatorama.com/2008/01/01/energy-independence-how-denmark-kick...
Comment number 22 and 28 are quite interesting on that site. I reckon we need to really investigate whether Europe really uses less energy and is scandanavia in particular really so independent? I'd say it's hogwash to say they are, they have not found some secret way to beat the laws of thermodynamics. Again if Scandanavia is so great than how come more people don't live there? And why hasn't their model been copied? There's more here than meets the eye.
What about the concept of virtual oil, a LOT of Chinese oil imports are most likely converted into exports for Western Europe, Japan and America. Hence because a lot of manufacturing has been outsourced, a lot of the energy use in America and Europe has been reduced due to this.
Also America basically maintains global security, i'd like to see how long Europe and Canada and all could maintain their low energy use relatively and their welfare states without the presence of the American Military, as they would have to set up their own forces.
"Again if Scandanavia is so great than how come more people don't live there?"
In short: Its cold, dark in winter, and it rains alot. Otherwise its a truly nice place to live.
Central europeans might got to work to Scandinavia, but they'd rather emigrate to the warm mediterranien shores :)
Sweden isnt actually energy indepent right now, they just adopted that plan like two years ago. At the moment they mostly run their volvos on gasoline just like the rest of us.
In the comments you mention they seem to talk a lot about how wind energy is not cost competitive and subsidized. That is true, but I consider these subsidies (in Germany paid by the end user) a very smart investment for a future with a much more insecure energy supply. I rather have people spend money on renewable energy and small cars, and states invest in the development of the same instead of huge military spendings to occupy oil producing countries.
"Virtual Oil" is an important aspect, however Germany has a large export surplus (we still export a little more than China) whereas the USA import twice(!) as much as they export.
I think the difference is really in things like car size and efficiency, car sharing, riding buses and trains etc. Exchanging a Hummer for a VW Golf yields a manifold increase in fuel efficiency and wouldnt cost anything.
If you contend that Denmark and other Scandinavian countries do not use less energy (all types) Per Capita than the USA then you are wrong.
2005 IEA Energy Trends - Kilograms of oil equivalent (kgoe) per person:
USA - 7,885.9
Denmark - 3,634.3
Finland - 6,555.0
Sweden - 5,780.3
Norway - 7,153.2
Regarding America providing global security, well, I think that
A. nationalistic posturing (USA! USA!)in the face of global crises is counterproductive and
B. if you mean that by guarding the oil in Iraq the USA is really just being Mr. Nice Guy, practicing high altruism sacrificing our young for the rest of the world's benefit, you are again mistaken and
C. if you think that choices made by the people in democratic nations in Europe regarding health care and other social benefits are only possible because of US military presence then you suffer from a great and misguided arrogance.
Drop the price of oil by $100? $147 was the highest future price and as I recall those contracts settled at approximately $120. At the same time probably most of the oil actually changing hands was going at less than that. At the moment there are lots of supply contracts hedged at more than the current future bet of $55. The actual average settled and delivered prices never moved nearly as much, as far as I know. The only consumers of crude are refiners, but there's lots of froth along the way. It would be interesting to know the average high and low numbers actually paid and I bet there's a lot less than $100 between them. Or there's something going on that I don't realize - ever a possibility.
The high price paid by refiners in the U.S. was roughly $127--my best info as of right now. (You're right, it was never $147.) Not sure yet of the low.
Re Danish climate, Danish Happiness, Danish self supply and Danish energy use.
Climate
The present Danish average is 3400 HDD oC, base 18oC = 5800 HDD oF.
This is close to the European average, similar to 1970 Vancouver Island- and 80% of Toronto – Ottawa. http://atlas.nrcan.gc.ca/site/english/maps/archives/5thedition/environme...
In Europe, the HDD range from Malta/ Gibraltar (500 HDD) to north of Sweden 6500 HCC (oC) = 11700 HDD base oF.
http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-76-06-604/EN/KS-76-...
http://met.no/Forskning/Publikasjoner/metno_report/2008/filestore/metno_...
http://www.energy.rochester.edu/units/Heating_Degree_Day_Conversions.pdf
Happiness.
Numerous investigations during the last two decades have found people in Scandinavia (Norway, Sweden, Finland, Denmark, Island) being very content with life. Same investigations have found that happiness is not synonymous with energy consumption. I will not volunteer an explanation, but that’s it.
Some examples.http://www.eurekalert.org/pub_releases/2006-07/uol-uol072706.php
http://www-stat.stanford.edu/~susan/courses/s30/web1/mn_happychart.jpg
http://www-stat.stanford.edu/~susan/courses/s30/web1/happy.html
Food and self supply.
Denmark is one of the world top exporters of food. We have been living of export since the stone age 4000 BC starting with flint and amber, in the middle ages fish, butter and presently we produce food for 5 for times the Danish population and have some of the largest agro industries in the world. Presently half the land area is farm land of fine quality- almost without the need of artificial watering. 25 % of Danish export is food. We have been sailing goods all over Europe for at least 3000 years.
Energy
As other nations, Denmark wastes a lot of energy. But we are ideally placed for transition to a sustainable “post carbon situation”, because we have “trained” in the necessary “skills” for years. Both on energy supply and energy use we have solutions to most of the tasks in a future sustainable society.
The Danish energy “knowledge” export is expected to be the largest export business in a few years.
Novo enzymes, Vestas, Danfoss, Rockwool, Grundfoss, Velux, to mention a few.
1) We can produce a lot of renewable energy. Relatively more than most other nations. We have wind and water.In any future energy scenario, Denmark will do fine. If we utilize the full Danish potential for renewables, we can produce 35-40 % of the present energy use forever.
2) We know most of the general techniques necessary to change society to a sustainable- low- or zero carbon society, what each technique will yield, and have an idea of what costs are involved. One example: The Danish Engineer association has recently taken the initiative to describe the “beginning of transition”. http://ida.dk/News/Documents/Energiplan%202030-Sammenfatning.pdf
What is needed for transition is political will. We got the means and the skills.
Regards/And1
This comment is an almost perfect example of what I mean about discreet 'nationalism' Scandinavian style and the selective use of statistics and 'history' to paint a very subjective picture for domestic and foreign consumption.
Danes may well be the 'happiest' people in the world, but one can also make an argument that they are also the most 'nationalistic' people in the world as well. Minority elements, especially Muslims, are not spectacularly 'happy' with there position in society. In many respects they are similar to the way people of colour were regarded decades ago in the United States, or the Jews in Europe. So 'hapiness' is a relative concept. I think Danes are mostly happy because of their functioning welfare state, full employment, high standard of living and something that resembles a 'tribal' culture.
As to their use of energy, this is a complex subject. True, Denmark uses less energy than the United States, but who doesn't. America's use of energy is profligate in the extreme. Denmark's a small country so transport is easy. Good roads, good railways ect. Denmark produces about 20% of it's electricity from windmills, which is good. But overall energy consumption has been rising steadily in Denmark because of Denmark's long economic boom.
Denmark likes to brag, in discreet way of course, about how it's economy has grown substantially over the last fifteen years, yet it's energy consumption has remained stable, and other countries can learn a lot from this. Up to a point this is true, however, it not that simple. Denmark has a massive merchant marine which has grown substantially in the last fifteen years. The fleet of huge bulk carriers and tankers uses a great deal of oil, some of the biggest ones use as much oil as small Danish town. But because these ships are not classified as part of Denmark's national energy consumption, Denmark's overall energy consumption appears far lower than it really is. Factor in Denmark's huge fleet and the flattering picture relating to Denmark's energy total energy consumption changes radically, and one sees that economic growth and energy consumption are very closely linked indeed.
Thanks for your comments Writerman, all that glitters is not gold. The last statement you make is very interesting. Also even if Denmark is not hit as hard by peak oil, the fact remains that the rest of its trading countries will be affected. The value of their exports and imports will be affected. No country is an island i.e. unaffected by what is going to happen.
Don't you just love the folks who have all the answers and insist on dictating how everyone else should live.
Their attitude is, "If you'd just be like me, think like I think, do what I tell you to do, then the world would be absolutely perfect."
Methinks they play god.
Let's try looking at this a little more reasonably.
Cut your calorie intake (energy, the food you eat) in half, and maintain your current level of physical activity. How would that feel, exactly? It would feel like starving.
Comparing the average Danish energy consumption to the average American's completely ignores the surrounding environments and infrastructure. It's like saying since pygmies do well on a certain diet, Sumo wrestlers will also do well on that diet.
It also completely ignores the fact that the issue at hand is everyone's energy consumption. So, if we were to accept for a moment that Americans could live on the Danish energy budget, what would have to happen for the Danes to live on half their current budget and maintain their current lifestyle?
This procedure is known as "dieting" and might help to fix the american obesity epidemic...
;-)
Seriously, though, it currently looks as thanks to the credit meltdown the americans will have to (and are already doing that) lower their oil consumption much faster then the rest of the world. Maybe in a few years the differences will not be so big anymore. I am not saying that this would be pleasant for America, but it certainly seems to be going that way right now.
"...thanks to the credit meltdown the americans will have to (and are already doing that) lower their oil consumption..."
Yes and thanks to the credit meltdown Iceland will severely cut their oil consumption, Hatians will go on a "diet", Hell the world will consume less so it looks like everything will be just fine in the long run, YEA!
Where did I say that everything will be just fine?
What I am trying to point out here is that the american lifestyle in the last decades has been enourmously and unnecessarily wasteful and whats more, in the last decade or two this was only possible due to an equally enormous debt inflation and a huge trade deficit. These things are coming to an end. As they do, the waste will stop, and even americans will learn to carpool, bicycle, take trains, heat less rooms in their houses if the cannot afford proper insulation. just wait and see.
This will probably not be pretty and I am not happy about it, I just think its unavoidable. As Gail pointed out too, all this luxury was only possible due to the debt explosion. Where I dont agree with here is that I think, in time of crisis, luxuries will be cut out first and funding for infrastructure and energy will be rather given priorities.
About the Haitians: They were starving last year not because of an actual food shortage, but a shortage of food *they could afford*. What drove this price inflation? Debt driven demand and debt financed speculation. As both evaporated, grain prices have fallen sharply and haitians are maybe not so much priced out of the food market anymore.
We not only should not ignore the Dane's surrounding environment and infrastructure, we should study it to determine in what way we can modify the structure of America's transportation, housing, and infrastructure to more closely emulate a country that apparently uses less oil.
We know we can radically reduce U.S. energy consumption without causing hardship. You are using a false analogy; it will not be like cutting one's caloric consumption in half.
Yes!
"We know we can radically reduce U.S. energy consumption without causing hardship."
No, obviously we don't know this because we haven't done so already. Radically reducing energy consumption without hardship isn't something that is known, it is being wished.
The analogy stands because most don't understand the complexity of the systems involved. And I have no idea how much needs to be explained. Nor even if it's possible to explain it, because it seems like many here are operating out of an emotional level rather than a rational one.
So I'll keep it as simple as possible. We are talking about different sub-systems, the cultures of the Americans and the Danes, which are nation-states within the global economy.
First, all the nation-states (and indeed all the sub-systems) are inter-dependent, so reducing energy consumption in one area will have complex feedback effects, and not just between the two cultures in question.
Second, as I pointed out below, the idea of if people move closer and if people insulate is Utopian. It certainly isn't working that way now, people aren't insulating and moving closer, and no mechanism is proposed for how we might get there.
Third, it's not just a Utopian idea, it's linear thinking in a complex system. No mechanism can be proposed in this way of thinking since "moving closer" and "insulating" are high-level complex composites of many other unspecified if's, such as the availability of money, housing, materials for insulation, political will, time, cultural adherence.
Fourth, energy flow in a complex system first must be used to maintain the system's integrity or self-organization, and afterward the energy may flow through the system for useful production. Because the system is complex, because we can't simply pick and choose which individual elements get eliminated, reducing energy flow from one level to half that level will impact the system's integrity, resulting in a massive shock to the system.
Yes, the analogy of starving is appropriate. I'm sorry if this bothers people.
Actually, it is not as complex as you make out, and American's are moving to more insulation:
http://www.scmp.com/portal/site/SCMP/menuitem.2af62ecb329d3d7733492d9253...
If heating is by electricity the installation of air heat pumps which now operate at good efficiency down to very low temperatures also improve efficiency by around 2.5-4 times, and some designs can also improve efficiency in air conditioning.
You can't instantly change to a Danish system with their housing stock and infrastructure, but then again a lot of things like low temperature heat pumps were not available when most of the Danish infrastructure was built, so that there is more than one way to skin a cat.
Anecdotal information. Misses long-term availability, system integrity, financial stability which I mentioned before.
And, actually, it's way more complex than I made out. I didn't address large-scale externalities like climate change, mass extinctions, or pandemic. I didn't mention scalability.
With a shot of sarcanol, I'm glad to see at this late date people are still steeped in denial. I do, however, recognize it as the lack of cultural adherence to a new and possibly threatening idea, which is usually necessary to maintain integrity. The force of "Mother Culture", as Daniel Quinn put it.
So the resistance is normal, but it certainly doesn't make the underlying wishes and hoping map any better to reality.
I agree with you. We really don't know how to cut back.
The credit crisis is resulting in huge cutbacks, but we have no idea how it is going to fall out. If our farmers shoulder a disproportionate share of the burden (or even a proportionate share) the world could find itself with a shortage of crops. If the ones dropping out are the shippers of crops, the crops may not get to the correct destinations.
We have no plan, just things falling apart in various places. It will take a while to see exactly which pieces are missing in the interconnected network, and what the second and third order effects are.
710,
I disagree with most of what you have said. To pick out a few statements:
"It certainly isn't working that way now, people aren't insulating and moving closer, and no mechanism is proposed for how we might get there."
As far as improving insulation of buildings, California has introduced improved building codes. Another mechanism that worked in Canada during 1980's was grants to assist insulation upgrades to existing buildings. Non of this is rocket science, its not even "complex". Improved insulation, improved energy efficiency of appliances all have very rapid paybacks. Lots of poorly insulated houses available, lots of insulation material available(rock wool/shredded newspapers), not sure what you mean by "cultural adherence" ?
"Because the system is complex, because we can't simply pick and choose which individual elements get eliminated"
Complexity doesn't prevent one form of energy, for example oil fired heating being replaced by another for example nuclear energy or wind power generated electric heat. In fact it has been done and is being done.
Your argument has been put forward many times at TOD, it goes:
1) FF energy cannot be replaced by non_FF because of the scale required
2)if it's demonstrated that wind, solar and nuclear can provide X10 more energy than is produced by FF, the argument is that it cannot be replaced before we run out of FF
3) when it's demonstrated that wind and solar are growing at 20-30% per year, the argument is that we will run out of steel, copper glass or FF before FF can be replaced.
4) when it's demonstrated that wind, nuclear and solar only use a small fraction of present resources, the argument is that we will not have financing or political will!or a new one "cultural adherence"
"Nor even if it's possible to explain it, because it seems like many here are operating out of an emotional level rather than a rational one."
I do agree with this statement. Try to explain to me in a "rational" way rather than using emotion.
California's insulation grants come through some governmental body, from taxes. However, the flow of money from the public to the government back to the public is not the creation of resources. The grants which help pay for these require enough of the public to be paying taxes and enough of a governmental budget, and a general economic depression will adversely impact or eliminate both.
The physical availability of the resources to harvest, mine, manufacture, ship, and install insulation at a sufficient scale is also uncertain, due to many insulators requiring cheap energy (to melt rock for rockwool) or being made with plastic (the binders in fiberglass), which is oil-derived.
"Complexity doesn't prevent one form of energy, for example oil fired heating being replaced by another for example nuclear energy or wind power generated electric heat."
We can't pick and choose which individual elements get eliminated. "Oil fired heating" and "nuclear energy" are not individual elements in the complex system.
Some of the individual elements in the complex economy are the people who build, maintain, install, support oil fired heating, each of whom finds themselves with less work or out of work and not enough money. There are the same people who build nuclear plants who find their skills are in too much demand, costing more. These types of imbalances did not have severe consequences when times were good, when we were awash in cheap energy. They tended to find some dynamic equilibrium. More training could be made easily available for, say, training oil heating technicians to work in nuclear plants.
When the system is strained as it is currently, similar imbalances ripple through the economy, and can manifest as economic depression, social unrest, epidemics, and war.
Implementation of "oil heating" and "nuclear energy" are emergent properties resulting from millions of individual decisions among millions of people in a complex network.
"Non of this is rocket science, its not even 'complex'." The manufacture of synthetic fibers like fiberglass or rockwool from petroleum and molten rock is applied materials engineering, and arguably just as involved and technical as astronautical engineering ("rocket science").
The materials manufacturing process is wrapped in various systems of management, goods transportation, equipment maintenance, further wrapped in various corporate, legal, political, and societal systems, further wrapped in climate and ecological systems. It is also bound by various biological systems.
The large impacts the small and the small impacts the large, within and between all the other levels, across different scales of time.
Yes, it's complex.
For a better understanding, I recommend:
"Chaos: Making A New Science", by James Gleick
"Sync: How Order Emerges From Chaos" by Stephen Strogatz
"The Tipping Point" by Malcolm Gladwell
"The Black Swan" by Nassim Taleb
"Overshoot" by William Catton
Unless we run out of straw too we are unlikely to be unable to insulate our houses:
http://www.ehow.com/how_2073643_use-straw-insulation.html
Because we do things one way when oil is cheap and an extensive infrastructure is available does not necessarily mean that you can't do them at all if they become scarcer or less available.
In much of the US adobe would also be a good choice for new house building, just as in the UK we built a lot of houses from cob, prior to bricks becoming universally used, and many of them are still standing a few hundred years later.
On a more general level you are assuming that because a solution to particular issues does not readily occur to you, that it is quite impossible that anyone will be able to come up with a solution, even in fields in which they have expert knowledge.
If our society is complex, it is also the case that each of us only have limited knowledge about it, and your assumption may well be incorrect.
For example, supposing this technology works out:
http://www.gizmag.com/cool-earth-solar-technology-fossil-fuel-power/10260/
This would provide power at a capital cost of around 30 cents/watt, and the world would clearly be very different from one in which it dis not work, and might falsify one of your underlying assumptions that society will need to simplify.
My point is not that this technology will inevitable work, but that there are literally hundreds of different possible technologies, not to mention political choices, which make the future far too difficult to make the categoric statements about what it will hold reasonable.
The very complexity which you think will make it impossible to keep things going make it impossible to to predict what will happen.
I do know one thing though.
We will be able to insulate houses, and doing so may soak up a fair few of Obama's 5 million new jobs.
This has a -4 rating so far, yet no-one is brave enough to actually come forth and say why.
Perhaps a lot of people feel threatened by the implications.
See below. :-)
I'm sorry, but this is complete garbage. Your analogy is meaningless. A huge amount of energy is consumed simply in "commuting". If a person is able to move closer to their place of employment and spend half the time and energy commuting, in most cases that is an improvement in their quality of life. A lot of energy is consumed in heating drafty houses with inadequate insulation. Cutting down on drafts and improving insulation reduces (ongoing) energy consumption, yet most would also consider the result an improvement.
Of course, there are activities and tangible things that involve energy consumption that people value, and a decrease in such "goodies" may be lamented. As I have just pointed out, however, not all energy consumption activities fit this description. There is no simple relationship between energy consumption and quality of life.
The proposal was that we could cut energy consumption in half across the board, and the implication was that everything would come up roses.
My analogy to starving has relevance to the effects of the collapse of integrity of a complex system due to insufficient energy to maintain it.
You suggested a Utopian dream requiring wish fulfillment on at least two explicit if's (if people move closer and if people insulate), and a number of unspecified if's (if housing is available, if money is available, if it represents a real-world in-situ improvement in life quality, if insulation is available, if it can be scaled for hundreds of millions of people, if there is enough time available).
The desires are different, the needs are different, the societies are different, the cultures are different, politics, religious make up, car dependence, road dependence, city and suburb layout, industry, commercialization ... and the suggestion is that since one variable, average per-person energy usage, is half for the Danes than it is for the Americans, that energy usage can be halved for the Americans without significant detrimental effects? And for pointing this out I got rated down?
I'm sorry, but either some IQs have dropped sharply, or this is just another sign of the unfolding complex collapse.
You doomers see no nuance.
He didn't say everything would "come up roses". He said something like "without significant hardship". Obviously there is some level of interpretation as to what is a hardship, but I would take it to mean, we could continue to function as a society (and not collapse) with half the energy we currently use. I see this as patently obvious. How much energy could be saved by the simple act of carpooling? And that's just one step.
No, you doomers like to set up a straw man (the idea that the rest of us are somehow saying everything will be just as it is, or BAU) then knock it down, when in fact we are not saying that. You don't take seriously any argument that we will end up somewhere between BAU and total collapse. That's why in return you are not taken seriously and your arguments are downrated. It's not because anyone feels "threatened." That is garbage. Implying so simply shows how low is the esteem you have for those of other opinions. We can't have arrived at them through rational thought, but only through pure emotion, fear, etc.
Instead of attacking your straw men, try to understand what we are saying. If you disagree with the position, give evidence arguing for your own position (i.e. that we are in for serious collapse). In several of my posts on other articles I've asked for this but have not gotten it. Why do doomers think there is no continuum of possibilities between BAU and total collapse? Evidence or strong arguments, please.
"You doomers see no nuance."
First, "doomer" is pejorative in the context you used it, suggesting that all people like me have is bad news for the sake of bringing everyone else down. So, I'll add this quote, "If a path to the better there be, it begins with a full look at the worst."
The doomers are the optimists and realists, because we understand the seriousness of the situation and are addressing it thusly. Others seem content at wishing it away.
The real issue is the lack of experience with thinking critically, the invalidity of the linear and Gaussian in complex systems, and the relevance of the issues at hand. I'll suggest "The Black Swan" by Nassim Taleb, "Chaos: Making A New Science" by James Gleick, and "Overshoot" by William Catton.
That I equated "lack of significant hardship" with "coming up roses", this is a not strawman, because whether wanting to end up at "roses" or "no significant hardship", you can't get there from where we are without first passing through the crash.
So I'll dispense with the lack of significant hardship argument.
Read the news over the last several weeks and months. We are experiencing significant hardship right now.
It will get worse. Plan accordingly.
Hardship? This is not hardship compared to what is coming. It will get worse, we can agree on that. Plans are being made accordingly.
Where we disagree, is the final destination of all this. The issue here is one of nuance, or the scale of possible outcomes, which again, I posit is not being correctly noted by those painting a picture of inevitable, total and rapid collapse.
Hardship? You call this hardship? This is not hardship compared to what is coming. It will get worse, we can agree on that. Plans are being made accordingly.
Where we disagree, is the final destination of all this. The issue here is one of nuance, or the scale of possible outcomes, which again, I posit is not being correctly noted by those painting a picture of inevitable, total and rapid collapse. It's not inevitable, it may not be total and it probably won't be rapid. Then again it may, but I take issue with the whole tone of inevitability.
Hi Scientastic,
Most evidence points toward total collapse.
Long before 2050, oil depletion will cripple the global economy, transportation, and food production.
There are no studies indicating that alternatives can fill the gap, not even the Union of Concerned Scientists moves in that direction.
There is one independent study that indicates that alternatives won't fill the gap: The Energy Watch Group (funded by the German Parliament) concludes in a current report titled: “Peak Oil Could Trigger Meltdown of Society:”
"By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame."
http://www.globaliamagazine.com/?id=482
In 1977, the National Academy of Sciences concluded that unless we develop a battery that can store much energy AND develop the breeder nuclear reactor, or develop a liquid fuel, we won't make the transition. The advances made in these 3 areas are not good. There is no battery that will power large combines/tractors for long (less than 2 hours and a 4 to 6 hour recharge), and same for large trucks (40 miles per hour for 100 kilometers on level road, then a 4 to 6 hour recharge). For tractors and combines the time could be a little as 1/2 hour, as they often use all 400 HP. How many tons of batteries to deliver 400 HP for one hour, I don't know. Maybe someone can help.
Moreover, we are out of capital and out of time.
I have often argued on TOD that alternatives yield electric energy which will not help, and will actually make matters worse. Solar/wind use much fossil energy (complete EROEI) and yield electric power, which does not help with the liquid fuels problem/transportation, nor with home heating.
Their is no plan for the electric economy (infrastructure plan and a trillion Euros in capital) and we are out of time.
Electric cars. Who can buy them when they are unemployed and the trade in value on the gas guzzler is five dollars?
Most studies indicate global oil production will begin to decline this year or next. Then the cost of energy for building alternatives will skyrocket.
Soon, governments will be putting the meager revenues they have (due to the Greater Depression) into subsidizing jobs, food, heating oil, and energy extraction. Nothing will be available for alternatives.
This is a catastrophe. Congress and the President will have no idea of what to do and will follow interest group pressures.
Congress and the president should commission the National Academy of Sciences to study this disaster on a continuing basis to give policy makers the advice they will need in a worsening crisis that threatens the lives of most citizens. The NAS is the only organization with the necessary political credibility.
It does not help when people avoid these realities and focus on techno-fixes, which give the illusion of hope and divert attention from focusing public attention on preparing for Peak Oil impacts.
Why should people worry about Peak Oil if they think that wind turbines and solar panels will save us?
Cliff Wirth
Evidence of your condescension and inability to take anyone else's arguments seriously. If people don't agree with your position, they must be retarded or reacting in denial and fear. No other possibilities, such as rational thoughtful arrival at a different conclusion than yours, is provided for.
Condescension, noted.
But I do take the arguments very seriously, which is why I'm debating them. And I'm looking for that rational, thoughtful process leading to a different conclusion, which I don't see.
These arguments have unsupportable assumptions. They use simple, linear methods to address intractably complex problems. They ignore Black Swans. They appeal to hope and Utopian thinking.
So, yes, people are acting as if there are huge analytical deficits (the "retards" you referred to, I didn't use that word) and engaging the issue emotionally (out of denial and fear).
So where do you see there being no problem, with the assumptions, linear analytical tack, external Black Swan shocks, or the retreat to a comfortable emotional state?
Given no change in energy intensity per unit of GDP, of course so called standards of living would decline as energy availability declined. But that does not mean we cannot change our energy intensity; not does it mean that past trends necessarily determine future destiny. In any event, GDP measures throughput, both good and bad, and is, therefore, an unreliable measure of standard of living, or, as you point out, happiness. Of course happiness is subjective, but that does not mean we should use GDP as our yardstick for standard of living, quality of life, or general well being.
To the extent that we try to minimize waste, consumption, and throughput, and focus on maintenance and creation of capital stock and weath, I think we can increase well being while ultimately decreasing our energy consumption.
I, personally, and many who frequent this site, have significantly decreased our energy consumption without decreasing our quality of life. While that may be somewhat subjective does not mean that we should slavishly assume that more energy and more GDP, however correlated, equal more well being, happiness, or comfort.
I don't think correlation with GDP will be an accurate measure unless you amortize GDP over the lifespan of the products produced. We might produce a million paper cups a day and still have nothing to drink out of, but a ceramic mug can last a lifetime if you remember not to drop it.
Hi Stuart,
This is something I've wrestled with for a while - to what extent can energy demand be reduced without significantly compromising standard of living. It seems fairly obvious to me that a lot of activities in developed nations could be drastically curtailed without plunging us into a dark age. If you look at human development indices, longevity, or electricity usage then there is a law of diminishing returns with energy usage and a plateau appears at around 1/4 of the most profligate (e.g. US/Canada) users. So half Denmarks consumtion is still OK. Same for GDP, which is related to energy usage - a plateau vs longevity starts to appear around $10,000 per capita, approx. 1/4 the US level;
http://graphs.gapminder.org/world/#$majorMode=chart$is;shi=t;ly=2003;lb=f;il=t;fs=11;al=30;stl=t;st=t;nsl=t;se=t$wst;tts=C$ts;sp=6;ti=2006$zpv;v=1$inc_x;mmid=XCOORDS;iid=phAwcNAVuyj1jiMAkmq1iMg;by=ind$inc_y;mmid=YCOORDS;iid=phAwcNAVuyj2tPLxKvvnNPA;by=ind$inc_s;uniValue=8.21;iid=phAwcNAVuyj0XOoBL%5Fn5tAQ;by=ind$inc_c;uniValue=255;gid=CATID0;by=grp$map_x;scale=log;dataMin=199;dataMax=42642$map_y;scale=lin;dataMin=25;dataMax=84$map_s;sma=49;smi=2.65$cd;bd=0$inds=
(use the linear scale for clarity)
To say N America needs more energy per capita because it's on a bigger scale is a nonsense. Other continents are just as big. It's a question of how humanity is organised. The big question for the US is whether it is able to reorganise from suburban sprawl to a more European-style human geography and transport infrastructure.
But even if developed nations reduce their energy consumption between 50% and 75% there is still the question of the developing nations bringing their consumption up to those lower levels. China and India for example still consume considerably less energy/capita than 1/4 the US level. So there will be a balncing act between decline in the developed world and increase in the developing world.
This balance might be achievable (always assuming wars don't break out with the attempt!) if energy production could be maintained at current levels, but that is looking less likely as we go over the peak. But I agree that to say that developed nations require the levels of energy they currently consume in order to maintain a reasonable lifestyle is misleading.
TW
Thanks!
Great site - I'll look into it more this evening.
You wrote:
But even if developed nations reduce their energy consumption between 50% and 75% there is still the question of the developing nations bringing their consumption up to those lower levels. China and India for example still consume considerably less energy/capita than 1/4 the US level. So there will be a balncing act between decline in the developed world and increase in the developing world.
I don't think it will come to a great levelling - I think asymmetries will always be around and cause a variety of results. Also there's a problem of needs involved as well - Cuba / West Africa etc. don't have nasty cold winters. At the same time, those who live in cold places are going to have to adjust their lives and lifestyles accordingly - adopting philosophies like "warm the body, not the house" etc.
Thanks for the link.
Yes I think there will always be rich and poor nations (if nationhood retains it's current meaning) but I do not expect the SAME nations will retain there current relative wealth. As resources run short, nations either adapt or lose out.
Amen to that.
Hi Stuart,
I agree with the main point of your comment.
But the Danes actually use much energy in the products they buy, food transported from all over the world, all of the stuff in their stores that is made/transported by oil, air travel, high tech stuff (uses energy in China/Japan/Taiwan wherever it is made, for example the transport of workers).
There is a myth about Europe that most travel is by trains and public transport. Denmark may be better, but for most countries there is much car and air transport.
Europe is just as dependent on oil as the U.S.
After the last power blackout, even France with all of it's nuclear power will be back to the stone age, like everyone else.
Cliff Wirth
OH certainly: I agree - the Danes are very dependent on fossil fuel - I have no problem stipulating that. What grinds me and got me to post what I did was this incessant attitude that I often find on TOD and similar sites is the notion that if the USA has to use less energy, especially a lot less, like 50% for instance, suddenly it's the end of civilisation itself, we all become cannibals or some other scaremongering nonsense. In fact you're guilty of it yourself, when you say:
After the last power blackout, even France with all of it's nuclear power will be back to the stone age, like everyone else.
Right. So like the 5000 years between the stone age and the age of petroleum don't count and have nothing to offer? Puhleeez...
Stuart,
I very much agree with you.
Somehow some people can not imagine that there are intermediate stages between bussiness as usual and "we'll all be back to the stone age".
Denying that there can be any possible solution to this coming crisis really does nothing to help solve it.
The last 5000 years were great before petroleum, but there were not 6 billion people on earth 5000 years ago!!!! How do you propose that we will grow enough food for 12 billion people (in 2050) and transport it without half of the current supply of oil? I guess people will grow their own food in their backyard if they have one with good soil. What about fertilizer? What about water? All the fish in the US are filled with Mercury and unfit for consumption. Most fish consumed in the US comes from thousands of miles away. We could go to riding bicycles if most people did not commute 30 miles per day to work!!!! What type of material will replace all the plastics derived from oil??? The power infrastructure needs a lot of repairs that we do not have the money to perform. When the crash happens, you can say you read about it hear on TOD. This is not as simple as live like the Danes..... Even the Danes will suffer when oil drops too. Just wait and see.....
I beg to differ. The last 5000 years without petroleum were a pretty hard slog for most people. Even kings and emperors did not have the luxuries that even the poorest in industrialised society can access. Air conditioioning in stifling heat comes to mind.
Hi Termoil
Hope you don't mind me seizing upon your post but air conditioning is an almost perfect example of the disconnect between what we believe we need and what we actually need. A couple of years back we visited Turkey and went into the hills to view the solar eclipse. Whilst there we were welcomed by the locals into one of their houses. And guess what? Despite the heat outside the inside of the dwelling was surprisingly cool. All about building design, shade and perhaps the occasional fan. Combine that with suitable clothing and lifestyle and it really is amazing what can be achieved and in perfect comfort. I can honestly say we hardly noticed the heat. Same on other mid-summer holidays to the med.
Also worth remebering the cradle of humanity was Africa which is hardly famous for its cold snaps! I'm not saying life in genuine desert areas won't be uncomfortable without AC but it's surprising how adaptable people are when needed. Even if that means upping sticks and moving from some of the genuinely unlivable in areas, of which I accept there are a few (Las Vegas springs to mind and not just because of the heat).
TW
Well I for one eschewed the traditional gluttony of the Thanksgiving day holiday and made a pretty good meal of farmed Florida Tilapia to share with my loved ones. As far as I'm aware it was reasonably free of mercury and other toxic heavy metals. The fish could be raised just about anywhere and their waste makes great fertilizer for hydroponic gardening of vegetables, but that's a whole nother can of worms in the compost pile ;-)
http://tilapiafarmingathome.com/default.aspx
When we visited Epcot Center a few years ago, we went on a behind the scenes tour of one of the exhibits. There, they had a display of tilapia they were raising. The tour guide commented on how efficient the process was (1.5 pounds of food for one pound of weight). The food they eat is vegetable, not fish. Since then, I have looked for them in the store. We eat them fairly often.
Tilapia is kinda far down in the hierarchy of fish... Tier 4, I think. Tiers 1-3 are 90% fished out. I expect barnacles to become a popular seafood before long at this rate.
"Well I for one eschewed the traditional gluttony of the Thanksgiving day holiday and made a pretty good meal of farmed Florida Tilapia" - Yes, but do they taste good and have good texture. Please compare eating quality with other well known fish.
Well, it all depends on the quality of the cook and there are many different ways to prepare them for sure. The texture is really very good (I'm a sea food lover and live in Florida and often spear my own fish in the ocean and the texture of Tilapia compares well), I broiled this particular batch in a pyrex tray with sea salt, olive oil, sun dried tomatoes, fresh diced garlic and a good dash of white wine. Not to pat myself on the back here but the general consensus was that is turned out rather well. The side dish was roasted potatoes and a wonderful fresh Mediterranean salad (prepared by my significant other) with assorted nuts, fresh mushrooms and sun dried cranberries (the only nod to traditional thanksgiving foods), most ingredients came from the local farmers market.
Gail, Re Epcot Center, yes, I have been there and seen that as well. Very interesting stuff.
Thanks for the information. I looked them up in Wikipedia as I should have before posting. Unfortunately, our climate would not support them in our two small lakes. I will just have to make do with our slower growing trout. I will keep an eye open in the fish shops as I would like to try them.
Best,
Bio1
This Tilapia farming stuff has a way of popping up that resembles ethanol production or a wart.
Originally from Africa, this sunfish-like fish has promised to be the salvation of aquaculture since at least since the early 70's. We've been down this road way too many times. It's a rut.
It's appeal centers on it's diet-phytoplankton-but then all other considerations are forgotten. In North America, it's very energy intensive to maintain the proper environment for culture, sun tube raising and solar heating notwithstanding.
It's considered a bony fish, with a most distressing aspect to the filet market, a very low dressout ratio. Consumers balk, and the trade is loath to pay for product that is left in the slaughter house. Producers are left holding the bag with a very low price. Mike Sipe unsuccessfully tried for decades to breed a variety, Red Snapper, to improve dressout.
Then there's the problem of competition. Venture capitalists in the 80's converted a bunch of grain silos in the farm crash of the eithties to breed Tilapia. Just as their expensive product was coming in, imports from SE Asia flooded the market at a little over a nickel a pound.
Stuart, I agree with your point, but not with your tone -- Gail's article is very informative and worthwhile.
The coming decades will see ever declining energy availability one way or another. We should be taking steps now to adjust to that reality. If proper restructuring takes place, then it can be comfortable. Otherwise it can and will be quite painful. The US is not at all well structured for a lower energy way of life -- see Kunstler et al. More than anything else, this is where investments need to be targeted -- restructuring so we can live on an ever smaller energy budget.
The talk of growing our way of the meltdown is disastrously wrong-headed, because it leaves out of account energy and resources. It can only lead to wild inflation once some kind of recovery does arrive, and it's unlikely to resemble a recovery for most.
Aside from investment in restructuring, of course there needs to be protection for those losing jobs, homes, healthcare. But advantage needs to be taken of the crisis to steer people into a new way of living -- no (or few) cars, denser, close to agriculture, local light industry, etc.
The economists and all else who advocate a replay of the New Deal (on steroids if necessary) only look at money -- they take no account of physical resources.
I realize that what I advocate is pie-in-the-sky, but that doesn't change the reality -- it's what needs to be done. The energy and resource budget is going to be reduced no matter how we deal with things.
davebygolly wrote:
Stuart, I agree with your point, but not with your tone -- Gail's article is very informative and worthwhile.
I agree - I think it's a fine article, I'm just picking up on her "tone" in one particular line which is one that I find endemic to this and other peak oil fora, which is a kind of kneejerk non-thinking which says "there is no alternative to BAU, and BAU cannot be reformed or changed, and we're basically fucked" and I find that attitude, well, for want of a better term: retarded.
By *NO* stretch of the imagination do I think humanity has a bright and rosy future. That doesn't mean that I think the automatic opposite - that we're utterly and irredeemably doomed. It's that kind of either/or blinkered thinking that I find detestable.
The coming decades will see ever declining energy availability one way or another. We should be taking steps now to adjust to that reality. If proper restructuring takes place, then it can be comfortable. Otherwise it can and will be quite painful. The US is not at all well structured for a lower energy way of life -- see Kunstler et al. More than anything else, this is where investments need to be targeted -- restructuring so we can live on an ever smaller energy budget.
Agreed.
The talk of growing our way of the meltdown is disastrously wrong-headed, because it leaves out of account energy and resources. It can only lead to wild inflation once some kind of recovery does arrive, and it's unlikely to resemble a recovery for most.
Aside from investment in restructuring, of course there needs to be protection for those losing jobs, homes, healthcare. But advantage needs to be taken of the crisis to steer people into a new way of living -- no (or few) cars, denser, close to agriculture, local light industry, etc.
I agree. I would also add that there is also a certain kind of kneejerk vulgar marxism, where the base and superstructure are in a tightly structured hierarchy with the base dominating the cultural superstructure. I think the recent discoveries in Turkey are refuting that - it appears to be religion what bound people together to build monuments prior to agriculture, and agriculture and civilisation were developed in order to service this superstructural concern.
I would humbly submit that at this juncture a similar cultural concern is what can propel humanity into the next phase. It will have to be multi-pronged: reducing population (through natural attrition), the abandonment of industrialism (as it is presently configured), and a refocusing of culture and social preference to the local.
I would humbly submit that such will be necessity happen, as people will have to adjust to the new resource situation.
However, this doesn't mean a "reduction in standards of living", except if you consider this particular arrangement as the only one possible, and any change as a reduction. Furthermore kneejerk attachment of energy consumption to living standards is, as demonstrated, absurd. There are any number of people reading this site who live on radically less energy and resources, and I would submit they are likely leading comfortable, rich, and colourful lives.
My "tone" comes from looking at this for the past 10 years and getting REALLY BORED with the rhetoric ant attitude.
I believe it was cjwirth's line that you were objecting to, not Gail's.
Why's everybody pickin on me? ) :
Cliff,
It may be because of your detailed but irrational thinking about how the world functions and would function post-peak oil.
For example your reply to my question " how much oil is required to maintain the US electricity grid"
Your reply was;
."When the gas stations are closed and people can't get to work, that's it, there goes highway maintenance and the power grid. When state governments don't have revenues to put highway crews out in trucks that use gasoline and diesel, that's it, etc. etc."
that's not an answer to how much oil would be required, you have given a possible reason why even if oil was available grid and road maintenance MAY be reduced. Considering that the US is still producing considerable oil 40 years after peak, is it reasonable to assume that NO oil will be available 20-30 years after world peak oil?? So an important question is; how much oil would be required to maintain essential services, such as keep highways open, electricity grid functioning, water, sewer etc.?
Perhaps you are not interested in working out some of these issues, it's easier to say "the world is doomed" because all social structures are going to fall apart after peak oil. How did the world function before 1869??
Hi Neil1947,
How much oil will it take to maintain the 5.8 million miles of highways is not the question. Rather, the question is will the oil get to the right place in time.
You did not include all of my reply, see below to XXX:
When the gas stations are closed and people can't get to work, that's it, there goes highway maintenance and the power grid. When state governments don't have revenues to put highway crews out in trucks that use gasoline and diesel, that's it, etc. etc.
4 wheel vehicles need open gas stations with gasoline/diesel to get out there. 4 wheel vehicles do not carry huge transformers, pylons, or cable all from hundreds or thousands of miles away. The transformers, for example come from Germany or South Korea.
No one is going to plan ahead as you are to figure out how to overcome these problems.
Governments are totally ignorant of what is happening and they are not planning.
I have personally been in communication with a colleague from grad school who works for a state FEMA agency. He ignores everything about Peak Oil.
I taught government officials for 30 years in 3 MPA programs until January 2008 where I retired from the Univ of NH, and I have many friends in government with whom I communicate regularly. Government is my life. Most do not want to hear about Peak Oil, and most run from it like it is the plague.
Will the National Guard come to the rescue. Yes, when it is too late, and they too need gasoline stations open in order to function. XXX
Here are other reasons why the highways and power grid will collapse.
Here come "the saw teeth," from TOD folks, "The 2008 IEA WEO - Oil Reserves and Resources," November 22, 2008:
Davebygolly: given the retreats in energy investments seen recently, I would think that a lot more of the remaining reserves will remain forever in the ground than was thought - the 2500 gb isn't real in that sense. The energy industry is highly capital intensive. I don't know how many blows like the current one it can withstand. So maybe there will be a few more reruns of the present crisis on the down slope, but maybe very few and not so far in between.
Like everyone else, just guessing. But we know where we are and we know where we'll end up. Just don't know the shape of the down slope. Linear? Naw. Vertical drop? Naw. Exponential dacay? Naw. Sawtooth down? Has to be, of one sort another, having excluded all else. How many teeth? A lot is not that much different from linear. Not so many and then a downward plunge as the world's infrastructure no longer can support the energy industry's ability to get ever harder to get at stuff.
Rockman: "I agree Dave. I've worked in the oil patch for 33 years and have lived on that saw tooth ride everyday of it. In the past, the aberrations we're caused by excessive production, economic down turns and growth spurts and a combination of these components. It seems we are now entering a period were those factors are still effective but have now added a new dynamic: inability to supply demand (at sustainable prices) during periods of growth in the global economy. I think it's becoming apparent that even as we slide down the PO slope we'll still experience the saw teeth. And those teeth will exact even more damage to mankind's ability to sustain itself in an orderly fashion."
Cjwirth: "Hey Rockman and Dave,
I like your saw tooth theory. The big saw tooth comes when the high price or lack of oil reduces the ability of states to maintain the highways.
[Google: state highway government budget cuts]
Then the power grid goes out and nothing modern works, including heating systems and transportation (electricity power pumps diesel and gasoline).
This will reduce the population of many cities, which provide the organization and finance for extracting and distributing energy. There could be smaller of such saw teeth when there are power grid failures in sections of the U.S. for weeks or months, or for a short duration nationally.
Another saw tooth is when gas stations are closed and people can't get to work to do the jobs required for oil or gas extraction.
When your car runs out of gasoline it stops. When the industrial machine doesn't get enough oil, something stops, and then that stops something else, I call this the 'gridlock effect.' " [credit here to Chris Shaw: http://www.onlineopinion.com.au/view.asp?article=5964 ]
Aangel: "One more sawtooth: when the cost of transportation gets so high that it is no longer worth it for a minimum wage worker to go to work."
********************
Global Oil Production
per Capita (World Pop.)
1900 0.1
1920 0.4
1940 1.0
1960 2.5
1980 4.5
2000 4.0
2020 2.7
2040 1.4
Source: ASPO-International
>>>>>>Interdependence in the Production of Energy
The production of each type of energy is highly dependent on other types of energy. Shortages or high energy prices for one type of energy will limit the production of other energies. Oil is critically important in the production of all forms of energy. Shortages in oil will mean shortages in gasoline, diesel, and jet fuel. Thus oil rig workers won’t be able to travel to the oil fields and off-shore platforms; coal won’t be mined or transported; electric power won’t be generated in some plants; roads and bridges won’t be maintained; and spare parts won’t be delivered for oil drilling and refining, electric power generation, and for natural gas production. Shortages of natural gas will limit the generation of electric power and production of Canada’s oil sands (unless equipment modifications are made so that the oil sands can be used to generate heat for processing of the oil sands).
>>>>Inflation and Scarce Capital
High energy costs will generate rising inflation in most sectors of the economy. As inflation and unemployment increase, individual investing will shrink, resulting in reduced capital formation. Scarce capital will also result from the need to spend more and more national wealth on buying oil needed for food production, transportation, heating, and energy production. As the price of oil rises, the construction of nuclear power plants, coal GTL plants, and solar based alternative energy projects will become more and more costly. Individuals will lack resources for: building new homes close to agricultural production, buying energy efficient vehicles (especially because the trade-in values for low-gas-mileage-vehicles will plummet), and retrofitting homes with passive solar installations, insulated dormitories, and wood stoves.
>>>Limits of Market Economies
Corporate enterprises exist mainly to make financial profits. Over last two and half centuries, abundant coal and oil energies bolstered expanding economies and corporate profits, and over the last century oil, natural gas, and technology explain the expansion of economies for the last century. Oil depletion and ever-deepening recession will erase profits and most corporations will fail.
In an era of high inflation and deepening depression, individual investors will lack funds for investing. In addition, investments in banks, equities, and bonds will shrink in value. Investments in banks, bonds, equities, and pension and retirement funds represent promises to provide future products and services that require oil, natural gas, and coal. As the cost of energy increases, the real value of these investments will decline. In a few years, such investments will lose value, and some years later they will be worthless. When investors and the public understand these realities, they will avoid investing in financial institutions. Chris Shaw is correct in writing that energy “is the one true currency,” it always was and always will be.”
Because of ever-worsening economic depression and rapidly rising energy costs, banks will hesitate in making loans for projects that have uncertain profitability due to high future energy costs. Such projects include: ultra deep water production of oil and natural gas; development of coal GTL; construction of nuclear power plants and wind turbines; relocation of populations from metropolitan areas to agricultural areas; and development of cargo rail, passenger rail, and public transportation.
>>>Government
Federal, state, and local governments will do little to adopt policies to prepare for Peak Oil. Interest group pressures, constituency priorities, and political self-interest explain the political actions of most U.S. members of Congress, state legislators, and local officials. Most government decisions will yield policies that interest groups and constituents favor, rather than rational and scientific policies that benefit all of the people. The general public and leaders in business, government, the media, and the academic community believe that the U.S. can discover more energy, or we can develop some alternative energy or technology, and thus maintain economic stability in the future. Most citizens and leaders believe deeply that solar energy, nuclear energy, hydrogen, biomass, ethanol, other renewables, or some invention will provide adequate energy for the economy. Deeply ingrained in the American psyche is the belief that we can accomplish almost anything if we apply technology and hard work to the task.
As the energy crisis deepens, all available energy will be consumed for survival -- food production, transportation of food and necessities, heating, basic services, and for handling emergencies. The national government, therefore, will not develop initiatives toward: relocation of the population to agricultural areas; local farming infrastructure based on animal and human labor; community farming and food preservation; freight and passenger rail systems; alternative programs for providing domestic potable water; passive solar installations; insulated dormitory rooms in homes; and provisions for residential waste disposal.
>>>Quicksand Effect
Chris Shaw explains a “quicksand effect” for energy production: it takes energy to get energy, and because the highest quality oil is extracted first, high quality oil must be expended to extract oil that is of lower quality. And as depletion progresses, we must spend more and more energy to get less and less in return, until the difference between energy invested and energy returned is zero. To produce oil in the future, more and more oil must be consumed by constructing more and more oil rigs for drilling smaller and smaller oil pockets. For off-shore oil drilling, more and more rigs, platforms, ships, and pipelines must be constructed to extract oil from greater and greater depths. Matthew Simmons indicates that the replacement of aging oil rig, refinery, and pipeline equipment and infrastructure will cost a great deal in capital investments in the coming years. The manufacturing and transport of this equipment and infrastructure will use much oil. Canada’s oil sands is another case of the quicksand effect. In order to produce low quality oil high quality natural gas and oil are expended for processing and refining; the manufacture trucks, processing equipment, pipelines, new houses, and airplanes (for transporting workers); and the energy used by trucks, processing equipment, airplanes, and pumps. In addition, oil sands operations contaminate local water supplies and generate much air pollution and carbon dioxide. Similarly, the GAO study found that “EOR [enhanced oil recovery] technologies [to extract additional oil from depleted oil fields] are much costlier than the conventional production methods used for the vast majority of oil produced,” and “operating costs for deep water rigs are 3.0 to 4.5 times more than operating costs for typical shallow water rigs.” The same concept applies to the use of high quality oil and natural gas energy to produce alternative sources of energy, such as corn ethanol, bio-diesel, wind turbines, and nuclear power plants.
As oil depletion progresses, more and more oil is used to produce oil. When the amount of oil used to produce a barrel of oil equals the amount of oil produced, it is pointless to continue oil production. In addition to the oil used on site to produce and refine oil, energy is used in all of the processes for the machinery, equipment, and personnel used in the extraction, transport, and refining processes. For deepwater oil production, this would include all of the ships, platforms, steel piping (many kilometers of pipes on-site and to onshore locations), and their employees, including the energy used in making the hundreds of thousands of parts, the energy used in the factories that make the parts, the energy used in transportation of all of the parts and employees, as well as the energy that is consumed when employees and stockholders spend their salaries or dividends on goods and services (food, automobiles, yachts, airplanes, recreation vehicles, vacations, consumer purchases, etc.). Because there are a number of confounded energy input variables, it is difficult to measure all of this consumption of energy, but it is an economic reality that is shown in corporate decisions about the profitability of deepwater oil projects. For deepwater, heavy oil, tar sands, and extraction where special techniques are used, the point at which energy consumed in production equals the energy produced will be reached rapidly. For this reason, some oil that is classified as recoverable (for example deepwater oil, heavy oil, and the Bakken formation) may never be recovered.
>>>Multiple Crises and a Grid Lock of Crises
Peak Oil means that the U.S. lacks the energy necessary to provide for transportation, food production, industry, manufacturing, residential heating, and the production of energy. Oil shortages and natural gas shortages will generate multiple crises for the nation: (1) Shortages in gasoline, diesel, and jet fuel will limit travel to work for oil rig/platform workers and technicians, coal miners, highway maintenance personnel, and maintenance workers for electric power generation stations and power lines. (2) Without truck and air transport, spare parts for virtually everything in the economy won’t be delivered, including parts needed for highway maintenance and energy production equipment. Simmons notes that 50,000 unique parts are necessary to create a working oil field. Many more parts are necessary for ultra deep water drilling operations, including a variety of high tech ships, remotely operated underwater vehicles, seismic survey equipment, helicopters, and technologically complex platforms (see The New York Times and click on Multimedia Graphic). Thousands of corporations around the globe manufacture these parts, and many of these corporations will fail in the Peak Oil crisis. (3) States governments will lack funds for maintaining the Interstate Highway System, including snow plowing, bridge repair, surface repair, cleaning of culverts (necessary to avoid road washouts), and clearing of rock slides. A failure in one section of the Interstate highway will cut off transportation for that highway and everything it carries: food, emergency supplies, medicine, medical equipment, and spare parts necessary for energy production. (4) The power grid for most of North American will fail due to a lack of spare parts and maintenance for the 257,000 kilometers of electric power transmission lines, hundreds of thousands of pylons (which are transported on the highways), and hundreds of power generating plants and substations, as well as from shortages in the supply of coal, natural gas, or oil used in generating electric power. Power failures could also result from the residential use of electric stoves and space heaters when there are shortages of oil and natural gas for home heating. This would overload the power grid, causing its failure. The nation depends on electric power for: industry; manufacturing; auto, truck, rail, and air transportation (electric motors pump diesel fuel, gasoline, and jet fuel); oil and natural gas heating systems; lighting; elevators; computers; broadcasting stations; radios; TVs; automated building systems; electric doors; telephone and cell phone services; water purification; water distribution; waste water treatment systems; government offices; hospitals; airports; and police and fire services, etc. Phillip Schewe, author of “The Grid: A Journey Through the Heart of Our Electrified World,” writes that the nation’s power infrastructure is “the most complex machine ever made.” In “Lights Out: The Electricity Crisis, the Global Economy, and What It Means To You,” author Jason Makansi emphasizes that “very few people on this planet truly appreciate how difficult it is to control the flow of electricity.” A 2007 report of the North American Electric Reliability Corporation (NERC) concluded that peak power demand in the U.S. would increase 18% over the next decade and that planned new power supply sources would not meet that demand. NERC also noted concerns with natural gas disruptions and supplies, insufficient capacity for peak power demand during hot summers (due to air conditioning), incapacity in the transmission infrastructure, and a 40% loss of engineers and supervisors in 2009 due to retirements. According to Railton Frith and Paul H. Gilbert (National Research Council scientist testifying before Congress), power failures currently have the potential of paralyzing the nation for weeks or months. In an era of multiple crises and resource constraints, power failures will last longer and then become permanent. When power failures occur in winter, millions of people in the U.S. and Canada will die of exposure. There are not enough shelters for entire populations, and shelters will lack heat, adequate food and water, and sanitation. (5) Water purification and water distribution systems will fail, leaving millions of metropolitan residents without water. (6) Waste water treatment systems will fail, resulting in untreated sewage that will contaminate the drinking water for millions of residents who consume river water downstream. (7) Transportation and communications failures will cripple federal, state and local governments -- leaving and residents without emergency services, emergency shelters, police and fire protection, water supplies, and sanitation etc. (8) Mechanized farming will cease, and harvested crops won’t be transported more than a few miles. (9) Food won’t be transported from the Midwest, California, Florida, and Mexico to the U.S. population. (10) Fertilizer, pesticides, and herbicides won’t be produced. (11) Due to limited farm acreage near cities (much of it destroyed by suburbanization), most cities and towns will be unable to support their populations with sufficient food from local farming (see Paul Chefurka and Paul Chefurka). (12) Homes across the U.S. will lack heating and air conditioning. Even if homes are retrofitted with wood stoves, local biomass is insufficient to provide for home heating, and it will not be possible to cut, split, and move wood in sufficient quantities.
In the coming years, the U.S. faces multiple energy crises. Each crisis will generate delays in handling other crises, thus making it more and more difficult to address multiplying problems. The worse things get, the worse they will get. A grid lock of crises will paralyze the nation.
Because the global demand for oil is high, conservation in the U.S. alone will not slow global oil depletion. Any oil conserved in U.S. would be consumed by other nations. The rational policy for the nation to follow, therefore, is to shift away from consumerism and economic stimulus programs (which waste oil) and use the available oil to prepare for Peak Oil risk management planning.
Cheers,
Cliff Wirth
Cliff,
You have jumped from a reasonable general statement:
"Shortages in oil will mean shortages in gasoline, diesel, and jet fuel."
To an irrational conclusion:
"Thus oil rig workers won’t be able to travel to the oil fields and off-shore platforms; coal won’t be mined or transported; electric power won’t be generated in some plants; roads and bridges won’t be maintained; and spare parts won’t be delivered for oil drilling and refining, electric power generation, and for natural gas production."
We all expect "shortages", 20 years after peak oil. Most expect a decline of 3-10% per year, so could be looking at 10-50% of the 20 million b/day, lets take an extreme case, of 2million barrels oil per day in US by 2030.
Lets just do a calculation of how much diesel and gasoline would be required to maintain the 250,000 km of high voltage grid. One 4 WD vehicle traveling 250 km per week and using 1gallon/25 km would mean that 2,000 gallons per day would be required. This is not for building new infrastructure but for inspecting, repairing or replacing components damaged or corroded. That's 50 barrels of oil/day, even if I am underestimating by x4 and we need 200 barrels oil /day for the grid, I think with fuel rationing we could spare 200 barrels for the grid out of the 2 million.
Before you claim all those dire consequences, do a few calculations to see what "shortages" imply. I would be interested to know who do you think is going to get the 2million barrels ans how much oil do they use today.
I think your message would be clearer without the sarcasm, but if I'm reading it properly you are pointing out (rightly) that abundant cheap energy supports a standard of consumption; a standard often confused with happiness or standard of living, but which is actually quite different.
Yeah - I get snippy. You got my point. The problem is, there is a culture in peak oil circles where either you are a clueless cornucopian (bad) or canning vegetables for next year's armageddon (good), when it doesn't take too much effort to realise that neither position is correct, nor is some "middle ground" correct either. I'm just so tired of the posturing that I get cranky and post critiques like the one at the top.
We ALL KNOW it's not going to be easy, but gluing consumption with standard of living, which is an american code word for happiness. As standards of living are inextricably linked to property, and the Declaration of Independence spoke of Life Liberty and the pursuit of happiness, but the line was changed in the constitution to read life, liberty and property: hence: the conflation of property and happiness are (literally) constitutional to America. From there when one talks of "standards of living" one is talking of quanta: things that can be measured to a standard, and in contemporary terms, that is linked to consumption.
So, when we cheaply bandy about terms like "standards of living" and say they are decidedly "linked to energy consumption" we are actually saying that energy is tied to consumption, which is property, which is happiness. Clearly the evidence from around the world is that this is not so, as other people have different constitutions and define themselves differently, and I would argue that NOT defining oneself by how many toys or the size of your McMansion indicates a much better grasp of happiness and healthiness.
I would also ask people to kindly give up the doomer talk. It's boring.
I remember an acquaintance of mine telling me we were going be neolithic by 2010, back in 2001. Somehow I don't think that's going to happen. I'm sure that if I saw him, he'd just push it back to 2015 or 2020. I'm so done with that nonsense. Since peak oil is a clear and obvious fact to the power structure (at least the part of the power structure that has half a lick of sense) it's now a problem of controlling the narrative. And as long as we're barking doom, we won't control the narrative, and the longer BAU continues, the more perilous will the transition be.
I don't mean to be a pill, and I think Gail's great, but I've decided to start calling "BS" when I hear it. It doesn't mean I disagree with the facts of the case: we all know the facts. It's a question of what to do with them that is now the problem, hence the issue of narrative control in social hegemony.
"I would also ask people to kindly give up the doomer talk. It's boring."
Stuart, I guess you might call me a doomer, that's OK, call BS all you'd like. Names roll off pretty easily. I do have this years and next years fuel supply sitting in the yard. Do you have your heating all bought and paid for for the next 2 years and on site? Going to keep your job for the next 2 years? Serious doomer prep there. Small stockpile of fuel, 30 gals, a genny, even have 2X4's and 2X6's hanging around. Nice to get in the mood to build something and not have to leave to get the materials. Now that's classic doomer.
Live in a tiny house, made 90% of local material. Built it myself so I know how to take care of it, and it's mine not the banks.
Easy to heat and light. Have my own well with a backup handpump, again serious doomer stuff. Heat and water, kind of high on the list of needs.
Canning yeah, we do that, good food that I am certain I know how it's been treated, not quite sure about some of the stuff you buy from the store. I like to be a little aware of what I put in my body. It's called health. Having it, helps a lot, certainly a doomer trait.
I have forests, and deer. A flock wild turkeys that will peck on the window glass to get their bird seed.
Big time doomer prep. Turns out it's quite a good way to deal with a severe economic downturn. Of course, all the bailouts will fix everything and everyone will keep their jobs. You to, in fact you may even get a raise.
Not long ago we had a major ice storm up here, quite a riot, transformers just popping, lines arcing.
Roads blocked completely with ice and trees down. Took close to 2.5 weeks before we got power back, we were just fine without it. Doom and gloom for sure. Seems to work well for bad weather. I think the weather might even get worse.
Oh yeah, got a big serious dog, likes to play with huge chunks of firewood and shred them, follows me and the wife everywhere. Doesn't much care for other people, in fact he can seem to get quite upset. Must be a doomer dog. Not sure he is though, he sleeps with a pile of kittens.
When my grandfather died, my dad and I moved all of his cans of bent nails to our house. A real doomer resource. I used a lot of them though, imagine that. I built my house with my grandfathers hammer when I was unsure about what I was doing the hammer knew. Imagine a tool the lasts 3 generations. Doomer tool.
Anyone else have cans of bent nails? If you do you are a doomer for sure
Grin
Don in Maine
Complete childish nonsense.
Actually, I think it's quite commendable to be as self-sufficient as practical/possible (some mix of those two), though I'm an ex-doomer myself. I have started a food stockpile, am gardening in my backyard, have planted fruit and nut trees, and am converting my gas car to electric.
It's prudent to prepare, and there are plenty of scenarios even besides total collapse in which a stockpile makes sense. And, we will have to re-learn a lot of lost skills and relocalize a lot of our production. We will have to downsize our lifestyles bigtime, unless (and maybe even if) we get some "magic" solution like cheap fusion.
I just don't see it as inevitable that we'll have a civilization collapse scenario. It's one real possibility out of many, but one I hope we can avoid. Like Stuart, I really dislike hearing this complete dichotomy between total doom and BAU. It's too simplistic.
Hey Don in Maine,
This is good advice, to keep a lot of nails, wood screws, tools, and extras too. These things are cheap now, but will be unavailable someday, soon.
The old gigantic wood saws are still manufactured and should be purchased now in numbers by communities. Other items: smaller wood saws, bow saws, hand operated drills, drill bits, wood chisels, crossbows which can be manufactured if you have a model, several wood stoves which crack, and other stuff too, IUDs, medical stuff, medicines most of which store well. etc.
A little known tool that is really versatile, the machete, inexpensive and good for cutting small pieces of wood/branches, better than an ax which is heavy and small blade.
Cheers,
Cliff in the State of Veracruz, Mexico
Right on Don...
I guess I'm a BSer as well and name calling is easy on the net.
Not so easy face to face.
Airdale
Cans of bent mails a plenty, my dad never threw anything away, containers of used sump oil from 1935, an 1898 303 rifle with bits missing, broken drill bit collection, boxfull of short bits of string, collection of broken guitar strings, it took months to clean it all up when he passed away, a very happy, optimistic and successful soul who lived through the Great Depression and new just how valuable used bits of string and dirty sump oil were. (I did keep the bent nail collection however)
Hi Stuart,
You believe that we can go into maximum conservation mode and stretch things out. That is not correct, and more important, it won't happen.
Once we are off peak, about now [ http://www.theoildrum.com/node/4792 ], no matter how much we conserve, oil production/depletion will not be affected, as demand will always be higher than supply. China, India, Middle East and developing oil nations will use up whatever we conserve. Despite massive demand destruction, oil producers are producing at max. Unless everyone in the world conserves, our conservation will do little. The U.S., for example, is just 1/4th of global energy demand.
The conservation you envision will never happen. We cannot control the behavior of others and our governments and leaders are ignorant of Peak Oil.
People the world over want gasoline, jobs, consumerism, highway construction, subsidies, and programs to keep things going as they are, and that is what governments will deliver.
So, Peak Oil preparations are the only way to think about what will happen in reality.
To get people to focus on preparing for Peak Oil impacts, it is necessary to focus on the gloom, that is, what actually will happen so we can prepare for it.
It will happen much sooner that you think. Read the Hirsch report and the GAO report, and now we know for certain that Peak Oil is now --- from reports by ASPO, EWG, Megaprojects. Reread these reports and put it all together. This is it mate, the ship is going down.
This is what independent scientists say: The Energy Watch Group (funded by the German Parliament) concludes in a current report titled: “Peak Oil Could Trigger Meltdown of Society:”
"By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame."
http://www.globaliamagazine.com/?id=482
So, it is time to prepare for Peak Oil impacts, and this is what the discussion should be about.
No actually. Its time to accurately and honestly identify Peak Oil impacts. So far, cj, you're nearly the only one who agrees with you on that.
Hi Lengould,
I know of about 6 others here on TOD, and prolly some that I don't know about, as there are many readers who don't comment.
The impacts are clear. Economic depression (Hirsch report and GAO report), ending with a collapse of the highways and power grid.
After that nothing modern works and nothing comes in on the highways.
No communications and no transportation = no government.
The question is how to prepare for that. And I see more and more preparation comments here, besides mine (defense/weapons/food storage/relocation/heating/hunting/community building/technology after the crash/insulation/passive and active solar), and a post or two also on gardening.
Cheers,
Cliff Wirth
I figure on plague war and nuclear war long before local survivalism establishes itself. A hole in the ground in the forest with a year's supply of food is probably going to be your best bet if the system goes down. After a year there will be plenty of abandoned land to farm if you are still alive.
I read books on the causes of World War One and brood about complex systems meeting stupid leaders. Here is hoping that Bush and Putin are a lot smarter than Nicky, Willy, and Franz.
Context, context, context. Lacking doomer talk, eg "this is urgent" - and a general understanding of the context - no one can talk sensibly. The recent elections in US being a case in point: property vs happiness, indeed. A little bit of important context there.
People tend to think the "correct position" is somewhere between the two extremes they can perceive. Without an understanding of the context, they haven't a prayer of jumping out of that box.
I'm all for doomer talk. I don't think we've even scratched the surface of that topic.
cfm in Gray, ME
Stuart Studebaker is trying to have a bet both ways. Is reducing US energy consumption by 50% desirable? Yes. Is being forced to do it in a short time frame going to be easy, have social consensus and harmonious implementation? No way.
Americans are culturally programmed to consume anything and everything they demand, when they want it. They are unaccustomed to being told that they can't have more energy. Indeed they got rid of Jimmy Carter for saying so. Carter's legacy of course is that the the US military is basically an instrument to be flexed to "secure" energy supplies so that American way of life can continue un-negotiated. Blood for oil is a price which middle class Americans generally are very comfortable with becasue they generally have no contact with the 3-4000 families who have sacrificed a son or daughter. The Iraqis or Arabs or enemy du jour are basically viewed as savages that are just obstacles to be managed in the quest for US energy supremacy, despite all the hypcritical hand wringing do-gooder sect of the larger consumer society.
"they got rid of Jimmy Carter for saying so"
Not really. It was more Volcker's 18% interest (only partly due to oil).
Gail did not say that energy consumption drives happiness, or even "quality of life". She said "standard of living", which is an economics concept that means, basically, how much we spend. I.e., how much we consume, use up, and pollute. Of course there are other approaches to "the good life" that might work out better on a finite planet.
I already addressed that issue in a post above.
$700,000 billion bailout of financial markets? I don't think so.
Perhaps you meant $700,000 million or $700 billion.
It's 7.7 Trillion according to CNBC if everything is added up.
Thanks for pointing this out. I fixed it. It is easy not to think when writing numbers down.
Excellent analysis Gail. Stoneleigh from the Automatic Earth and a previous editor of the oildrum had an excellent analysis on the future of the credit crunch.
The suggestion is that the present credit boom was far more excessive than the great depression and is in all likelihood going to be much worse. Stoneleigh carries on.
So according to the kondratieff wave cycle, the bottom looks set to occur in 2013-2015 according to the winter wave. By that time we will have probably have seriously gone past peak. On the one hand a depression might be good as people will learn to do with much much less and might prepare them for the future. It also might give the planet a rest in terms of less pollution, less wasted resources etc. On the other hand my future job prospects are pretty slim and I have an Actuarial degree that isn't going to be worth much possibly.
VK,
Many thanks for your link to 'The Automatic Earth' -- most people, including most economists, just 'don't get it' when it comes to understanding what inflation and deflation are really about. In fact, I'm not sure if I 'get it' myself.
At any rate, Stoneleigh's contribution is a must-read.
Thats true, I can thank Mish Shedlock for my education and numerous other blogs out there. I just finished a degree in Actuarial Studies in the past week and I can honestly say that if it weren't for these blogs and theoildrum.com i'd be absolutely clueless about what's going on. There were many super super smart people in my course, a few people were basically like computers i'd say! But our whole course was based on the idea of interest rates, continuously earning interest on principal FOREVER! Some of my lecturers were geniuses with statistics and mathematics. How did they actually believe what they taught? the idea that something would grow forever, investment returns of 5% per annum, fractional reserve banking would last forever? The environment if I recall, was NEVER considered. No limitations existed! We didn't learn about how energy and the environment are so intertwined. Most of my fellow graduates probably have very little idea that what they studied was basically based on a lie, the lie that economies can grow forever and that the environment is almost irrelevant.
As Bill Boner says at the dailyreckoning, "when things get out of whack, they get whacked back in". I reckon that common sense is not so common, especially when you can create fancy models and theories which makes everything look within 95% confidence intervals and models that are optimized using maximum likelihood theory and funny sounding things like sigma algebra, martingales and chebyshev's inequality. LOL. pardon the rant at the end.
Your rant needs no pardon.
Sometimes it seems the business world has been taken over by idiot savants incapable of understanding anything beyond their complex, but very incomplete "models" - whether they be for economic growth, future oil production, financial derivatives, etc.
Anyone who understands the exponential function and applies it to any real quantity of relevance over the course of the 20th century KNOWS that we are in deep doo.
And even then, most of them still display Cognitive Dissonance.
VK
In K-cycle theory we should then resume upwards in K spring. But now PO sets in at the same time, which should keep us down in the bottom or lower for a long time, or?
Take a step beyond the K-cycle.
See "The Great Wave - Price Revolutions and the Rhythm of History"
I was very happy to see this text in the list of books at the bottom of Ilargi and stoneleigh's "Automatic Earth".
I agree with Leanan and others here - Automatic Earth seems to have the best understanding of what is happening to the financial system
Why isn't Automatic Earth one of the Oildrum's financial blog links?
That is strange indeed. And stoneleigh used to be an editor on the oildrum.
That sounds about right. A long term down trend with every boom below the previous boom and lower lows. What I know about K Wave theory is quite limited, just what i've read from Mish Shedlock. It's all going to be hitting simultaneously though. Peak oil implies peak energy IMO, peak potassium means peak food production and as totoneila would say fertilizer is probably the most important Christmas gift. Again it's very hard to predict the future, maybe there will be some massive breakthrough in nuclear especially thorium reactors. I ascribe to the view that John Micheal Greer shares most of the time that we'll have a long descent, he explains his views brilliantly, probably the best writer on the internet from all the blogs I follow but that doesn't mean he is correct, I find Jay Hanson's logic too be spot on.
I wonder if Jason Bradford is reading this from the reality report, we could have a face off between John M Greer, Jay Hanson and Nate Hagens as well? :-)
By the way, Jason Bradford is now on The Oil Drum staff as well. He has recently been participating in The Oil Drum staff discussions on a variety of topics. The side bar isn't really up to date on who is what.
VK,
I am not at all convinced that we can have a clear idea where we will be headed in 2013 to 2015. We have such a complex interconnected system that it may not take a whole lot to make things very different from the way they are now. For example, if we lose electricity in large parts of the US (and probably the rest of the world as well), the up side of the cycle could look very different, or there may not be an up side of the cycle. As another example, if there are major changes in governments (redrawn boundaries, perhaps groups of states or provinces, instead of the current boundaries), or changes in the monetary system, trade could be very different. It is easy to think we know more than we do.
I think common sense is one of the things that is overlooked in the actuarial science curriculum. I studied a lot of these things quite a few years ago, and it wasn't much different then. I learned the actuarial material through self study and passing the exams, rather than course-work. At least with self-study, one can think through things through, without a professor indoctrinating you on his theories.
Hi Gail,
Thanks for creativity and hard work in researching and writing this post :)
It takes energy to get energy, and energy is getting more expensive.
Gasoline and diesel may be cheap today, but most know that oil prices will rise again, and so too will the cost of producing/extracting any other energy.
Oil is the great enabler of all other energies.
As the price of oil/future oil increases, it costs more and more to produce/extract any energy; thus energy companies, investors, and bankers look askance at projects that may not be profitable.
The energy inputs are more than most think. There is the energy used directly in extracting, processing, refining, and transporting, plus all of the salaries of all employees which are spent and use oil, natural gas, and coal, plus part of the salaries of the employees that supply services and parts (it's a lot) which are spent and use oil, natural gas, and coal, plus all of the oil used in transporting all of the employees and the parts and equipment. All of this energy is necessary to get some energy into an automobile gasoline tank, for example.
We are beginning to see the limits of "Complete EROEI," or C-EROEI. This is why the collapse will come sooner than many think.
Meanwhile, back at the ranch. Because profits are not certain, private investors will balk, and there will be some delays with energy production/extraction.
This will be followed by great public clamor for "more, more, more --- energy, and more of the good life, and "drill, drill, drill," and such stuff..
The government will respond with programs/subsidies. This will continue even after the C-EROEI is less than one.
The government will subsidize solar/wind, even though investors know we will have spare electric power as the gourmet coffee stores, plazas, factories, big box stores, and offices close.
Our dreams and illusions have real limits.
Here come "the saw teeth," from TOD folks, "The 2008 IEA WEO - Oil Reserves and Resources," November 22, 2008:
Davebygolly:
"given the retreats in energy investmenst seen recently, I would think that a lot more of the remaining reserves will remain forever in the ground than was thought - the 2500 gb isn't real in that sense. The energy industry is highly capital intensive. I don't know how many blows like the current one it can withstand. So maybe there will be a few more reruns of the present crisis on the downslope, but maybe very few and not so far in between.
Like everyone else, just guessing. But we know where we are and we know where we'll end up. Just don't know the shape of the downslope. Linear? Naw. Vertical drop? Naw. Exponential dacay? Naw. Sawtooth down? Has to be, of one sort another, having excluded all else. How many teeth? A lot is not that much different from linear. Not so many and then a downward plunge as the world's infrastructure no longer can support the energy industry's ability to get ever arder to get at stuff."
Rockman:
"I agree Dave. I've worked in the oil patch for 33 years and have lived on that saw tooth ride everyday of it. In the past, the aberrations we're caused by excessive production, economic down turns and growth spurts and a combination of these components. It seems we are now entering a period were those factors are still effective but have now added a new dynamic: inability to supply demand (at sustainable prices) during periods of growth in the global economy. I think it's becoming apparent that even as we slide down the PO slope we'll still experience the saw teeth. And those teeth will exact even more damage to mankind's ability to sustain itself in an orderly fashion."
Cjwirth: "Hey Rockman and Dave,
I like your saw tooth theory. The big saw tooth comes when the high price or lack of oil reduces the ability of states to maintain the highways.
[Google: state highway government budget cuts]
Then the power grid goes out and nothing modern works, including heating systems and transportation (electricity power pumps diesel and gasoline).
This will reduce the population of many cities, which provide the organization and finance for extracting and distributing energy. There could be smaller of such saw teeth when there are power grid failures in sections of the U.S. for weeks or months, or for a short duration nationally.
Another saw tooth is when gas stations are closed and people can't get to work to do the jobs required for oil or gas extraction.
When your car runs out of gasoline it stops. When the industrial machine doesn't get enough oil, something stops, and then that stops something else, I call this the 'gridlock effect.' " [credit here to Chris Shaw: http://www.onlineopinion.com.au/view.asp?article=5964 ]
Aangel:
"One more sawtooth: when the cost of transportation gets so high that it is no longer worth it for a minimum wage worker to go to work."
Humpty Dumpty sat on a wall.
Humpty Dumpty had a great fall.
All the king's horses and all the king's men
Couldn't put Humpty together again.
Peak Oil is here now >>> Four years on a plateau of crude oil production, despite very high oil prices and increasing demand.
Cliff Wirth
Your description of the saw tooth is very similar to the economics 101 of farming production, where previous shortages leads to overplanting, gluts, price depression, failure to plant, shortages, u.s.w. The historical plot of price points for supply and demand over successive years in this cycle looks like a concentric spiderweb as the knock-on effects of each seasons imbalance grows larger and larger, and is quoted as the reason for agricultural price supports.
Sadly we're collectively broke, so shifting capital into price supports for energy won't work. In this case, we should expect the sawteeth to get progressively larger though constrained within a falling curve indicating the maximum energy available to society.
I love Kunstler's saw tooth - the end of the five-thousand mile salad when the truck axle breaks.
Thanks. I think your downward sawtooth may be a very good analogy.
Back in the days when there wasn't too much division of labor and nearly all goods were local, almost any group of 100 people would have the necessary skills to keep a village going (build a hut, farm a few crops locally, build a fire, make simple clothes, make pottery, act as a midwife, etc.). Now with everything so complicated, and so many things imported from a distance, even a small disturbance in the supply chain can interrupt production.
Now, we have a much more complicated situation, and even small disturbances can have a big impact on future production. We assume everything will work together, because it always has, but increasingly this will not be the case. It seems to me that in the sawtooth analogy, there are likely to be a few pretty big steps, plus some smaller ones. Once the integrated system stops working as well as it has, there could be a big drop in production.
And the best land in the metro areas is destroyed forever thousands of years, droughts are increasing, animal habitats are destroyed, apple orchards are far removed, aquifers are depleted, rivers will be polluted as sewage treatment fails, and the easiest to mine coal and ores are used up.
Gail,
"Back in the days when there wasn't too much division of labor and nearly all goods were local, almost any group of 100 people would have the necessary skills to keep a village going"
I think you must be talking about the dark ages 500-1000AD(Europe).
Even then in China, India and Middle East there was continental trade.
In the last 1000 years in Europe their has been very important trade, think of British wool going to low countries, tin from Cornwall, glass from Italy, spices, tea, coffee from SE Asia and after 1500 New World trade in sugar, cod, rubber, coco, gold,copper etc.
All powered by renewable energy until 1700's.
I agree that there was trade, even back in New Testament days. I don't think the world was nearly as interdependent then as now, however.
I was really thinking of more primitive cultures than even the dark ages. For example, some of the Indian cultures of the North and South America.
Trade in North and South America before Europeans was limited. However, Michigan copper and Yellowstone obsidian was found in ancient Florida sites. Also, sea shells were found in northern areas far from the sea. Traders often had, in effect, safety passes and were seldom aggressed as they gave access to commodities not available locally. Small scale and mostly material for decoration and weapons, yes, but it existed.
Gail,
Not sure why the world would trade less in a post-peak world than in 1800 when all transport was with renewable energy. Lots of FF free options available for shipping including wind, ammonia, hydrogen, nuclear.
Sure - long distance land shipping can go by electrified rail, local can go by plug-in hybrid truck, and water shipping can find substitutes for oil.
Substitutes for oil for water shipping? Pshaw, you say.
No, really. Substitutes include greater efficiency, wind, solar, battery power and renewably generated hydrogen.
Efficiency: Fuel consumption per mile is roughly the square of speed, so slowing down saves fuel: lately, with high fuel costs, most container shipping has slowed down 20%, and reduced fuel consumption by roughly a third. For example, Kennebec Captain's ship carries 5,000 cars from Japan to Europe (12,000 miles) and burns 8.5 miles/ton of fuel at 18.5knots, for a total of about 1,400 tons of fuel. At a 10% lower speed of 16.6 kts, the ship burns 21% less fuel (about 300 tons).
Size brings efficiency: the Emma Maersk uses about 320 tons of fuel per day to carry 220,000 tons of cargo, while Kennebec Captain's ship uses about 60 tons to carry about 23,000 tons (see http://www.ships-info.info/label-car-carriers.htm ), so the Emma Maersk uses roughly 60% as much fuel per ton.
Other substantial sources of savings include better hull (possibly including axe cleaver designs) and engine design (very large (3 story!)marine diesels can get up to 50% thermodynamic efficiency), and low friction hull coatings (the Emma Mærsk saves about 1.3% that way).
Wind: kites mounted on the ship's bow have been shown to provide 10-30% of ship's power - this is cost effective now. See http://www.greencarcongress.com/2006/01/beluga_shipping.html and
http://www.skysails.info/index.php?L=1 It's astonishing what can be done with modern materials, computer-aided design, and electronic control systems, to turn the old new again.
Solar: The first question is: is it cost effective? Sure - it's just straightforward calculations: PV can generate power for the equivalent of diesel at $3/gallon (40KWH per gallon @40% efficiency = 16 KWH/gallon; $3/16KWH = bout $.20/KWH.
Let's take the Emma Mærsk ( http://www.maersk.com/NR/rdonlyres/53C3A206-24BD-4290-9FE9-417971C4A710/0/EmmaMærskL203FactSheetUK.pdf ). With length: 397 metres, and beam: 56 metres, it has a surface area of 22,400 sq m. At 20% efficiency we get about 4.5MW on the ship's deck at peak power. Now, as best I can tell it probably uses about 10MW at 12 knots (very roughly a minimum speed), 20MW at 15 knots, and 65MW (80% of engine rated power) at 25.5 knots (roughly a maximum). So, at minimum speed it could get about 45% of it's power for something close to 20% of the time, for a net of 9%. Now, if we want to increase that we'll need either higher efficiency PV, or more surface area from outriggers or something towed, perhaps using flexible PV.
Batteries: Large batteries could provide most of the remaining power needed, to be recharged at frequent port stops, as used to be done with coal. Let's analyze li-ion batteries: assume 20MW engine power at a cruising speed a speed of 15 knots (17.25 mph) or 20MW auxiliary assistance to a higher speed, and a needed port-to-port range of 2,000 miles (a range that was considered extremely good in the era of coal ships - the average length of a full trip is about 4,500 miles
http://vi.unctad.org/trasnpfaccd/docs/occ_55.pdf, chart 8 ). That's 116 hours of travel, and 2,310 MW hours needed. At 200whrs per kg, that's 11,594 metric tons. The Emma Maersk has a capacity of 172,990 metric tons, so we'd need about 7% of it's capacity (by weight) to add batteries.
So, li-ion would do. Now it would be more expensive than many alternatives that would be practical in a "captive" fleet like this - many high energy density, much less expensive batteries exist whose charging is very inconvenient, but could be swapped out in an application like this. It should be noted that research continues on batteries with much higher density still, http://www.greencarcongress.com/2008/07/researchers-d-2.html , but existing batteries would suffice.
Hydrogen fuel cells: they can't compete with batteries in cars, but they'd work just fine in ships, where creation of a fleet fueling network would be far simpler, and where miniaturization of the fuel cell isn't essential. If batteries, the preferred solution for light surface vehicles, can't provide a complete solution, a hydrogen "range extender" would work quite well.
Hydrogen has more energy per unit mass than other fuels (61,100 BTUs per pound versus 20,900 BTUs per pound of gasoline), and fuel cells are perhaps 50% more efficient, so hydrogen would weigh less than 1/3 as much as diesel fuel.
Electricity storage using hydrogen will likely cost at least 2x as much as using batteries (due to inherent conversion inefficiency), but will still be much cheaper then current fuel prices. Fuel cells aren't especially heavy relative to this use: fuel cell mass 325 W/kg (FreedomCar goal) gives 32.5 MW = 100 metric tons, probably less than a 80MW diesel engine.
Hydrogen would have lower upfront costs versus batteries, and a lower weight penalty, but would have substantially higher operating costs. The optimal mix of batteries and hydrogen would depend on the relative future costs, but we can be confident that they would be affordable.
What's an 'axe cleaver' design? My Google skillz have failed me.
My god, unless you dropped a decimal point someplace, battery powered supertankers and bulk carriers are actually possible!
Flywheels and thermal storage for steam generation are also possible. God knows you can haul low energy density stuff in a bulk carrier.
Water transport has always been hugely efficient in energy terms, hence the founding of ancient cities as ports.
In contrast land transport needed vast mule-trains to convey a fraction of that which a modest boat could waft effortlessly to it's destination.
That is why arguments for regionalisation are perhaps not entirely convincing, as port cities are in many ways closer to each other in transport terms wherever they may physically be in the world than many inland destinations in the same country.
That's nicely written.
If you don't mind, I'll use some of your language.
While there was trade in 1800, a much bigger percentage of goods were produced locally than now. I would expect a shift in that direction. We get so much from long distances now that a shift in the direction of locally produced would be a huge change.
Great post, thanks.
Yes, alternative energy is one of the major casualties of Peak Credit. In fact, apart from some inertia-driven lip service, climate change is now totally off the agenda as far as the general public and their politicians are concerned. In financial crises people’s time preferences change – i.e. they discount the remote future more and become focused almost exclusively on the present. Just as a hungry man doesn’t agonise about the morals of killing the last specimen of an endangered species when the choice is between starvation and survival, cash-strapped citizens are more concerned about paying today’s bills than about the fate of humanity in 20 years time.
Alternative energy sources, organic farming, transition towns … sadly, all jam tomorrow as far as most of us are concerned. Like hanging, the looming threat of penury and foreclosure has a way of concentrating the mind.
Perhaps consumers aren't as cash strapped as we have been led to believe. Despite price reductions, total sales on Black Friday were 3% greater than last year. They may be cash strapped, but perhaps they are not yet credit strapped enough. There seems to be no limits to the need to satisfy short term greed and lust for shiny objects to be tossed in land fills a couple of years from now.
Now is precisely the time when we should go full steam ahead on alternative energy and other measures to deal with climate change. To the extent, the oil and other fossil fuels are required to invest in alternatives, this means that now the cost of these alternatives may be cheaper than waiting until all is humming again.
Obama has been explicit about the need not to become complacent just because oil is cheap now. It is when oil is cheap that we should invest for the certain day that it will be expensive than ever. Putting climate change aside, are we not sick and tired of depending upon those who don't give a wit about our welfare and would even actively harm us.
That should be classified as the 'statistic of the month'!
Pretty freakish -- the American consumers' last dead cat bounce? Or total discounting of the future beyond the next 6 months?
I think the early Christmas shopping results are not entirely surprising, given how far gas prices have fallen. That puts significant chunks of extra cash and/or credit in people's wallets as compared to, say, six months ago. And people who have been scrimping are probably very anxious to enjoy at least a brief yuletide season of "business as usual."
Was that inflation adjusted?
How many people shopped then instead of some other time because the discounts mattered more to them than they did last year? I suspect the demand curves will get all sorts of choppy, as people focus more on deals than on convenience, due to tighter budgets. So yes, higher peak days. Deeper troughs too.
While sales were up, profit was not. Deep discounts enticed shoppers to open their wallets. We will have to see if they ever come back without even deeper discounts.
Zales, Tiffanie's and Nordstrom's have growing inventories and they are slashing spring orders, even cancelling orders already placed. Poor Christmas season could do them in, as the burden of debt payments and underfunded pensions need to be met next year.
As "anchor stores" stumble, so do landlords, as re-finance plans collapse.
This one could last longer than many expect!
"Because of the credit squeeze, many oil and gas companies are finding it necessary to limit their investments to what they can finance with cash flow."
This is why my petro-investments are in mineral rights and private-equity junior petes working only on cash flow. For the latter, share price equals book value, not what some panicky investor is trying to dump it for on the TSX or NYSX. With mineral rights, one justs collects the quarterly cheque and lets the lease operator do the sweating.
I don't claim to have any predictive knowledge; the oil price slump caught me by surprise as much as everyone else. But I learned the hard way growing up that you don't spend more than you make, and that it applies just as much to corporations as it does to individuals. I have no debt and my investments have always been in old-fashioned types where you don't need a double-talking sales agent to explain it. I never got the double-digit gains that others around me did but I have not taken double-digit losses they did either. If schadenfreude is a sin, so be it.
Sleeping well definitely has its advantages. Some people have believed the folks who claim that with leverage, you can increase your earnings. You can also increase your losses. Furthermore, when you are paying interest on a loan at the same time your investment is declining in value, you can get yourself into a lot of trouble quickly. I tend to follow the conservative route myself, as well.
Most here, me included, find your work relevant and insightful, Gail. Thank you again.
This all highlights how that what is transpiring now is the culmination of many ideas which were proposed here during the preceding months and years regarding:
1. Our entire system's dependence on petroleum. This dependence includes our ability to access and harvest other energy sources.
2. The abstraction of money, and that it is not a resource, but only represents the resource-driven goods and services produced by the system.
3. Chasing the abstraction of money yields increasing amounts of debt. The debt is unsupportable by the underlying system's resources, causing financial turmoil.
4. Peak oil yielding peak energy.
5. Abrupt seizing-up of the system.
We would first like to think that as individual pebbles we are not responsible for an avalanche. Then when we understand how we do, in fact, contribute, we find the avalanche has already begun and it is too late for the pebbles to vote.
So what is to be done next? As far as I can tell, the options are:
1. Enjoy the remainder of life to the fullest.
2. Prepare to exit the system in advance.
3. Weather a crash within the system.
4. Live in denial.
5. Panic.
"So what is to be done next? As far as I can tell, the options are:
1. Enjoy the remainder of life to the fullest.
2. Prepare to exit the system in advance.
3. Weather a crash within the system.
4. Live in denial.
5. Panic."
or
Alternate between all 5 on a daily basis.
To some extent, we end up taking one day at a time.
In the last couple of years, I have made it a point to visit family and friends at a distance, when we could have taken some type of more exotic vacation. Seeing family and friends is one of the things I value, so I have tried to make a point to do so when I can.
Knowing what the future is likely to bring can also bring some perspective on how we treat other people. Maybe it is not as important to "win" in every business transaction, and not as important that children get into the most prestigious college. Perhaps we can take the time to value what we have, and try to bring some joy to others, in the time available.
Your analysis of the uranium situation runs completely contrary to the article in the Mining Weekly you quote.
In this article, all it says is that the very speculative players have been wiped out: "A lot of them have had no intention of mining in uranium, but have created a speculative hype to attract investment in uranium exploration." and: "The serious participants in uranium-mining have largely been unaffected by the drop in the spot price. Wadley says the big companies like Cameco, Areva and BHP Billiton have had their share prices going up and coming down, without really affecting the companies." and: "“The current downward trend has left behind the serious players with serious objectives who are much easier to evaluate, because they have known resources. These uranium producers have time frames on developments, and long-term contracts at reasonable prices, which the serious investor can analyse and invest in,” concludes Wadley."
Instead of what you say, it actually states that the more important long term contract prices have risen strongly: "Currently, contract prices have risen to about five times that level and most contracts are now being settled at between $40/lb of U3O8 and $60/lb of U3O8.
Further, at the beginning of the decade, contract terms were drawn up for periods of up to a year, with contracts now being signed for much longer terms of up to five years.
“This significant increase in contract prices as well as contract terms, is very good news for producers,” says Wadley.
About the relative irrelevance of falling spot prices:
“About 85% of uranium is not sold on the spot market – it is sold under contract,” he says.
The spot price is based on the few transparent public sales of uranium that are surplus to contractual requirement sales. Alternatively, if a producer has not managed to secure a contract for some reason, the uranium is sold on the spot market. “Even though the spot market price is widely quoted, it has very little relevance to the real uranium market, other than as a frequently abused way of exciting the interest of investors,”.
Regarding the end of the reprocessing of nuclear warheads, while it says that there will be a short/medium term shortage of uranium that will soon drive the price up again, but this shortfall will be covered by more mining: "Wadley says that consumption (of processing plants) will definitely increase to over the 200-million pounds of U3O8 a year required, by as soon as 2015." "New explorers have been searching for uranium deposits and collecting funds from investors, and by the time these speculative explorations are proven, the shortfall gap would have passed. The most likely candidates to fill in some of the production shortfall will be the uranium-miners who are currently developing known deposits"
While peak oil and the financial crisis are very serious problems, it is also a serious logical fallacy to say that *all* resources must have peaked now. It would indeed be really odd if they would all peak at very same time!
Please go back and reread that article, as it clearly outlines many areas where uranium production can rise. Very telling is this part: "While in comparison (with Africa), in Australia, which contains about a quarter of the world’s known resources, prohibitive environmental and political legislation towards uranium-mining inhibits the mining of the resource. An example is that existing mines, like resources giant BHP Billiton’s Oympic Dam mine, are allowed to expand, but not permitted to open new mines." That means if there was a real shortage, it is very likely this ban would be lifted and production would rise again.
I will agree that it is a strangely written article. The title of the article is Impending shortfall leads to rising African uranium production. So the article is really talking about two things--a shortfall in world production, and rising African production. The article starts out with a quote by Richard Wadley:
This sounds a whole lot like a problem to me.
Later, there is a section called "Uranium for Nuclear Power".
Later in the same section it says:
In the last section, it talks about all the possibility of development, but then says:
I scratched my head after reading the story. Clearly the writer didn't want to scare people. It is written from a point of view of "There is going to be a shortfall. Gee whiz, this is good news for the investor." The writer manages to so fill the article with gee whiz stuff about Africa (which is not enough to fill the shortfall, and won't be in place soon enough) that it is easy to miss the point about the shortfall.
Yes, I agree that this article isn't completely clear on wheather uranium production will go up or down. I took it as meaning that a short term shortfall because of end of reprocessing agreements will spur the opening of new mines which will in 8 to 10 years lead to more production.
You write: "Clearly the writer didn't want to scare people. It is written from a point of view of "There is going to be a shortfall. Gee whiz, this is good news for the investor." The writer manages to so fill the article with gee whiz stuff about Africa (which is not enough to fill the shortfall, and won't be in place soon enough) that it is easy to miss the point about the shortfall."
I think it is important to realize that this is just your projection about his hidden intentions. What if the writer just wanted to write (as he stated!) about investment opportunities in african mining and personally doesnt care at all whether there will be ashortage? Investment people would not be "scared" by a shortage but get rather excited about the excellent investment opportunity that poses, so he would have no incentive at all to hide this from his readers.
old_europe,
Uranium mining bans have already been lifted in most regions of Australia. I agree with rest of your comments.
Many thanks for a fine article.
It is very clear from your work and from the work over on Automatic Earth that the wheels are about to come off the present models of the economy.
It is also clear that financing the changeover to other sources of energy will be extremely difficult.
I will take the opportunity to link here to a study comparing economic slumps over the ages:
http://www.economics.harvard.edu/faculty/rogoff/files/This_Time_Is_Diffe...
The difficulties of the late Middle Ages are perhaps the most apposite, as they were intimately linked to limitations in the resources being exploited and the changeover from the use of wood in some areas.
In formulating my own response both to this article and to your previous thoughts, which seem to be based on Tainter's collapse theories - which I have on order, largely because of your impressive deployment of some of the arguments, I take it in what is hopefully a correct construction - I would perhaps look to possible weaknesses on both the downside and the upside.
On the downside, it seems to me that people are too given to warfare for a relatively gradual collapse, and war fundamentally driven by scarcity of resources is very likely.
On the upside, I have reservations on some of the analysis you have done on steady state economies.
We actually have extensive experience of this, as for many ages growth if it occurred at all was at an imperceptible rate.
In practise, capitalism coped very well, but not by the adoption of anything like what are often referred to here as appropriate policies.
Instead, interest rates were high, and this was made possible because even if overall growth is nil, some areas contract whilst others expand.
In the context of the present crisis, this might mean that instead of any decline being relatively homogenous, then the economy will resemble a bubbling pot, likely with a high degree of conflict but also with some areas which do relatively well and expand at the expense of those which are contracting.
I would expect to see State control of the economy, probably everywhere, and under those circumstances I am primarily looking to France, Germany and China to do a lot better than most, and to transition far better than most places.
After default, the US also has considerable resources of all types to draw on.
None of this means that the world economy won't crack up, certainly before 2015, and the precedent the Middle Ages set with famine, warfare and plague is far from encouraging.
Dave,
Thanks for the link. History offers many ways to get rid of embarrassing debt:
and
Who will seize what this time?
BobE
If we were going to a steady state economy any time in the next 50 years, I wouldn't have as many misgivings. We are talking about a declining economy for the foreseeable future. If we switch to a steady state economy soon, it will be at a vastly lower level than we are used to thinking about. At this vastly lower level, it is hard to believe that we would have much resources for warfare.
I read the Rogoff article. One of his insights about the relationship between growth and lack of collapse was interesting (page 15):
This very much goes with what I have been saying. To successfully use debt, you really need growth. You can manage a little debt in a flat society. Once you go into decline, debt becomes a major problem.
Again, it is not clear how an overall decline translates into the situation in individual countries, and if the variability is large then the possibility remains that a technological 'hot spot' will in due course expand to take over the ones which have failed.
On the other point you raise of there not being enough resources for war, societies, especially recently in Africa, but also throughout history have shown an immense capacity to continue to wage war, even if they have to do it hand to hand and with machetes.
Examples can be found from the times of the fall of just about every Empire I can recall, starting with the fall of the Pyramid builders in Egypt, where there is good evidence of conflict at a time of drought when the population were reduced to cannibalism.
One resource we will have plenty of is human beings, Rwandan style :(
One good plague and we would have plenty of resources for fighting a war. On horseback, if need be!
If by plague, you mean the spread of infectious disease, consider the following.
Most soaps and cleaning products are made using petroleum. These are the things we use to keep the microscopic invaders at bay (bacteria, viruses).
Many antibiotics, used for curing disease when we do get sick, like other pharmaceuticals are made using petroleum.
The water we use to clean needs to be pumped and heated, both of which rely on cheap energy.
Similar to the monoculturing of crops making it easier for pests like locusts to also eat them, when people are packed more closely together, such as in cities, it makes it easier for all manner of disease to be transmitted between people.
Heavy population plus shortage of hygiene products plus shortage of antibiotics plus shortage of clean water equals an infectious powder-keg. We'll likely not experience a single major pandemic, more likely several smaller to moderate epidemics.
Various responses to infectious disease epidemics lie on a continuum between, on one end, quarantining, meaning a partial or total managed shutdown of most socialization and/or services, and on the other end, increasing demand for antibiotics, hygiene, and sanitation.
Quarantine involves both less demand for economic activity, and less ability to produce activity. Increasing sanitation demand increases demand for petroleum and other cheap energy, at a time when our infrastructure's ability to harvest cheap energy is declining.
Will we be moving to a disease-based economy?
"Most soaps and cleaning products are made using petroleum. "
Only a tiny %. Hydrocarbons on that scale can be produced from biological sources, or even synthesized.
While waiting for a Megaprojects update from Khebab and Co., here's a comparasion of the Nov. 19th update with the previous incarnation - which I think (looking at Wiki history) was from the 28th of October:
Which seems to factor in the latest round of cuts, although it hasn't given up on the big works KSA are planning - Manifa is still being "reviewed," although this new item from a FL paper says it's been postponed. Haven't the skill (or time at the moment for that matter) to factor in bars for gross/net, growth in demand, what have you; but this shows how things have been trimmed generally - and gained slightly too, owing to delays.
For comparison, here's a thumbnail hosted at Imageshack for the main graph from the The Oil Drum: Canada | Oil Megaproject Update (July 2008):
Which seems to suggest that minor shortfalls will set in ca. 2010, barring some new supply or demand destruction. Note that this latter graph uses for computing net the 4.5% decline rate CERA postulated, not the 6.1% given by the new WEO.
The post will be up tomorrow -actually probably later tonight. It is written by "ace" (Tony Ericksen), but has both Khebab's and ace's forecasts.
The Great Depression...has existed mostly as anecdotes by those who lived as adults during the 1930s. I was an infant then and heard much about it and later searched through some of what was published. I will share the essence of what I came to believe, because the current "Credit Crisis" is a distraction that misleads to no solution.
The 30+ years prior to 1929, when the Great Depression began, saw the creation of gigantic, personal fortunes of wealth ...many of them. All were accumulated at the expense of the general population, who survived on minimums of benefit from their labors.
In the general population, the numbers of minimally fed, clothed, housed, working 10-14 hours 6 days/week, including pre-teen children, climbed as a percentage of total population.
Their labors as workingman/woman in factory, on farm or homemaker saw improvement only in the minimal increments allotted by those accumulators and wannabee-accumulators of great wealth who wrote the laws, interpreted the laws and decided which laws were to be enforced... and when... and when not.
The great fortunes were enabled by "clever strokes" and swindles. All of them. And all at the expense of the general population. Rockefeller, Carnegie, Mellon, JPMorgan, Harriman, et al flourished and prospered, endlessly, until their "clever strokes" and swindles reached unsustainable, human proportions and thus the economy imploded... which is just what happens at the never-mentioned end of the Monopoly game. Is it not the end of the game?
It was not just an American event caused by Americans. The "clever strokes" and swindles were ancient and practiced worldwide...but nowhere so uninhibited and without limits as in America, where the colonists arrived with guns to confront "natives" who knew not "private property", so took the lands, failed to enslave the "Indians" so imported slaves ...all in a territory wildly rich in resources and protected by 2 oceans and unthreatened by neighbors.
Here's the essence of the Great Depression and the Credit Crisis and similar events:
Balzac's "Behind all great fortune is great crime" is insightful.
And this: "...glorification of that sort of gambling in 'clever strokes' which constitutes the very essence of theft, swindling and all sorts of similar anti-social deeds.” P.Kropotkin’s Memoirs, ca 1899
The Great Depression was caused by failure to abide a lesser-known Golden Rule: "Do Not Do To Others What You Yourself Would Find Distasteful."
I have heard that many religions have some version of the Golden Rule, such as the one you give. There is good reason for it.
Some time back ,perhaps three weeks or so ago, I made the comment that
Whatever it is that is sinking the price of oil/gas,whatever it is,,,when it ends and the prices start to escalate way way higher than before?
Whatever it is this is what scares the hell outa me!
For I believed that surely it was something artificial and now Gail has identified it. It is the credit crisis causing businesses to sell or consume their precious 'seed corn'.
On the other side awaits hell. Death on a stick.
All the signs are lining up. People are joyous but aware that something is in the air,they can smell it. They are conserving in many ways which means that it will just accelerate the faster crash coming.
Of course it would be nice if everything just slid back to the way it was a few years ago. Back to the consuming consumption of buy,buy,charge,charge but we know that something serious is broke with our system of living here in Murkha.We can feel it but don't want to talk about it. Just watching the Big Three crash and burn is enough.
Airdale-all just my opinion of course,but the recent runup in my electrical rates has floored me so I am already starting to hunker down even more. This next years gardening is going to be IMO 'for real'.
I am awaiting news that my pension is kaput and will cease soon. Same with medical insurance. Without large amounts of drugs my wife will not make it. I might. My children won't. What will be left then?
Prayer? Nope, the Acopalyse as promised,if your a Christain that is.
PS. I viewed the Elizabeth Wlarren Youtube someone on TOD suggested.
I was amazed that a female gave such a presentation on the effects of the two earner household being responsible for the Decline of the Middle Class. Really amazed. This all then started back in the early 70s.This huge rage to consume,consume,consume,charge,charge,charge.
For those who haven't seen Elizabeth Warren's YouTube talk, this is a link.
So we are having a global credit crisis with global economies in collapse.
...and the Bretton Woods institutions (IMF/ World Bank) are in charge of rules, regulation and guidlines of international financial management.
Time to play a little bit of The Blame Game;
"Those who have studied the history of the World Bank and the IMF will understand that their absence from the summit fits into a framework that favours elitism and "club-based" decision-making over inclusive processes."
http://english.aljazeera.net/focus/2008/11/2008112813739268445.html
"But since the early 1980s, they began to get involved in domestic economic policy choices, leaning on the "power of the purse" and their role as "gatekeepers" for the money from the bilateral donors."
"This model was based on the belief in the logic of unrestrained market forces; accordingly, states were urged to resist planning or intervention activity in the markets.
In time, the model has been discredited by empirical evidence about its poverty reduction and development results, and by the words of prominent economists."
"The 1980s model of reforms called for freeing the private sector from the state so it could engage in innovation and risk-taking as the engines of growth and wealth-creation.
Such reforms, it was argued, were necessary to avoid the inefficiency of a subsidised and deficit-creating government provision and protect public resources."
"Research shows that standards of living are closely tied to energy consumption. "
Gail, your reference doesn't support this. The abstract says:
"A correlation is shown between the United Nations’ Human Development Index (HDI) and annual per-capita electricity consumption for 60 populous countries comprising 90% of the world’s population. In this correlation, HDI reaches a maximum value when electricity consumption is about 4,000 kWh per person per year, well below consumption levels for most developed countries but also well above the level for developing countries. The correlation with electricity use is better than with total primary energy use. "
So, the study shows a correlation (not a causal relationship) for electricity (not total primary energy), which no longer holds above about 4,000 kWh per person per year. The US, for instance, uses about 13,000 kWh per person per year, so this correlation doesn't apply.
Nick,
I just finished reading the same link, its worth noting that even below 4,000kWh per person per year( down to 1,000 kWh) most countries still have a reasonably high human development index( 0.8).
It does suggest that the US can give up a lot of FF consumption(70%?) and still have a viable, comfortable, well fed, healthy and well educated society. Just so happens that non-FF energy generates about 25% of electricity so maybe US could give up >70% FF.
It really won't be very hard for the US to replace FF with wind, solar, and nuclear, with niche contributions from other things.
Replacement of all FF electrical generation with wind would only cost about $2T, or about 2% annual GDP for 7 years (or half of US light vehicle sales).
Oil will be easier: 50% of US electricity comes from coal, and the US has much more coal (and, IIRC, uranium) than we'll ever need. US light vehicles powered by electricity would only require about 17% growth in US electrical production (in KWH's - plant could get away with little expansion, as generation would be at night). Plug-ins won't cost significantly more than ICE vehicles, and so replacement of ICE's by PHEVs by attrition will cost almost nothing.
The hardest is the transtion: the fact that the US could reduce it's oil consumption by 25% overnight with simple, relatively painless conservation measures (carpooling, telecommuting, driving more slowly & carefully) has in the last year already reduced it's oil consumption by more than 10% (and oil imports by more than 15%); and could reduce it by 50% with current on-the-road tech, makes it even clearer that a transition to electricity is very doable.
How old are you Nick ?
Since you're having a cartoon-style approach to those hard and overwhelming issues in question .
Sigh. I was worrying about LTG V1 30 years ago. Does that help?
"cartoon-style approach "
I may have used a broad stroke - but, broadly speaking, what I said was correct, and no more simplistic than many things accepted without question on TOD.
I agree these are hard questions, but they're not overwhelming. For instance, the wind investment I discussed would take more than 7 years to implement, but the scale of investment is correct: 315GW of FF generation, times $2/watt, divided by 30% capacity factor = $2.1T, which is about 15% of US GDP. In the grand scheme of things, that's not much. For some more detail on my thinking, see www.energyfaq.blogspot.com .
Please, be specific as to where you disagree with my post.
Sigh. back to you !
It really won't be very hard for the US to replace FF with wind, solar, and nuclear, with niche contributions from other things. (words and loose claims, value = zero)
Add meat to the bone here http://en.wikipedia.org/wiki/Image:World_energy_usage_width_chart.svg
Replacement of all FF electrical generation with wind would only cost about $2T, or about 2% annual GDP for 7 years (or half of US light vehicle sales).(words and loose claims, value = zero)
Future energy predicament is NOT about money, but about EROEI. We can not print more monies to circumnavigate this challenge.
Oil will be easier: 50% of US electricity comes from coal, and the US has much more coal (and, IIRC, uranium) than we'll ever need. (just fantastic) Who are we ? Again EROEI ... and I read some place that GM (?) expect there to be 1 million el-cars on US roads by 2015 .... How many houndreds of million cars do you have over there, again ?
and then you go on ...
I may have used a broad stroke - but, broadly speaking, what I said was correct, and no more simplistic than many things accepted without question on TOD.
Nick, some of your taks I can agree with (in theory) but other claims are pure wishfull thinking, IMO. You have been member of TOD for 3 years. Did you learn anyething?
Eroei, Receding horizons, that energy ultimately has nothing to do with monies, that todays calculations does not apply tomorrow.... that ALL renewable energyforms FAIL on their claimed statements .... Where did Hydrogen go BTW ?
You are a cournocopian at heart. Nothing wrong in that. I am not.
those
"It really won't be very hard for the US to replace FF with wind, solar, and nuclear, with niche contributions from other things. (words and loose claims, value = zero) Add meat to the bone here http://en.wikipedia.org/wiki/Image:World_energy_usage_width_chart.svg"
My goodness, that old, bad, EIA chart has sprung to life again! The data is old (5 years old is an eternity in renewables), and confuses primary energy with high quality electricity: EV's use 200-350 watt-hours per mile, while the average US light vehicle uses the equivalent of about 1,500 watt-hours per mile.
"Replacement of all FF electrical generation with wind would only cost about $2T, or about 2% annual GDP for 7 years (or half of US light vehicle sales).(words and loose claims"
Do you have any specific disagreement with the calculations I presented (besides your later remarks, which I address below)?
"Future energy predicament is NOT about money, but about EROEI. We can not print more monies to circumnavigate this challenge. "
Sure, E-ROI is important. Wind and solar have very high E-ROI, as high or higher than oil, currently, as has been detailed by Cutler Cleveland here: http://www.theoildrum.com/story/2006/10/17/18478/085 . See Figure 2.
"Oil will be easier: 50% of US electricity comes from coal, and the US has much more coal (and, IIRC, uranium) than we'll ever need. (just fantastic) Who are we ?"
We, in this case, is the US, though in fact Australia, China, Europe and the UK have quite a lot left. Coal demand is likely to peak soon, as demonstrated by Rutledge and the EWG, but not supply - there was a recent article on coal on TOD by Heinberg http://www.theoildrum.com/node/4061 which agreed, BTW, and no one contested that conclusion. For further info see http://energyfaq.blogspot.com/2008/06/are-we-running-out-of-coal.html .
"Again EROEI"
See above.
"I read some place that GM (?) expect there to be 1 million el-cars on US roads by 2015 .... How many houndreds of million cars do you have over there, again ?"
We have about 220M, but about 90M of them account for 50% of Vehicle Miles Travelled (VMT). On the one hand, I would agree that it will take some time to ramp up plug-ins. OTOH, oil isn't going away tomorrow. For instance, the latest bottom-up analysis on TOD http://www.theoildrum.com/node/4792#more projects a decline of only about 10% in oil production by 2020. Heck, the US reduced it's oil consumption 13% in September, which probably reduced imports by 20%. Finally, that's under a conservative, BAU scenario - realistically, we're likely to push things much more quickly than that. Do you think we'll be facing BAU?
"other claims are pure wishfull thinking, IMO"
Hmmm. Could you point them out, and give specific reasons (by which I mean a little more than just saying you disagree, or that they are "loose claims").
"Receding horizons" have to do with E-ROI. Again, wind and solar have very high E-ROI.
"energy ultimately has nothing to do with monies"
Sure, but you need to connect the dots, here. Specifically, let's see a detailed analysis of why would a decline of 10% in oil production get in the way? And, before you do, please review this: http://energyfaq.blogspot.com/2008/06/there-are-several-studies-by-rober... , so we can have a productive conversation.
"ALL renewable energyforms FAIL on their claimed statements "
You might want to back that up with facts and analysis. There are plenty of articles on TOD that agree that wind and solar can perform as they promise (cost effective power up to 20% of marketshare, in the case of wind), though there's certainly lively debate on whether they can do more than their mainstream proponents claim, as I have suggested.
"Where did Hydrogen go BTW "
I think every serious energy geek understands that hydrogen for transportation was never a serious proposal, but was in fact a red-herring presented by the car industry/Bush admin to deflect pressure for greater vehicle efficiency and allow the Bush admin to kill the PNGV program (which developed the precursor to the Prius).
Again, have you taken a good, leisurely look at http://energyfaq.blogspot.com/ ?
Essentially efficiency and capital investment are inversely correlated in energy storage. You can always run electrically conducting cables underground and artificially generate geothermal heat for instance, but this in not exactly an efficient way to store wind power.
Treat windpower as a twenty percent solution and build other systems as well.
"Essentially efficiency and capital investment are inversely correlated in energy storage. "
Not always: plug-in hybrids and EVs will provide essentially free supply-variance buffering through dynamic charging (aka demand management), not to mention V2G, which would provide another level again of system buffering. They'll also provide night-time demand, which is actually a bigger problem for wind than intermittency.
Geographical diversity, negative correlation with other sources, especially solar, demand management and backup by obsolete FF plants are also very important partial solutions to wind intermittency. I suspect we could get wind up to 35% very cost-effectively. Alan Drake thinks we could do 50%, especially with pumped storage.
Having now read some of the sources quoted it seems that there are serious divergences between their texts and the conclusions drawn from them, so that Nick's arguments appear to be correct.
The quoted link does not indicate a very solid link to living standards and electricity use above $4,000 per capita, let alone overall energy usage where it is much weaker.
In reality, of course, it is rather hard to see why a society which insulated it's houses to Passivhaus standards and commuted by a variety of public transport means, electric vehicles and so on would be much worse off than one which achieved much the same standard of living by driving around in SUV's and burning gas to power poorly insulated houses.
The overall thrust of the article though is undoubtedly right, as current financial circumstances will make the introduction of other sources of power to keep things going tougher.
Dave,
"The overall thrust of the article though is undoubtedly right, as current financial circumstances will make the introduction of other sources of power to keep things going tougher."
It would be more accurate to say that the current financial circumstances (a world wide recession) will make it harder to replace FF( because of the price declines), but may make it easier to finance wind, solar, geothermal (and nuclear?), because of the big declines in input costs( steel, cement,copper, labor).
With the big reductions in interest rates and government support of banking, financing costs are also likely to decline especially where feed-in tariffs are available( because of the low-risk of the investment).
Remember that when FF prices were increasing the argument was that higher FF prices just put up the costs of inputs( drilling platforms, labor, diesel). For wind, steel prices had increased x4 in last few years, increasing prices, especially for off-shore wind. These prices are now back to prices 4-5 years ago. Lower barge rentals, lower cost to transport turbine components( even if this is only 1% of costs)
See also NICK's comments below about the wind turbine back-orders( 2years) below.
Nick, things are changing so fast that I tend to refer mainly to the current situation, rather than projecting too far forward, and it was the current situation which I was referring too in my statement - finance for renewables is currently tougher.
Looking further forward, you are correct that materials costs are now cheaper, and falling.
This appears to be more than counteracted by increasing financial concerns, which hit nuclear and renewables especially hard as the cost is up-front.
To finance a new project great uncertainty has now been injected, via the recent crumbling in fossil energy costs, which makes it a lot tougher to attract finance as they have to look over their shoulder in case energy costs fall again, even supposing that they rise anytime soon.
To counter these trends one might call for Government guarantees, but most of the available credit is being used to finance the black hole which is bank losses.
As for your other point that availability of some of the equipment is getting easier, that is really another way of saying that take-up of renewables is lower than had been expected, and so re-enforces the hard times that renewables provision is going through.
I now follow the situation abroad in the US and Europe much less closely, as tough times concentrate the mind, and it is apparent that in the UK at least it is going to be very difficult indeed to finance either the projected growth in wind power or nuclear.
A crashing pound is wiping up most of the benefit of falling raw materials prices, whilst even EDF which is in charge of building most of our new reactors says that there will be a large gap for many years which will have to be filled with gas.
Since simultaneously Russian gas supply as early as 2010 is in question, then the prospects look grim indeed.
Even in the US it is unclear how large the US economy actually will be after present losses are fully on the books. A rough guess would put the non-inflated size of the US economy at maybe 25% lower than the inflated figures, where huge sums are 'earnt' by financial engineering.
Financing anything but coal may not be easy, and regulatory uncertainty makes even that difficult.
All this is a walk in the park, of course, compared to the UK, which has not got the resources such as coal and gas which will power the US, only unbuilt nuclear and very expensive off-shore wind.
"This appears to be more than counteracted by increasing financial concerns, which hit nuclear and renewables especially hard as the cost is up-front."
Well, nuclear takes a lot longer to develop (roughly 10 years, vs 1-3 years for wind), and wind can installed incrementally, which helps one's cashflow enormously.
"As for your other point that availability of some of the equipment is getting easier, that is really another way of saying that take-up of renewables is lower than had been expected, and so re-enforces the hard times that renewables provision is going through."
It wasn't wind turbines that he was talking about, it was steel, concrete, etc. Regarding wind turbines, remember, there's a 125GW backlog of wind projects just in the US, many of which were being postponed/cancelled due to the lack of turbines - it's not at all clear that even a reduced order-book would make any difference, due to the enormous overhand of demand for turbines.
"Even in the US it is unclear how large the US economy actually will be after present losses are fully on the books. A rough guess would put the non-inflated size of the US economy at maybe 25% lower than the inflated figures, where huge sums are 'earnt' by financial engineering."
Could you expand on that? New US home construction has already fallen by 70%, and that's already been factored into US GDP. Similarly, large reductions in size for the US financial sector have already been factored in, and the US financial sector accounts for less than 25% of the economy, so that 25% reduction can't come primarily from there. What makes you think this?
I think you (as many others....) may be exaggerating the size of this current financial panic. Take a look at the US panics of 1907 and 1920 - they were much larger. Review your article about international panics - we've just gotten lulled by the post-WWII financial calm (ironically, the same over-confidence encouraged the unsafe lending practices which got us here), but this is nothing new, historically.
Wind is easier to finance in the present climate than nuclear, but the money is still upfront.
Many projects are being delayed or cancelled.
Off-shore wind, which is what the UK has most of, cost multiples of the cost of on-shore.
Here is some of the info on financial engineering and it's contribution to the bubble:
http://www.agorafinancial.com/afrude/
So perhaps 2 out of 3 dollars of this annual $2 trillion is 'bubble', and that is before considering knock on effects.
Executive pay in other industries has inflated beyond recognition, and the performance of the executives certainly has not.
Then you have to consider knock on effects of removing this much purchasing power from the economy - take the car and building industries to start with.
25% seems a very modest estimate - unemployment may hit this level, but I have based this just on the fall in monies in the financial services and profits leading to reduction of bonuses elsewhere, plus some modest knock on allowance.
I do not know enough about the 1907 or 1920 panics to compare in detail, but all the information I have seen puts the size of the bubble now as much greater than the 1920 one, at least:
Here is a recent graph:
http://www.cliffkule.com/2008/11/us-debt-buildup-worse-than-1929.html
And here is a more detailed analysis, but rather more dated:
http://www.oftwominds.com/blogjuly07/unraveling-summary.html
The differences between these earlier periods and the present include that the 1907 panic did not destroy London to the same degree, which at the time was the centre of the financial world.
The degree of indebtedness is greater today than in 1929, the period I have the data for.
Finally, peak oil was not occurring.
Dave,
You have presented some good reasons to question the continued growth in renewable investment.
A few points to consider that make 2008 different from 1929, 1893 etc.
As far as debt, there is now a very large middle class of home owners, that have replaced a large worker class that rented. The middle class now have assets as well as a house, pension plans, savings.
Its natural that the finance industry is larger now, its a service industry and we all need more financial service now that we are not paid with cash( my first job in 1964) have charge cards, have a mortgage , have investments.
In the past banks were mainly financing businesses, the working classes use "unofficial loans" or pawn shops.
Are we more resilient now?
1) Often households have two incomes, so 10% unemployment may influence 20% of households but only 1% may have no income( this is a simplistic calculation to illustrate idea).
2)safety net insure some income flows
3)more disposable income(restaurant meals, holidays, consumer electronics) basic food, energy is only a small part of income.
4) a much higher retired proportion of the population in developed world, and available labor force is or will be shrinking from 65% participation ( in Australia). Unemployment will not directly impact retired, but indirectly by reducing asset wealth, but income may be less impacted. Retired can cut back especially if living in suburbs as they do not have to travel, have time to grow some foods and cook meals,make preserves of in-season foods, make some home repairs, repair clothing.
These factors may mean that a recession is initially actually worse in GDP terms, but not in the real effect on people or the resilience of the economy.
Those monies in pensions and so on have been invested in things which are crashing rapidly - the stock market, for instance.
The basic problem is that where the money has been put is in things which were dependent on asset price inflation and rapid growth:
House finance, via the pension plan - the fall in the economy has made vast sums invested in this worth far less.
Commercial property - again built on the basis of an expansion which is not going to take place.
Derivatives - dodgy assets re-bundled.
Car firms and manufacturing firms - they will only have to produce a small amount of the ones expected.
1) Debt has been incurred on the basis of two incomes not one - in the past in hard times the women would often raise a bit of extra money by going out to work, now for many either loosing their job will lead to their loosing the house.
2)Safety net - from the Government, who are currently ruining their credit rating by trying to support the banks, which will prove ot be a bottomless pit.
3)I agree that higher incomes mean that there is more flexibility to survive at a fraction of current incomes.
4)The pensions bill was anyway becoming unsupportable, and it is dependent on tax revenues which will not exist when too many are thrown out of work.
I am not trying to argue that everyone everywhere will starve, but in some countries things will be much worse than the already very severe decline in the US, with the UK prominent among them.
Once confidence is lost in the ponzi schemes which support these asset bubbles, they can only deflate, and the bigger the bubble the more severe the effect.
This is the biggest and most universal bubble there has been, and it has wrecked the financial world, the effects can only play out.
A few thoughts, while I have time.
"Many projects are being delayed or cancelled."
That's always true. Take a look at Gail's article from the Chr. Science Monitor: you'll see that 2006 and later years had a lot of "churn", but still installs grew. The question is, are the numbers rising significantly?
"Off-shore wind, which is what the UK has most of, cost multiples of the cost of on-shore."
I believe Jerome a Paris, who is an expert, disagreed strongly with you on this.
"So perhaps 2 out of 3 dollars of this annual $2 trillion is 'bubble', and that is before considering knock on effects."
$6T in US corporate profits?? This is completely unrealistic! Total US corporate profits are about $1.7T, about 12% of the US's $14T economy - see:
http://www.bea.gov/newsreleases/national/gdp/2008/pdf/gdp308p.pdf
I don't mean to offend, but I think you're not being sufficiently critical about the quality of the websites you read.
More later, when I have time....
Nick, I do not mean to be rude in turn, but I have gone to some trouble to provide links for you, which are part of a very general body of knowledge which reading the financial press would inform you of.
It is simply a fact that the bubble is bigger than that in 1929, and multiple sources would have informed you of this had you researched.
Instead you provided completely unsubstantiated statements, and so are hardly in a position to criticise the links I gave.
Here is another link with graphs showing debt levels, and it is clear that the debt to unwind is greater than in 1929:
http://www.debtdeflation.com/blogs/2008/11/29/can-the-usa-debt-spend-its...
This does not mean that the unwind process will be the same, but the problem of debt is clearly more substantial than in 1929.
Jerome a Paris has not been able, for reasons of confidentiality, to support his remarks, and in any case is not trying to argue that off-shore is no more expensive than on-shore, to the best of my knowledge.
I therefore go along with the figures that I have, which initially were based on UK Government reports and later information in the public domain as it is a fast moving field.
Here is one recent estimate in the public domain:
http://www.forbes.com/afxnewslimited/feeds/afx/2008/03/16/afx4778629.html
Here are the DTI's 2006 estimate's for off-shore wind, which are clearly much higher than for on-shore, as any reasonable person would expect.
http://www.renewables-advisory-board.org.uk/vBulletin/attachment.php?s=0...
If you wish to dispute the figures, please do so with other sources which are in the public domain.
'Profits' can be given in several different forms, and whilst the $1.7 Trn you refer to would be monies after all expenditure on wages, executive pay, bonuses, investment capital and depreciation, available for net return to shareholders, the link I gave clearly and explicitly references profits as the amount left over after taking out immediate operating expenses, and indeed says that the bonuses paid out to executives in the financial services industry would in other industries be used to provide extra capital for new machinery etc - IOW since it has been disbursed as bonuses it would not appear in the profits figures as you wish to use them.
There are gross profits and net profits, which are used in different contexts.
If you wish to debate further, please provide references to the contentions you wish to make, and have a look at the financial papers as most of the points that you wish to dispute are in fact a matter of common knowledge, such as the relatively high rate of cancellation and delays in wind projects:
Here is one from today:
http://spokesmanreview.com/breaking/story.asp?ID=18008
If you wish to dismiss this as purely anecdotal, please provide your own sourced figures for what the overall position is by country.
"It is simply a fact that the bubble is bigger than that in 1929, and multiple sources would have informed you of this had you researched."
I've seen no dispute of the basic chart, showing US debt since the Depression. OTOH, I haven't seen anything in mainstream economics that supports the idea that it will have the same effect now that it did then. I asked James Hamilton of Econbrowser if he thought it would, and he said no - I find him pretty credible. The websites that put great emphasis on it appear to be goldbugs. I would like very much to see a longer timeline, and similar data for other countries - I wonder if this chart is an artifact of the anomolous position of the US after WWII. I would also note that much of this leverage is sovereign lending by oil exporters, who, if they're smart, will maximize their lending while they've got the oil. The bulk of the remainder of the sovereign lending is from China and Japan, who show no sign of changing their export/mercantilist ways.
I think Neil1947 helped put some of this into context: homeowners pay interest, tenants pay rent: the homeowners may pay no more than renters, but could be described as "leveraged". Is a shift from renting to owning necessarily a problem? I don't see why.
I'd be curious for more substantive info on this (not from a goldbug site....), as it does seem to be an unresolved concern.
"you provided completely unsubstantiated statements"
I wasn't actually responding to the debt question - that why I said I hoped to return and write further. I did, in fact, provide support for everything I said: the CSM article and Jerome a Paris remarks.
"Jerome a Paris has not been able, for reasons of confidentiality, to support his remarks"
True, but don't you find him credible?
"and in any case is not trying to argue that off-shore is no more expensive than on-shore, to the best of my knowledge."
Well, here's what he said here ( http://europe.theoildrum.com/node/4670#more ):
" offshore is slightly more expensive today than onshore wind"
"The "vast costs" of offshore wind are still in the same range as those for nuclear or gas. Most of the cost of nuclear new build is the financing cost; if you're doing offshore by the private sector, then you have to get nuclear done by the private sector too, with the same high discount rates (if you use the French exemple for nuclear, then you have to ajust offshore wind costs to use the same low discount rate of the State).
Another point to note about these "vast costs" is that they apply, right now, to what essentially are prototypes, with no effects of scale on either manufacturing, logistics, installation or maintenance. Once the industry has grown a bit, after a few of the early large wind farms are built, costs will come tumbling down."
The Forbes article doesn't separate offshore and onshore, and gives a total estimate of 2 stg/watt (80B/40GW), which is in the range of nuclear, and not much above onshore costs of $2/W in the US, when you include the effect of a higher capacity factor.
I looked at the DTI: take a look at Figure 10, P 22: it shows the cost/KWH of the two converging in 2010: it looks like 3 pence onshore vs 4 for offshore - that's not a big difference. The capex figures are .9/W vs 1.6/W, which isn't much considering the effect of a higher capacity factor.
As far as profits go: your source doesn't discuss net vs gross profit, or indicate where they got the figures. I'd point out that it makes absolutely no sense to talk about gross profit before salaries, in a service business: salaries are your main cost.
I couldn't get your wind article to open. However, I would note that the burden of proof is normally on the Original Poster to prove their assertions, rather than asking the reader to prove the negative. That's where we started: Gail had a source that didn't support the strong tone of her remarks.
I do not believe I have ever argued that the way things will work out will be the same as in 1929, just that the level of debt is in fact larger and so it seems reasonable to expect that the problem of unwinding it or financing it will be even more difficult, as Japan has recently discovered to it's cost.
You were arguing that the crash of 1929 was much larger, and provided no support for that:
You stated:
This is certainly not true in respect of the level of debt, even before you take into account Government unfunded liabilities such as pension and medicare commitments.
Of course, it may be argues that the Government will not honour them, but that is rather my point, that the Governments certainly in the UK and probably in the US will not be able to meet their commitments and living standards have a long way to fall.
Dismissing references to arguments of those who feel that the crash may be severe whilst saying that you find Hamilton 'credible' is really just a statement of preference rather than an argument.
Many of the 'mainstream economists' were arguing as late as January of this year that the economy was just fine and saw no bust ahead.
I find, for instance, Roubini more credible, who saw it coming.
Here is an article by a writer in 'The Telegraph' which references a whole sheaf of economists who think that this has the potential to get very sticky indeed:
http://www.gata.org/node/5870
That is what the economists are frightened of, people like Geithner who I reference here are hardly going to come out and say that this is likely going to be worse than 1929, but nothing they have tried so far has worked.
It is far too early to evaluate whether the end result will be better, worse or about the same as the Great Depression, and no doubt the powers that be were saying at the time that it was all under control.
What is perfectly plain though is that the imbalances are worse, and that in addition we have to contend with peak oil.
It is also clear that either a very long slow decline or standstill as in Japan in the 90's is in prospect, or a very severe slump analogous to the Great Depression.
I don't think that we will make it through to just a standstill, certainly not in the UK.
Things are unravelling too fast.
As for wind, you can find whoever you like credible - personally I find a contact I have in the renewables industry in New Zealand credible, and as they do not have the cash to put in large amounts of subsidy off-shore wind there is problematic.
Here is another attempt to provide a link to UK Government sponsored costings:
http://www.renewables-advisory-board.org.uk/vBulletin/attachment.php?s
=0b50c25ccdc1ce4d2162c6e797a93ce2&attachmentid=39&d=1187018799
Please copy and paste
How you can work out that £80 billion for 40GW is in the range of gas, I can't understand, as the capacity factor even for the offshore part of this is averaged at 35%, so you are going to get less than 14GW of actual annual generation, so it is costing you just under £6 million MW of capacity.
Whatever may be the case in the rest of the world the fall of sterling means costs are only going up.
If I am misinformed about the high cost of renewables, at least I share this with the House of Lords:
http://news.scotsman.com/uk/Rush-for-renewable-energy-will.4746098.jp
Please note that this projected increase in cost still only takes account of providing a very limited part of energy via renewables, so the cost difference per MW is projected to be very large.
It was not my intention in any case to argue against the use of renewables where they can be afforded , but simply to point out that this investment will not be easy in cash-strapped countries.
The relevance of the article presenting the figures this way, is that bonuses in the millions, and tens of millions, and occasionally in the hundreds of millions, are not what is normally meant by 'salary', and that that part of the economy is not going to be available, whether it is called profits or wages.
It is still deflationary.
The UK, with it's banks crashing, is still paying out around £16 billion in banking bonuses - London is going to be hard hit when those bonuses are not about.
As to your point that you shouldn't be asked to substantiate anything you say as you were not the original poster, I was originally replying to someone else so presumably the same would apply to me.
In practise, I feel that anyone who wishes to debate should be prepared to back up what they are saying.
"I do not believe I have ever argued that the way things will work out will be the same as in 1929, just that the level of debt is in fact larger and so it seems reasonable to expect that the problem of unwinding it or financing it will be even more difficult,"
It seems like a reasonable hypothesis, but I haven't seen a real explanation, or any kind of testing against other panics in other times and places. I gave several counter-arguments (greater leveraging for homeownerhship is natural; this chart may be an historical anomaly due to the unique post-WWII position of the US), and here's another: a modern economy needs a debt-based money supply that expands with the economy, so you'd expect debt to increase with growth and fall with economic crash, but the cause and effect is the reverse of what's proposed here. So, this hypothesis needs testing, and a conceptual explanation.
"as Japan has recently discovered to it's cost."
Could you expand on this? I haven't seen a discussion of Japan "de-leveraging", though I've seen many discussions of their various bubbles, and problems with bad debt.
"This is certainly not true in respect of the level of debt"
Again, this is an untested hypothesis. The current crash is unquestionable smaller than many earlier ones, at least so far: see the NBER chart of previous US cycles (I'll try to add the link later).
"Government unfunded liabilities such as pension and medicare commitments"
Those aren't liabilities in the legal sense, they're just projections of current benefits. In fact they are expansions of current benefits, due to longer lifespans.
"the Governments certainly in the UK and probably in the US will not be able to meet their commitments and living standards have a long way to fall."
Again, the projected US SS & Medicare benefit levels represent expansions. If they don't materialize that won't be a decline in living standards.
"Dismissing references to arguments of those who feel that the crash may be severe whilst saying that you find Hamilton 'credible' is really just a statement of preference rather than an argument."
Yes, I prefer the opinion of a well-respected, PO aware economist over that of goldbugs (who are often commodities salesmen). Of course, I prefer a well argued, quantitatively supported analysis over opinions from anyone, and I haven't seen that.
"How you can work out that £80 billion for 40GW is in the range of gas, I can't understand"
That was Jerome a Paris, not me. I presume that was based on high NG prices.
"it is costing you just under £6 million MW of capacity."
Which is not far from the current $6/W cost of nuclear, but with lower interest costs (due to much shorter installation times), much lower overall project risk, and substantially lower operating costs. Also, that 35% is either incorrect (it would be good to go back to the source) or very conservative, as offshore wind is generally expected to have 35-45% capacity factor (closer to 45%).
"The relevance of the article presenting the figures this way, is that bonuses in the millions, and tens of millions, and occasionally in the hundreds of millions, are not what is normally meant by 'salary'"
They look excessive, but we need a real, careful analysis of their size relative to the economy. That's very much missing.
"The UK, with it's banks crashing, is still paying out around £16 billion in banking bonuses "
That's less than 1% of the UK's GDP, which is probably in the range of £2T (as a really wild guess).
"As to your point that you shouldn't be asked to substantiate anything you say as you were not the original poster, I was originally replying to someone else"
Your comment of December 1, 2008 - 3:28am was addressed to me. I thought you were addressing my remarks - perhaps they were intended for Neil1947. In any case, my remarks were addressed to Gail.
"I feel that anyone who wishes to debate should be prepared to back up what they are saying."
My point was that Gail was asserting that "These renewable energy companies have been hit very hard by the credit crisis." I don't think she showed that this was true. It's not reasonable for her, or others defending her point, to ask for proof of a negative (that they haven't). That's not to say that it wouldn't be nice to find that evidence - I don't have time at the moment, and the evidence may not exist quite yet, even if wind investment will eventually prove to be relatively unaffected. OTOH, if you look at the Forbes article Gail provided, you'll see that it strongly supports my point.
Finally, thanks for the new links - I'll check them as soon as I have time.
They haven't de-levered. The economy has been static since the 90's, and some fear that the results of the present crash will be similar.
In my view the world wide nature of the present crash will mean that this stability will not be attainable - Japan managed to attain a static state through exports - that doesn't work when everyone has a depressed economy.
The static state of the Japanese economy is now worsening daily, and it seems quite possible that what they actually did was simply delay deleveraging, which may now work through.
I have provided links to charts which clearly show that the level of debt is greater than in 1929.
Here is another indicator published today which is also worse than the great depression:
http://www.telegraph.co.uk/finance/newsbysector/industry/mining/3543370/...
The second part of your argument that consequences have not been so severe depends on retrospectively comparing it with the depths of the Great Depression.
The appropriate point of comparison would be with the the conditions less than a year after 1929.
The imbalances now are greater, as the figures I have provided clearly show.
It will take time to work through.
In a depressed economy, not even current benefits will be able to be maintained. See the current difficulties in California, where they can't fund pensions.
In any case, much of the increased costs are due to demographics, as an ageing population means that fewer working people have to support more pensioners.
The fall in the stock market now means that already many pensions are much reduced.
It all boils down to a fall in living standards.
You are confusing dollars and pounds. It should be noted that the figures I gave also do not reflect current exchange rates, as the fall has been rapid, but are likely based on a figure closer to $2/£1
The figures I gave are correct for wind capacity in the UK and North Sea according to the British Government sources, which has much worse resources than the States.
I gave links to sources - here is another for on-shore wind in the UK, which gives a capacity of 28.2%:
http://www.bwea.com/ref/capacityfactors.html
This is from the wind energy association, so are hardly likely to be unduly negative.
Here is a link to a comparison of actual capacity for on-shore and off-shore:
http://www.leonardo-energy.org/drupal/node/3214
As it says, actual capacity for this modest fleet at least was only a tad over 27% for off-shore.
No doubt improvements can be made on this figure in future by siting further off-shore and so on, although it should be noted that this increases costs.
It is clear that the figures I gave for on-shore of 30% and off-shore of 35% are if anything on the generous side.
In much of Europe wind resources are still less.
Your arguments on the relative modesty of bonuses are based on the present economy, which if my arguments are correct is simply an inflated, non-sustainable reckoning, based on house prices rising forever and huge numbers of people in financial services shopping debt about and re-packaging it.
The UK economy is around £1.5 trillion
I have already provided links to the fact that around 25% of the workforce in the UK is in financial services or the building trade.
I presented the links which most readily came up, but the data I was using are not so far as I know controversial, and have little to do with their attitude to holding gold.
If these particular sources, or some of them, are not the ones you personally would choose, then no doubt a more thorough use of google could substantiate them elsewhere, as I have certainly seen essentially the same information presented rather differently in many other places.
For wind delays and cancellation simply go to google advanced search, specify 100 results and put in 'wind' 'delay' 'cancel'
I limited the time to 24 hours and came up with several.
It is not really reasonable anyway to expect other than that there would be many cancellations and delays, as if there were not that would go against the universal experience in recessions not just for wind but for all capital projects.
If you were in charge of a wind project, demand dropped together with the expected price you would get from your product, whilst finance became more expensive and difficult to obtain, would that make you more cautions or less?
Here are a few energy-related thoughts.
"You are confusing dollars and pounds."
No, I took currencies into account. My point was that £6/W wasn't that far from $6/W+ for nuclear, when you include other factors, including increased capacity factors; substantially lower operating costs; lower interest costs, and much lower overall project risk.
"the figures I gave also do not reflect current exchange rates"
Any idea what the PPP ratio is for the pound and the dollar? I think that's the important thing.
Here's what the BWEA says about off-shore: "Isn't it more expensive to build offshore?
So far offshore energy prices are around 40% higher than onshore costs. Capital costs are around 30-50% higher than onshore, mainly due to foundations and the costs of transporting and installing at sea. This is partially offset by higher energy yields - as much as 30% (emphasis added). However, as happened onshore, these prices are expected to drop as technology improves and more experience is gained."
As you note, UK off-shore wind was pretty small, only about 300MW. Early off-shore windfarms did indeed suffer from higher levels of maintenance outages - as best I can tell these were temporary growing pains.
"It is clear that the figures I gave for on-shore of 30% and off-shore of 35% are if anything on the generous side."
I was questioning the off-shore figure. Regarding onshore, I would note 1) that the 2005 figure of 28.2% is pretty close to 30% - in the US average capacity factors often vary by 2-3% points annually, and 2) wind critics (taking their cue, unfortunately, from the EIA) often divide annual KWH figures by end-year installed capacity, which understates the industry-wide average capacity factor.
"In much of Europe wind resources are still less."
Yes, on-shore wind resources in Denmark and Germany really aren't that good - it's amazing to me how strongly those countries want to use wind, despite that. I think it's an orientation towards the future, despite the large costs of getting there.
What did you think of what I found in the DTI report (which you provided, after all), which on careful examination appeared to be supportive of UK off-shore wind?
"It is not really reasonable anyway to expect other than that there would be many cancellations and delays"
Well, first, if you refer back to Gail's CSM article, you'll see that having 25% of projects cancelled is "par for the course" for wind, even during times of very strong expansion. Here's what the article said: "This year saw 262 wind projects announced while 66 projects were canceled or postponed – on a par with 2006, according to Ventyx, an Atlanta-based energy consulting company." So, just finding project delays or cancellations doesn't tell you anything.
Second, I acknowledged that it was likely that the current crunch was likely to have some effect. I just disagreed with Gail's unwarranted assumption that the effects were going to have a "very hard" impact on wind installation, which is, after all, what we care about.
Let me say that again: we, as consumers, don't care about the travails of the energy industry, as long as it doesn't affect it's ability to provide the energy needed. The Forbe's article Gail presented actually indicated that the solar industry sales were likely to continue the near-annual doubling we've seen lately. There was no long-term adverse effect predicted for industry growth, only on industry profits (which lately have been unusually high, due to very high profit margins). Similarly, I see no evidence yet that the growth of the wind industry will be greatly affected. It's possible, and some slowing is likely, but the kind of long-term effect that would compromise the world's ability to kick the FF habit? No evidence for that, really.
Hmm. A few financial thoughts:
"They haven't de-levered. "
Again, this appears to be a hypothesis, not a proven financial rule. I haven't seen a real explanation, or any kind of testing against other panics in other times and places. I gave several counter-arguments (greater leveraging for homeownerhship is natural; this chart may be an historical anomaly due to the unique post-WWII position of the US), and here's another: a modern economy needs a debt-based money supply that expands with the economy, so you'd expect debt to increase with growth and fall with economic crash, but the cause and effect is the reverse of what's proposed here. So, this hypothesis needs testing, a conceptual explanation, and answers for these counter-arguments.
"I have provided links to charts which clearly show that the level of debt is greater than in 1929."
Again, that's a hypothesis, not a measurement of severity of recession. So far, this recession isn't deep, and mainstream projections of it's depth don't suggest that it will be worse than 1907, 1920, 1970, 1990, or other relatively mild events. There's no question that there's quite a bit of instability in the world economy, but I'd like to see a real analysis of suggested predictive measures such as these.
"See the current difficulties in California, where they can't fund pensions."
That's actuarial funding, not payouts.
"much of the increased costs are due to demographics, as an ageing population means that fewer working people have to support more pensioners."
An "aging" population because it's healthier, and living longer! Providing lifetime pensions for people who are living longer, and retiring much healthier, is an expansion of benefits. To keep benefits level, you'd raise the retirement age. Actually, you wouldn't have to raise it as much as lifespan increase, you could just raise it enough to maintain the ratio of working to pensioners, thus allowing a gradual increase in benefits.
"Your arguments on the relative modesty of bonuses are based on the present economy"
ummm, yes. If they're only 1% of the economy, then their elimination only reduces the economy by 1%, right?
"around 25% of the workforce in the UK is in financial services or the building trade"
You'll still need some financial services, and building tradesmen, so you're not going to lose 25% of the economy. Heck, move the tradesmen over to building energy infrastructure - if we then lose half the financial services, we're looking at loss of 6.25% of the economy. And, these are generally well educated people: they can do something else.
This is becoming too time consuming to pursue much further, and also we seem to a degree to be talking past each other.
It is also a bit confusing when you refer, for instance, to £6 million and $6 million being 'nearly' the same, and then explain this difference as being due to an allowance you have made for decomissioning and so on.
Well, I don't know if you have ever seen the North Sea in winter, but I can assure you that maintenance of off-shore wind turbines will be neither cheap nor easy.
In any case I was being exceedingly generous in my cost comparisons to wind power.
here are some costings for off-shore for America:
http://blogs.wsj.com/environmentalcapital/2008/12/01/a-shore-thing-why-o...
As can be seen, they base even their very high costings for wind on a huge capacity factor of 45%, which is very unlikely because capacity is reduced by high wind speeds which mean that it has to be shut down as well as low, and there is down-time for maintenance.
Any rate, at a North sea capacity factor of 35% you come out with around $15 million/MW of average annual power supplied.
You also grab the hope expressed that costs will drop, and seem to be willing to give full credence to that, as opposed to treating it as an hypothesis, which you are critical of in other contexts.
It is also plainly possible that maintenance etc will be higher than expected, and until much more is know too much standardisation seems unwise as a design flaw in much of the fleet would entail staggering costs.
If the credit crunch does not have a very heavy impact on wind build, it will be about the only capital outlay which avoids it.
As for debt levels and hypotheses and so on, there is nothing hypothetical in the level of debt and the fall in commodities being larger compared to the Great Depression,and if you choose to maintain that there is no link between them and the depth of the depression then it seems peculiar to say the least how closely they have tracked depressions and recoveries, and you would also appear to differ in not accepting a correlation from all the main stream economists that I am aware of.
They know that the indicators show a very severe depression indeed, but many hope that some of the consequences can be mitigated by various financial finesses.
Read 'The automatic Earth' for Dec 1st and 2nd for an analysis of why they are likely on the contrary to make things worse by their interventions.
Your last point that not all of the 25% would loose their jobs persuades me that we are talking past each other, as I have never said that in this debate.
From memory I think I said that it would seem likely that at least this might reduce to perhaps 15%.
This does not allow for knock-on effects though, as this level of drop in consumption would throw many who had previously been in work out of it in the service industry.
In the great depression unemployment rates approached 25%.
Since most of the indicators which are commonly used as correlating with depressions show a larger change than in 1929, it does not seem unreasonable to expect comparable figures.
"we seem to a degree to be talking past each other"
I'm listening, and replying, very carefully.
"It is also a bit confusing when you refer, for instance, to £6 million and $6 million being 'nearly' the same, and then explain this difference as being due to an allowance you have made for decomissioning and so on."
No, I never mentioned decomissioning. Let me explain: let's assume that the £to $ ratio is about 3:2, based on a very rough estimate of PPP-Purchasing Power Parity. The other adjusting factors I mentioned include higher capacity factor for offshore, and additional costs for nuclear due interest due to much longer installation; higher operating costs; and higher project risk. A higher capacity would reduce capital costs proportionately: 30% higher capacity factor reduces capital cost by 25%; interest due to much longer installation probably increases nuclear's overall cost by 10%; Nuclear's operating cost differential (at least $.01/KWH) would add another 10%; and higher project risk another 5-10%. Each of those add up to reduce the differential by a factor of about 3:2, or roughly the ratio of the exchange rate. Does that help?
"capacity is reduced by high wind speeds which mean that it has to be shut down as well as low"
Turbines feather at high wind speeds, so they can continue to work fairly high speeds. The kind of operating characteristic you're talking about is very basic, and anyone making cost estimates would include it.
Now, I know a couple of US East Coast projects came up with very high capital costs - I'll have to look at your article, but I have to say I'm puzzled by some of the very recent capital cost increases for both wind and nuclear: I think they're scarcity premia for industries that have been expanding much faster than their supply base. That's not likely to persist, with demand for steel and concrete dropping as they are, and with at least some of the bidders for wind turbines likely to drop out.
"You also grab the hope expressed that costs will drop, and seem to be willing to give full credence to that, as opposed to treating it as an hypothesis, which you are critical of in other contexts."
It's the same phenomenon that made cell phones cost $3,000 30 years ago, and $200 now, or DVD players go from $1,500 to $50. It's a basic law of manufacturing.
"It is also plainly possible that maintenance etc will be higher than expected,"
It's possible, but I haven't seen a particular reason to think so.
"until much more is know too much standardisation seems unwise as a design flaw in much of the fleet would entail staggering costs"
That's much more of a problem with nuclear than wind, as the unit costs are much smaller for wind, the development cycles much, much shorter, and the ability to test much greater.
"If the credit crunch does not have a very heavy impact on wind build, it will be about the only capital outlay which avoids it."
I didn't say there would be no impact, but there are a lot of utilities, like FPL, with good internal cashflow, and a lot of potential investors for wind. It, solar (see the Forbes article again) and EV's are likely to do much, much better than most.
"it seems peculiar to say the least how closely they have tracked depressions and recoveries"
I've only seen evidence of tracking for the US Depression. Have you seen analysis for other crashes, and in other countries? That's part of what I've been asking for.
"not accepting a correlation from all the main stream economists that I am aware of"
I haven't seen any main stream economists talk about this specific indicator: the ratio of government & consumer debt to GDP. Can you point me to them? Automatic Earth is really, really not mainstream (though I haven't finished looking at it, I can tell that much so far).
"Your last point that not all of the 25% would loose their jobs persuades me that we are talking past each other, as I have never said that in this debate."
This is what you said: "Even in the US it is unclear how large the US economy actually will be after present losses are fully on the books. A rough guess would put the non-inflated size of the US economy at maybe 25% lower than the inflated figures, where huge sums are 'earnt' by financial engineering."
See? I've been listening very carefully, and I took that as an estimate that the economy could be reduced by 25%.
"This does not allow for knock-on effects though, as this level of drop in consumption would throw many who had previously been in work out of it in the service industry."
And yet, if there is no fall in the money supply, other sectors would expand and employ most of those people. The Depression persisted, and was as deep as it was, because banks were allowed to fail, reducing the money supply - that's not being allowed to happen this time in the same way. We still have a panic, and a fall in money velocity, but there's no reason to think this will persist long-term, and mainstream economists don't believe it's likely to.
Update: I looked at the WSJ article (though I haven't had a chance to look at all of it's sources yet), and I have to say that if I have a choice between a WSJ blogger and T. Boone Pickens as a source, I'll go with Pickens. More specifically,
1) it's highly unrealistic (to use understated language) to suggest that maintenance outages will reduce capacity factor from 45% to 30%. That would suggest that 33% of the turbines were out of service at any one time. If it takes a week to repair a turbine, then you'd be repairing each and every turbine every 3 weeks. Onshore turbines have a Mean Time Between Failure measured in decades - turbines specially designed for ocean conditions won't have a MTBF of two weeks;
2) it's inaccurate to compare various wind resources, such as a particular one in Europe, with a particular US project; and
3) the WSJ blogger misrepresents the 33% figure: that's a sample "starting" figure in a BWEA mini-simulation for teaching purposes.
Here is John Stuart Mill on depressions:
Stoneleigh and Ilargi over at Automatic Earth lay bare our financial predicament far more knowledgeably and eloquently than I could ever do:
http://theautomaticearth.blogspot.com/search?updated-min=2008-01-01T00%3...
They also predicted what was to come, unlike mainstream economists.
As argued in today's Automatic Earth, what good are banks if they don't provide a profitable haven for savings, or capital for business?
At the moment they are doing neither, and vast sums are being committed to them, based on dodgy assets so the the loss shifts across to the taxpayer.
As systems do, the people who ran the systems and created the mess are just playing double or quits with everyone's money to prop up the system as long as possible, and extract whatever they can whilst the going is good.
All that taxpayers money is achieving is to pay bonuses to bankers.
Real wealth destruction continues apace.
I'll have to take some time to look at Automatic Earth.
I don't think anyone here at Oil Drum would have predicted six months ago that the price of crude and other energy at the threshhold of Peak Oil would decline precipitously in price. It appears there was some speculation in the energy markets.
The markets' unpredictability - by itself - is making investment almost impossible. Stable low - or high - credit cost would allow investors to impliment longer- term plans.
If the government had possessed the wit to put a floor under the gasoline price @ $4 a gallon back in June, there would be a nice chunk of billions available for alt energy investments. Now ... an opportunity has been lost.
Quite a number of posters were predicting extreme volatility in the markets. They just weren't predicting when it would happen.
I was out raking leaves in my yard and started contemplating the piles my neighbors had neatly arranged in front of their homes, awaiting pickup by a truck from the city. I thought, how wrong is this? How will the soil be replenished when so much biomass is removed? It's like a run on a bank which was built up over millions of years. The only deposits are the pollution left by the trucks hauling the leaves. My neighbors are good people, but they have no clue as to the basic principles of natural systems.
Anyway, all my leaves wound up as mulch and I got the city truck to dump a load for use in my back gardens, for free.
Hey Liferaft,
And the same goes for the good fertilizer that goes down the toilet, that used to go on the crops by filling the outhouse hole with water, then pumping the stuff onto the veggie fields at night so the squeakily types wouldn't see.
Such fertilization was called "night soil."
And that stuff will soon kill us as it goes untreated into the rivers one day after the power grid fails, to be consumed downstream. Yuck.
Not smarter than yeast, dying by consuming our own poo, when we could have had a system to use this fertilizer.
And then there is burying the best farmland under a sea of suburbs, malls, strip malls, housing, highways, etc.
Good call. I have to pay my local council to get anything more than a car trailer load of mulch. :(
Nice post Gail. I think the overall problem for the energy industry on the financial side is similar to what everyone is facing lack of long term credit and problems rolling short term debt. We can expect this to continue.
As you mention this is also tied in with a significant drop in commodity prices across the board. I'd suggest this is driven more by the existence of and expectation of the potential for a new Great Depression rather than significant actual drops in consumption. For example the price of rice has dropped but given rice is primarily used for human consumption we can safely assume that we did not lose a significant amount of our population.
http://www.bangkokpost.com/280808_Business/28Aug2008_biz47.php
Other commodities are similar with some like oil certainly experiencing a slight decline but the real extent is not known.
This is important because the current price declines in commodities seem to generally be from a temporary credit crisis loss in confidence not in general and underlying fundamental change in the world economy.
However this temporary credit crisis has long term implications that are not in my opinion really brought out in your article. As you can see expectations can have a incredibly profound effect on prices and this current collapse will have a very long reaching consequence's even after prices recover.
The real problem is from now forward regardless of the prices for commodities the expectation of the potential for another crash exists commodity producers will now treat every price increase as a sort of temporary even and delay expansion regardless of changes in the credit situation. They will become highly conservative in there expansion plans and will no longer use leverage or credit to the extent that they had previously it does not matter if it become available again or not. Also of course we can probably expect given the way that the credit crisis is being handled that credit itself will continue to have problems for some time.
Thus the big fundamental change is that high prices will no longer drive producers to expand production at the rate that they did up to this point the price signal will result in much lower real investment in expansion of production.
Thus the credit crunch has served to break the basic link in economics between prices and production.
In fact its probably shattered it.
This is the very real danger thats been introduced by the combination of our credit crisis and collapse of commodity prices well beyond whats warranted but demand considerations. By in effect crying wolf now we will be slow to respond when the wolf is really at the door. This is the true problem with using fiat currencies and credit to finance production of declining resources with and expanding population. On the downslope credit problems can dramatically alter the markets response for the worse.
The Credit Bubble, the last of the really big bubbles of the 'post-modern' age, has damaged trust in any financial structures so throughly, it's hard to imagine any 'recovery' in the credit market, ever. It's over. Really over, as in historically on a scale of centuries.
One of the truly unique characteristics of civilizations that don't use or even have the idea or notion of institutionalized Credit, is that they are very, very slow in developing Any Ideas about Anything because it is a 'pay as you go' pace.
Napoleon's armies moved at the same pace as Caesar's, almost two millennia earlier.
Investment, notably Alt energy investment, without credit market's will also move at a Roman pace. (Ok, maybe a little faster because of word processors and widely available expresso, but still, very, very slow)
Trust is what credit really runs on, and the lying cheating dirt-bags of modern finance have killed trust for at least a generation (70-80 years) which will be smack in the sweet zone for trying to make the transition away from fossil fuel.
The timing could not be worse.
From the first Earth Day (1970?) to now 2008, almost 40 years time of planning and preparation has been effectively pissed away on false starts and dead end technologies and political stalling.
If you want to see massive mis-investment condensed into one chart, read this and weep:
http://4.bp.blogspot.com/_H2DePAZe2gA/STAqqdE8CfI/AAAAAAAAGks/WrursaMDRI...
Probably correct its at least reasonable to assume the credit markets will remain messed up for several years.
Now whats interesting is the interaction of Pay as you Go with rising EROEI.
Obviously increased energy consumption in the extraction phase leads to higher costs reducing the rate at which you can extract using the Pay as you Go approach. Credit in a lot of ways hides this feedback loop allowing you to buy up extraction technology using previously extracted cheaper energy earlier.
For example with credit you can by 10 drill rigs and these will be manufactured with oil at say 30 dollars a barrel to extract oil costing 60 dollars a barrel. Without credit lets say you do 2 with oil at 30 a barrel 2 with oil at 60 a barrel and 1 with oil at 80 a barrel. Then no more till say 150 a barrel.
So you can see what happens your ability to increase production declines and lets say as this goes on you actually expand slower as your cost basis increase.
So EROEI effect formerly ameliorated by extensive use of credit become prominent. Not to mention of course uncertainty about future price also slowing investment rate. Now for example when oil goes to 150 people are not going to jump to invest even at pay as you go. This means of course as they delay when they finally decide to invest costs will be higher as production equipment would need to be created with the higher priced oil.
In short the collapse of both credit and oil prices practically ensures that previously suppressed EROEI feedback will dominate.
What you are suggesting, memmel, is that someone will be able to place an order for 10 rigs at today's prices and that they will be delivered based on those prices. I wonder if, instead, someone in that loop will crash and burn because they are building a rig or providing a service based on old data and prices that no longer apply at the time they are making the nth rig. Simply producing gear faster doesn't change depletion. You're only arguing that credit allows one to get in line ahead of others, but production over time is going to have to reflect the real resource costs.
cfm in Gray, ME
No with credit the Oil Industry is able to take a bigger piece of the pie if you will of the production using cheaper oil. Thus the oil industry takes a larger part of the economy if it has credit. This allows it to keep production rates higher.
With pay as you go in any given year the oil industry represents a smaller fraction of the overall economy and its paying higher prices each year and its ability to increase production is spread out.
If you slow down the extraction rate then the rate of decline will over time lessen but you also can't expand rapidly to remain on plateau. Th plateau requires and ever increasing effort and this eventually requires debt. And its more profitable to buy rigs today with "cheaper" oil then later.
Longer term say 4-5 years this would result in a slower decline rate but it ensures that production will begin to decline and the issue for us is the first 4-5 mbd down not longer term declines.
That is a good point. That is a big part of the reason the current plateau is not sustainable.
I think that the economy itself will change going forward, so a smaller amount of oil may become a bigger part of it. Some of the less essential uses will fall away, leaving us with more of a streamlined economy.
You make some good points. Once oil companies are burned by a run up in prices followed by a decline, they will act differently.
I don't think our credit problems are likely to go away anytime soon, because of peak oil. This will further add to the difficulty of increasing production, even if there is a run-up in prices.
Right and as I posted above a runnup in prices for oil will show up as price inflation in the broader economy and it will impact costs i.e by waiting they gain nothing and probably face higher expenses later.
Maybe another way to look at it is to consider say cutting down a forest in rugged country lest assume the roads need a lot of logs to build into the forest for this example. With credit you can build out the log roads to log the forest using lower prices logs from the easier to log parts but if you go with pay as you go your now using logs from the current cutting region i.e the harder it gets to cut logs the higher your costs become. The price increase in logs is not doing you a lot of good since your actually suffering as much as anyone. On top of this we can assume say some sort of financial price effect say price for logs dropped for tangentially related economic factors.
Using the logging example what happens if you have a economic crash and a small drop in demand is a reversion to clearing the pipeline if you will we can assume that logs are stored at several stages at the cutting site at the saw mill at the lumbar yard etc. A sharp cutback in credit leads to a slowing of expansion but it also leads to the pipeline having to drawdown the various storage areas. Lets say the sawmill cuts orders and draws down its sawn logs afraid that it will be caught with a large supply of logs. Nominal demand may have not changed much but the logging community sees rising storage and dropping prices all along the supply channel leading to a drastic pullback in purchasing till "real demand" stabilizes. Thus a small change in demand leads to a fairly alarming ripple back through the supply chain as prices are falling. Lets say log demand dropped by 2% what happens is at each stage in the pipeline you see a build up of logs as prices are dropping.
The natural reaction is to overcompensate at all levels with each part of the chain limiting orders in a sort of snowball effect.
Lets say the lumbar yard sees his inventory go up 2% and prices are falling. He tell the sawmill to cut his orders by 4% to ensure he can drawdown inventory. The Sawmill cuts its request to loggers by 8% for the same reason.
What should have happened is that loggers should have just cut by 2% and the supply channel would have smoothly slowed instead your rippling through a ever larger shortage in time. Eventually of course this will reverse and the lumbar yard when its down say 30% in storage asks for more wood back up the chain. And lest say they ask for 5% more you can see this ripple back up.
This destabilizes the supply chain making it ripple if you will. And of course this sends prices up but no one responds since they got burned. Change wood to oil and you have the oil market.
Now supposedly KSA understands this and its one reason they are not cutting but if there customers are scared and not buying they will see decline regardless. In the case of wood we can assume the logger is will to sell as many logs as he can for a profit. Its just he sees a sharp drop in demand as the rest of the supply chain works to reduce inventory.
I watched this unfold in the Oregon forestry economy the loggers got slaughtered early on. In this case its a real drop in demand but I don't see that the actual change in demand is all that important since this is perception based.
http://www.kmed.com/pages/landing/?TIMBER-WORKERS-HURTING=1&blockID=1883...
http://www.capitalpress.info/main.asp?SectionID=67&SubSectionID=782&Arti...
http://kdrv.com/news/local/59007
The key is that any supply chain with substantial storage is going to compound the pain up the chain as
demand drops until inventories are drawn down the whole system gets mucked up.
"Now these plans are being re-evaluated because at an oil price of $60 barrel or less, the cost of CTL is no longer competitive. "
Gail, your reference doesn't support this (though it does support the central thesis that the capital crunch is affecting energy investment). The article says:
"...industry officials are going back to the drawing board, Kelly said. "Everybody's got to evaluate their positions," he said. "We have to wait to see how the capital markets evolve....We can produce and earn a competitive rate of return at today's oil price," Kelly said."
Not only this. This even can decrease the likelyhood of the more expensive investments outside the OPEC - just as described in the WEO 2008. Those who support the theory that the low oil prices of the 80s triggered the bankruptcy of the Soviet Union may conclude that the same may happen now with the rest of the non-OPEC World.
Maybe now again industry history is repeated like in the 1870s with Rockefeller's Standard Oil company: Few haves eat up the many have-nots.
"In the US, wind energy has been hit very hard"
Gail, your reference doesn't support the "very hard". It's clear that wind investment has been hurt, but how much isn't at all clear. The article points out that it's very common for wind projects to be delayed or cancelled (see the stats for 2006); the commodity price rise that pushed up the cost of wind is reversing; and there's currently about a 125GW backlog of wind projects in the US. Uuntil recently the bottleneck in wind construction wasn't the availability of project sponsors or financiers, it was the availability of turbines - I'd be curious what effect the current credit crunch is having on that.
"Until credit markets smooth out, tax-equity investment in wind power is likely to suffer. But despite the doom and gloom, longer-term trends continue to push wind ahead. "
Your section on solar says: "The situation in the US for solar and geothermal is similar to that for wind. "
Gail, your Forbes reference doesn't support this at all. The article says that solar is expected to continue to grow quickly - it's thesis is that supply is going to catch up with demand (a classic maturing market) and that therefore inflated prices will fall, forcing a shakeout in the industry.
When I put together this analysis, I put together a 169 page Word document, in which I copied in a lot of articles on different subject. I then went through, and re-read the articles on particular subjects. I didn't try to reference everything precisely in the article.
My statement about wind being hit very hard did not come from any one article. It came from the fact that much of the financial support for wind was coming from Lehman Brothers and AIG and other firms very hard by the credit crisis, and the fact that the tax credit is not working as planned, when investors are already losing money elsewhere. Also, from the fact that almost every new project has to be financed, in a very difficult market, since this is not a field where cash flow will save a company.
We know that the North American Electric Reliability Council has said that the transmission lines cannot handle more variable power without upgrades. With all of the government's financial problems, where are we going to get the funds for these upgrades? This will hurt wind as well.
I would really be interested if you can provide examples of wind projects that have gotten new financing at reasonable rates. What evidence do you see that wind will not be much affected?
A few thoughts:
"I didn't try to reference everything precisely in the article."
It helps to either reference each major point, or provide your own quantitative analysis. Then you see where the holes are in your argument.
"much of the financial support for wind was coming from Lehman Brothers and AIG and other firms very hard by the credit crisis"
Yes, which is why I agree that wind will be affected to a certain extent. OTOH, we don't have anything quantitative to begin to allow an assessment of the damage. That's the kind of thing that happens when one relies on secondary popular sources, even high quality ones like the CSM.
"almost every new project has to be financed, in a very difficult market,"
Most current projects were financed quite a long time ago. How long until the pipeline isn't full? Might the credit crunch be over by then? We don't know.
"North American Electric Reliability Council has said that the transmission lines cannot handle more variable power without upgrades"
Not at all. They've said that, as a generality, wholesale replacement of coal, and very large additions of wind/solar will require upgrades to the grid. Those are very, very different statements. Note the current projects in TX and CA to add necessary long distance transmission.
"What evidence do you see that wind will not be much affected?"
Well, I think Jerome A Paris is a reliable source - he said on TOD very recently that wind is relatively unaffected by the credit crunch.
Minor typo: " The lack of new infrastructure will act as another deterrent to growth of the cola industry." Pepsi?
Thanks! It went through spell check. I will fix it.
You are right, it is not a good investment environment.
Some new priorities need to be set. Enter denial; "It can't (Great Depression II) happen here!" The denial makes the unlikely ... more and more likely.
Nobody in Washington, DC, seems to know what they are doing. The fact that the 'Obama Collection of Powerful White Guys' exists does not inspire confidence. It tells the public that Obama himself doesn't have a clue. It tells me he likes to sit back and watch people argue. Maybe, he plays the fiddle ...
I like to watch arguments, too ... not when my house is on fire.
A shift in priorities would put energy investments back on track. Unfortunately, there is a lot more that simple economics involved. One big problem is the question whether the incoming administration is aware of Peak Oil or peak anything else? The 'Niewe' administration's priority seems to be fixing the unfixable economy, which will dampen the ability of our country to act toward anything else. There are only few, small opportunities to fail ... or not. A failure means that the new administration will be - at best - ignored; at worst, swept aside by a tide of clanging pots and pans.
A related big problem is the requirement for authority to pretend ... the unthinkable Depression is impossible, whether they privately deny it or not. This convinces the public the administrators are idiots! Obviously, there is some serious deflating taking place ... and they know the recsssion will be bad. Most Americans have grandparents or parents who lived through the Great Depression I. They know what's going on! Because of this public pretense, or because of denial, there are no preparations being made! Nothing is being set aside to deal with the human fallout of ... mass bankruptcies, mass unemployment, energy and materials shortages, public services breakdowns and whatnot. There is a lot of talk about 'public works and infrastructure' but the BAU approach will have a small number of well- connected contractors taking the money fron Uncle Sugar while a slightly larger number of people (undocumented immigrants) do the actual work for a pittance.
Meanwhile, the mass of citizens are expected to shiver in their unheated houses.
This is not fiction; it has and is happening in Hew Orleans. Right now, New Orleans, post- Katrina is a window upon America's future ...
As Founder & Chair of the Greenhouse Neutral Foundation and Author of 'ZERO Greenhouse Emissions - The Day the Lights Went Out - Our Future World' www.strategicbookpublishing.com/ZEROGreenhouseEmissions.html It is clearly a no-brainer that finite fossil fuels, from which ever perspective we enter the peak oil - peak gas debates, the system and our consumption is destined for demise. Finite IS GOING GOING --- GONE.
I go over here every now and then, just to read up on some science and see if I can finally learn something;
http://thoriumenergy.blogspot.com/
Keep in mind, the Atomic Energy commission built two of these liquid Flouride- Thorium reactors in the 1950's - 60's. They worked.
Lessee ... how much did the Treasury just give to Citigroup?
Hi Gail, and many thanks, as always,
I need to read through your article and all the comments more carefully. Meanwhile, at the risk of asking naive questions (my specialty :)), I wanted to ask you about some basics:
re: "Even if prices should rebound, lack of credit will limit the ability of the oil supply chain to increase production."
Do you see it as possible for any of the oil exporters, let's take OPEC, to just decide to raise prices - (in order to prevent volatility and help ...either "buy time to study the transition options" or what?)-
Question one: Can they do this? Could they have done this at some point? (Decided on a "floor" and kept it?) I assume this could be done via withholding production, but perhaps I'm mistaken about this?
Q two: Would you see this as desirable?
Q3: In other words, to broaden the question somewhat:
Are there any concerted action any specific group of actors (NOCs, majors, governements, etc.) could take in order to have the ideal scenario, price-wise?
And what do you think that ideal scenario would be?
I agree, from a naive point of view, somehow setting a base price for oil makes sense. We don't have any world mechanism to do this, though, and I don't think we could get agreement on any particular price. There are always winners and losers in any negotiation of this type.
Hi Gail,
Thanks for your response.
1) Is OPEC not capable of setting a price?
2) Is it necessary to have a "world mechanism", or is it only necessary for some segments to do this?
For example, US. Either gov't. set (taxation - I believe a straight tax has been discussed).
Would this benefit or harm the US if the US did this?
3) If preventing volatility is the goal, and was the goal of the Texas RR Commission, and later OPEC (?), then...is it the case that there's no longer a mechanism? So, there are no effective cartels any longer?
Or, is it that the actors capable of doing this do not see it as desriable?
4) Is the specific price really that important? In the sense that, if one is looking at the "ideal case" of a gradual price rise as further decline set in...it seems the point would be to avoid the fluctuations.
Or even to dampen them.
No, I don't think OPEC could set a price and have it stick (although one might argue they could try).
It seems like the credit situation has had a huge impact on prices, and whatever mechanisms that have been holding things together have fallen apart. It is a lot like many buyers credit cards have been cut up. Sellers are so anxious for cash flow, they will sell at unreasonably low prices. I am not sure how to stop the situation, before shortages develop.
The "credit crisis" is
Illuminati banksters yanking our chains.
After creation of credit was privatized,
it is like a home invasion took control
of the whole family's financial affairs.
All of the consequences laid out above
are us being deliberately driven over
the energy cliff, to crash and burn.
Although I yet find this Web site
to be full of wonderful insights,
one of the greatest ironies is it
does not track the energy laws,
especially the role of entropy,
as a flow of energy IN society.
Entropy is the scientific Satan.
Entropy results in civilizations
being controlled by the people
who are the best at telling lies,
& backing lies up with coercion.
Thus generation and channelling
of energy through human groups
is directed to go own down its
own path of least resistance,
which is simultaneously the
path of least morality ...
Organizing resistance, to change
the paths of least resistance, is
not being done very well, since
we are still mostly operating
within what Plato called the
"Noble Lie" that there was
truly "good government."
The flow of energy through society
is symbolically controlled by $$$.
The money systems are already
almost completely crazy and
inconceivably corrupted.
"We" are not sanely attempting
to avoid driving over the E. Cliff.
"We" are being controlled by
the belief in huge lies, and
they control us now, since
they did in the past, as
those lies were able to
really be enforced ...
Who does it benefit in the short-term
to do almost everything the opposite
of what would benefit us way more,
if we could act for the long-term?
Ah, the Illuminati Banksters
are yanking our chains, and
making us notice more that
their shackles are too tight.
I believe this "Credit Crisis"
was deliberately engineered.
I think all the bad consequences,
as were outlined by Gail, serve
the interests of some people.
The role of entropy in the energy flow
is most extremely important in society.
Consider that "entropy is evil,"
and then think about how our
civilization really is working.
The abilities to corrupt and control
governments made the credit crisis.
We could have a higher quality life,
with less quantities of consumption,
but, those who designed and built
civilization were really criminals.
They have a plan to gain more of
their relative power over others.
All of the bad spin-offs from the
credit crisis are extreme risks
that may benefit those few?
Or, even they may lose control,
as the wild ride towards some
social storms spins beyond
any human control to stop.
There is something very strange
in people spending so much time
to try to understand energy law,
but not perceiving principles in
the context of the whole system.
ENTROPY IS A SCIENTIFIC SATAN.
Mostly religious bla, bla, blah
were some perspectives on that.
"They" have developed a global
electronic fraud money system,
backed up with the threats of
the use of atomic weapons ...
meanwhile, we are pretty well
doing everything to drive OFF
of an energy cliff, as fast as
we possibly can, instead of
working to climb back up.
I hope I will see you at the
bottom of the waterfall???
Please, please use the 'Return' key less!
I think you were supposed to see the image of a waterfall.
Something to keep an eye on...
http://www.msnbc.msn.com/id/27989275/
Gail,
Thanks for this nice summary of how the global economy is affecting energy investment.
-- Dave
Gail et al,
Sorry for joining the conversation late -- enjoyed my turkey dinner offshore this year. I can offer a first hand account of the significant effect of the credit crunch. My current client, one of the biggest unconventional NG players is the US, just recently cut their 2009 budget from a little over $1.2 billion to less than $700 million. They decided to fund the budget from cash flow only. Not that they don’t have they credit line (they are quit healthy in that area) but they didn’t want to pay the increased costs. Just as you, Gail, they tend to be conservative. In addition to credit costs cutting into the bottom line, taking a conservative position at this moment also allows for some of the pricing risks to be mitigated somewhat. Their actions, as well as that of other UNG players, may well impact NG prices in the 2009-10 winter season. Most understand the rapid decline rates experienced in the UNG plays. It has only been a very aggressive and sustained drilling effort that has helped raise NG rates. But these rates should see a leveling off (if not a marked decline) in the next 12 to 18 months) do to the cut back in drilling budgets.
Though my client will probably suffer a drop in booked reserves y-o-y, there are some benefits. The growing NG supplies have been putting downward pressure on prices. Any continued recovery from hurricane damage in the GOM will only hamper pricing further. Increases in drilling cost over the last 2 years were starting to impact the bottom line significantly. Cutting loose 40% of our rigs, as well as withdrawing steel orders, should have a positive impact in that area. It also comes as something of a relief to the over worked staff. The company has over 20,000 proven UNG drill sites already under their control so we have a very health backlog of work. Thus, there are some positive offsets to a decline in drilling activity. Letting the UNG plays cool off a bit really won’t hurt the industry as much as some might think…at least in the longer term. It may also weaken a number of companies which will make them acquisition targets…a standard move by the healthy during down cycles.
Rockman, thanks for that refreshingly on-topic post at the bottom of this thread!
I have been wondering what to expect from UNG and unconventional crude supply ca. 2010-11. If we factor in anything like a 40% cut in deployed rigs for the next year and a half, doesn't it virtually guarantee that when/if the economy recovers by then, and steps on the gas again, it will hit an "air pocket" in supply?
That's my argument, anyway. Here's my article from last Wed on the impact of the credit crisis on the energy industry; I guess Gail and I were on the same wavelength! Why Oil Prices Are Bad
And nice work Gail, you brought together a good deal of disparate info here!
I agree with you Chris. And I don't think it will take much economic rebound to put significant upward pressure on NG prices. Even if we stay stagnant for an extended period of time that will only delay significant resumption on unconventional NG drilling. The UNG wells that came on line 12+ months ago are already beginning their steep decline phase. The effect of reduced drilling will be clearly seen by next winter IMO. I haven't kept a data base on US rate increases in NG but perhaps Gail et al can offer a forward look at delivery assuming a certain decline rate. A tough goal given the diversity and timing of the data base. Qualitatively, watching our individual well declines, I can attest it will be significant.
I appreciate your on the ground reports. I am not sure what I can do about forecasting the future. i will have to think about it.
Thanks for writing! I enjoyed your post!
Gail
Detroit is unsustainable,,,,, no 1, The buying frenzy by people with bad credit is over. The banks made these bad loans,, the union workers built the suv"s and low mile per gallon but profitable cars and trucks with the mony from the banks that issued these bad loans. No mony down,, No credit checks,, No proof of income,, Just sign and drive,, Great job mister banker people auto lobbyist home mortage lenders you bankrupted my entire country.
no 2, The united states has been sucking it's oil mostly from opec and SA for fifty plus years, and no small dayly amount at current levels, these supply output levels are forcast to decline very rapidly as is already true concerning the north sea oil production and mexico's oil production. What this means is cheap oil is unsustainable and what that means is demand for fuel econimy cars will rise for a short time untill everyone understands the use of oil for transportation fuel is unsustainable,
and start building electric vehicals,, 0 to 60 will soon become a joke we will be doing well to "ride" 0 to anywhere, but it will be mostly walk or nothing and thats gonna suck.
no 3, If there were any way to """ throttle union power """ short of disolving the job there may have been some hope for detroit, My home town lewiston maine a major shoe industry FREE hydro energy. thousands of jobs DRIVEN over seas by the unions, mile long four and five or six floor factory buildings stand like ghosts in the city, empty just empty buildings if you don't believe me go and look for yourselves LEWISTON MAINE.
I'am sure many of you people have seen this in other industry's also. years ago unions had a place to better the lives of people but now the demands of unions on mature industry's are so unreasonable they simply collapse and the jobs are lost many times forever.
no 4, Go read no 1. again.
http://research.stlouisfed.org/fred2/series/MZM
The money supply is exploding. Banks are hoarding it in vaults. RADICAL ACTION is required by the Fed/Treasury to force them to lend the money into the real economy. Failure to do so will be chaos once the real unwind begins. We cant be this stupid as a society.
First, why are the banks not lending? Second, what if the reason they are not lending is that they cannot find anyone credit worthy under existing and projected economic conditions? They may not be lending for the same reason that I am not investing. Cash is king until further notice.
The banks haven't got any money.
They have a deposit ratio of a fraction of their loans, and the loans they have made are for dodgy debts.
As house prices in particular continue to fall, and more people default, then they have to sell the house into a falling market, and since, to give an idea, they might be leveraged at 30:1, so they have 30 houses but only the capital to pay for one.
So if they have, say, 300 houses on mortgage, and 40 default, they are wiped out.
What do you think the money that they have in Malls in America are worth?
They have sunk trillions into investments which are falling rapidly, and foreign institutions are also unwilling to continue lending at the same pace.
How thrilled would you be to make an investment in a manufacturing company in the present climate?
Any money they can lay their hands on goes to mice, safe bonds - or to executive bonuses - get it while the getting is good.
The concept is drilled into our heads from early childhood and onwards.
However, rationally speaking, cash is merely a token that represents the alleged ability of our civilization to make good on its promises.
Had you been raised in a different culture, in a different time, you might have said with equal conviction that Moai heads are king.
And in Yap (Micronesia), their giant stone money (largest is 12' diameter) doesn't change physical location, and loses value when it "changes hands."
http://purgatopia.wordpress.com/2008/11/22/stone-money/
Interesting story. Thanks.
Perhaps those stone coins were proto-types for bigger versions of an invention they called, "the wheel"?
double post deleted
The credit crisis is obviously causing serious problems for projects.
http://www.energybulletin.net/node/47252. Very good article dealing the coming problems with wind power. Clean coal technologies must continue to develop and continue to be the saving grace - as coal has lifted hundreds of millions of people out of poverty due to its reliability and low cost. Coal provides the energy security we need. The Air Force realizes this and wants a national coal to liquids program implemented quickly.