The notion that Easter Island died due to the cutting of the trees is only partially correct. According to Jared Diamond, the problem was more subtle than that. Somewhere along the way, the islanders brought rats onto the island and the rats liked to eat the nuts from the main tree species on the island. As a result, the rats eventually grew into a population such that no new trees could grow back, once cut down. Even if the islanders had not cut a single tree, once the rats arrived, the trees were going to disappear as they lived out their life cycles and no young were able grow and replace them. Cutting the trees only sped up the process.

As for Prop 13, I'm one of the casualties as I had applied for a job with the State, meeting all the requirements, and after Prop 13 the hiring freeze killed the job. So much for a shot at a career and a "normal" life. I've experienced mostly unemployment since then...

E. Swanson

Exactly, the people of California will soon become like Easter Island. There are too many people and not enough resources. They talk of conservation, but when it comes down to survival, all bets are off. When we have to make the choice to cut the tree or watch another starve, the tree loses the bet. State gov't wastes more money than any other business. Corruption abounds and taxes do not go to support the services needed by the citizens.

Distance and terrain? It's almost 400 mi from San Francisco to the Oregon border and very remote, meaning no places to resupply. I suppose hikers could feed themselves along the way if they're good at foraging. At least drinking water won't be as much of a problem as hiking from LA to SF. Either way, a tiny fraction of Americans have the fitness to make that trip on foot, no matter how desperate they were. At least that's what I'd be counting on if I lived up there.

Good points. but, 'What'll keep the southern Californians from walking up there?..' Well its the Walking part, I'd say. (Call it 'Hiking' and you'd get maybe 1/30 of them, though.)

There's a story of a fella whose farm was just past Fryeburg, and a state surveyor come through one day, and soon he gets a letter saying that there'd been a mistake and he was actually located in New Hampshire!
"Thank GOD!" He exclaimed, "I couldn'ta stood another one of them Maine Winters!~"

wah..

I think you might all be missing the part when tens of thousands of Californians, Nevadas, Arizonans, Mexicans make the trip up north by car, bus, whatever, BEFORE the point is reached when you can only make the journey on foot. Plenty and I mean plenty of people will decide to get out 'while the gettins' good' so be prepared for a lot less elbow room in the NW before the walking distance becomes the limiting factor.

what is to stop the millions in California from simply walking up to Oregon and Washington and B.C.?

Thoughts like that will get Tom McCall to rise from his grave.

Come visit us again and again. This is a state of excitement. But for heaven's sake, don't come here to live.

The speculators are starting to wind up and it seems as if the whole cycle of $140 is about to repeat itself. The price correction mechanism that was in place during the late 20th century is not working and the Obama adminstration STILL HAS NO ENERGY POLICY!

Two points.

1. It's interesting that Tommyvee supports an assertion about the internet with an example about cellphones. They're not the same thing, and I suspect people would give up the Web and email before giving up phones.

2. The key point, the hinge, is whether we (the world) will be able to continue to support a semiconductor (very large scale integrated circuit, VLSI chip) industry. Semiconductors are the highest of high tech, requiring air cleaned to parts per billion, manufacturing tolerances of one nanometre, and many complicated processes using exotic chemicals. Direct investment in microprocessor (CPU) fabrication plants currently runs at $10 billion - $100 billion per plant. Add in factories for the support equipment and materials, and you could probably double the direct investment. And those factories, in turn, require yet other exotic materials in their machinery.

As with so many things, the visible part is just the tip of the iceberg.

Archdruid Greer clearly believes that at some point, some part of the complex network of products needed will disappear. Yes, we will still know how to build everything we need - I don't think he denies that - but, for some reason, we won't be able to actually do it.

It seems like the most likely bottlenecks are in Electronics MFG. Strung Wire and FiberOptic cable are nice, but wireless is also an option..

Has anyone seen any really good analyses of the infrastructural vulnerabilities of the Electronics Industry? Trace Materials, Economics, Energy?

How many Transistors were in an 8088, or 80286 chip? I guess I'm chewing on the MOL of a barebones digital communications system. (ie, Survival Level.. not today's assumptions..)

pi,
"As food costs go up with oil"
Just look at Jason's post yesterday, growing and transporting food only uses 3% of US energy consumption, not a big energy user, even if you include the processing industry(another 2%). Think about the demise of incandescent lights and the old beer fridge in the basement now they are big energy users.

Provided you have the components. We don't make almost any of these things in the US anymore - semiconductors, passives, etc. A very long and complex supply chain.

Bot optimizing for results/joule and raw speed has been major trends for manny years. Results/joule has been critical for the enourmous mobile phone industry and raw speed has been nececerry to get into the high margin per unit niches. Raw speed has been a major motivator for large scale investments in RnD and manufacturing and the financing for those investments.

Now might the electricity bill for the server farms and public interest in power savings give a convergence of these trends wich would be a good thing. But I still hope there will be a sizable raw speed niche since there allways is some research that benefits from the ability, I hope we still will have lots of gamers with unsatable appetite for cycles and good paying day jobs...

I'm a big fan of your rational posts and worldview, Ron. And you may well be right about this.

But I think it's possible that the high oil price was only part of a unique context (every context is unique) which preceded the deflationary fiscal deleveraging. And that we have a weakness for simple retroactive narratives which don't really capture the behavior of the complex systems we're describing.

I'm not sure there is really explanatory or predictive power to this, although of course I agree about geological and thermodynamic limits, and that oil is past peak, etc. I used the word "stable" in that sense: predictable results from a given input. Rather, I think we'll see more chaotic behavior.

Guess we'll see.

...if we had free medical care and all the free social services Europeans have,

huh? Europeans have no such thing. Somehow they've figured out how to pay for them through higher taxes yet still have a standard of living, worker productivity and educational quality similar to that of the US with more leisure time and less energy usage per capita.

The more people try to save money by not buying this or that more people are laid off because of their efforts and the worse the economy gets. If they pay more for gasoline and other petroleum products, the less they have to buy something else.

Again, it is the recession, that is the economy, that puts the ceiling on oil prices not what individuals with good jobs can afford to pay.

Ron it does not your mistaken. As prices increase those with lower incomes either because of low wages or job loss will simply do without oil if its priced higher than they can afford. Certainly this starts in the third world but its a continuous process it does not stop until the system itself fails.

If oil hits say 200 a barrel I'd argue that some taxi drivers in Bangladesh may lose their jobs as their customers can no longer afford taxi rides and use rickashaws or walks. I'd argue at some price point the same happens in the US. Certainly some poor people that live in a cheap trailer in the country with a pickup will find they can simply no longer afford gasoline period.

This is called demand destruction and there is no magic price cap the price will go up until supply meets demand. Certainly at some point the overall system will fail but looking at the third world shows that 90% of the population can readily live in abject poverty and you still have a quite functional society. Not a nice place to live but still functional.

Look I'm a computer programmer if I'm lucky I will keep my job and continue to be able to work its not important if this means 50 others are out of work and gasoline is 15 buck a gallon I'll buy what I can afford and from time to time drop a few quarters into the cups of former programmers less fortunate then me begging on the side of the road.
If I lose my job or society does not want to pay me enough to survive then I join them.

There is no magic limit to demand destruction. Certainly at some point the society could readily collapse because of the strain causing other problems to explode but the direct effect of falling oil supplies is to simply ensure that supply and demand are met at some price.

Certainly many will be forced into a new lifestyle often its one of starvation fear homelessness etc. But so what that does not create some magic price point where the price of oil can't go higher.

And yes it does come down to the individual I've done my best to ensure I'm not dependent on oil and that my usage level is low enough that if I can maintain anything close to my current salary then I can afford oil well beyond when many will have to change. I'm not being a bastard just I'm doing everything I can to try and limit as much as I can the effects of oil on my lifestyle. I won't move anywhere near San Francisco because I don't want a employer to try and force me to commute its practically a death sentence. You will run out of money and be toast if you lose your job. If at some point I can't work remotely then I'll aggressively seek local employment in some critical industry say agriculture maybe even if the pay is low. My opinion is that many of the people that try and play the mortgage and commute game are going to eventually run down their savings lose their jobs and join the ranks of desperately poor as they try and maintain that lifestyle against rising energy and food prices.

Ron one of the most important things about peak oil is eventually its not just a individual problem but a personal one. I've tried to mitigate and maybe I'll succeed or fail who knows but certainly I won't go over the cliff blind like many will.
Its not clear if thats good or bad :)

Many Jews in Germany realized the implications of what was happening in the 1930's and fled the country often at great personal costs. Others did not and eventually died.

Peak oil is not the same in the sense its impersonal but each individual will face his/her own personal tragedy from peak oil regardless of how much they have prepared. At the minimum they will have a relative or friend in dire straits.

The economy can and probably will eventually collapse until is a very small group of wealthy and a large population of poor so overall there is no intrinsic reason economic contraction cannot go until a few are able to maintain there position even if it means a tyrannical government. So you economic argument is not correct it does not stop the effects of peak oil. And at the individual level its a serious of decisions you make and pure blind fate that will determine how much and how severely your affected.

And last but not least given the way our civilization works the most probable outcome is the the pressure from rising oil prices will cause other parts of the system to crack then collapse leading to a global collapse well before the price of oil itself actually forces countries like the US into a third world like economy directly. Just because there are excellent reasons why it will probably blow sooner rather than later does not mean that there is some magic cap on oil prices or the world cannot effectively become a place with only third world nations and worse. It can and probably will and all peak oil does is ensure that if something else does not crack first dwindling energy reserves will eventually force the matter.

There are numerous areas that will suffer min collapses similar to the tremors you see before a big quake. State and local government will be forced to cut back. Eventually as sort of a side benefit I suspect the US will be forced to only incarcerate people that are a true menace to society.

Pensions will go unfunded. Your correct food prices will increase.

There are all kinds of secondary problems that will arise. The recent price hike played a role in collapsing the biggest credit bubble in history going forward in time your talking not about bubble collapse but real systematic failure. Some like pensions are really a bubble in the sense they are funded via bubble expectations same for state and local governments. But eventually it will pass from being just more bubble deflation to the point that services are really cut to low. A town will lose its fire department then simply not have enough money to maintain a volunteer one for example.

Whats important is outside of financial collapse most of these collapses will occur disjoint in time they won't be concentrated enough to cause wide spread systematic collapse until one day the thing just goes down. I just don't see any intrinsic reason for any sort of widespread failure in the short term i.e next two maybe three years.

This also means I don't see any real limit on oil prices as they increase they will simply force some random part of the system to contract or collapse but not enough to collapse the entire system. Lets say globally 5% of the worlds population is locked out in any given year from access to oil this weighted on population implies that say 1% of the US population will be unable to use oil products nearly as much as the used to.

Each year its more of the same. Eventually of course countries like Eygpt and Pakistan and parts of India will reach the point of regional or national collapse but other regions and nations will continue until they to one day just collapse probably with no real reason visible.

This by no means prevents one of the many issues we face causing the system to blow up early and it could even last for years ten or more. I can't really see more than ten before it would collapse. If we make it ten years then one could imagine that somehow we managed to bring alternatives online fast enough to prevent collapse. Its not improbable but then nothing is really improbable :)

To be clear this is just peak oil as far as the overall system goes I also think that the worlds governments will get away with playing financial games for at least two years before something really blows up. However as you look 3-4 years out and even further it becomes increasingly difficult to be convinced that some part of the system won't fail taking everything down.

The way I look at it is we have two years more of effectively a recession as anything related to debt and fiat fractional reserve lending is forced out of the economy and it become increasingly one focused for the most part on survival and a few personal consumer items. For better or worse I think mobile phones and flat screen TVs will make it to the bitter end and beyond. So a few consumer electronics are now effectively luxury items and food and gas and finding ever cheaper housing etc. More or less most people in the first world who are middle class will be in this boat.

Say about two years from now the persistent unemployment and probably riots and some outright local collapses will make some cities in the the first world become very unstable. This could spread or not. But now things really don't look good. People are not starving but bread lines are finally really noticeable. In general even the biggest bull and idiot is finally starting to worry about their future. Slowly I think it will begin to dawn on people that things won't get better.

Once this has set in then its simply a race to see when this understanding turns to anger it will. And who really knows what the outcome will be but I suggest this is as good a place as any to mark the true start of the end of our civilization and its basically the real slide from a recession into a true depression.

This might be meta stable for two or even up to four years but even my crystal ball fades at this point :) It really depends on to many factors although almost all are negative.

Now to reply to people worried about Californians heading north to the PNW.

Even during the Depression we had people driving from Oklahoma to California looking for work. I think the dispersion out of problem areas will be similarly broad across the entire nation as long as travel is not restricted and yes they will go by car.

I don't expect the PNW to look all that appealing to most in fact although I'm moving there myself and have high hopes for its long term sustainable living capability short term I fully expect its economy to be one of the worst in the nations. In fact Oregon already has one of the top unemployment rates. I expect similar to some extent for northern California. For quite some time people will be leaving to look for jobs not food and the PNW will not be a good place to look for work. I actually expect a lot to head for Texas :)

Once the migration for work ends you may eventually see migration for people looking for food but even this is doubtful if the coastal cities empty out and the irrigation remains relatively intact the central valley of California is itself a rich agricultural region. I see no real reason why any immigration looking for food/farm work won't for the most part stop here. I don't see Oregon and Washington becoming large farming states in this sense give the isolation from the rest of the nation I'd argue that farming will probably become more focused on supplying the local population. Thats not to say it won't see a influx into the region but its not clear that it will be large.

But I also see just as large a outflux from the PNW of people looking for work as you see going out of California if not larger. The region could readily lose half its population as people leave looking for work only to eventually gain some of it back later as farm laborer returning to the newly labor intensive farms.

Once this sets in the Rustbelt for example will also probably be repopulated.

And to be clear I don't see any intrinsic shortage of food in the US for a long time from lack of ability to grow food. I do see that the expense of food could become crippling i.e your working to eat but that does not make it unavailable. Gardening will make good monetary sense and provide a bit of excess food helping keep food prices in check. That does not mean we won't have famines given the circumstance famines could happen at any time but in the US at least we have enough agricultural land and just plain land capable of growing food that a intrinsic shortage in the near term is unlikely for natural reasons. This says nothing about a riot or something disrupting the food supply to the point that people begin to starve but thats a different issue.

In general for the US the best place to live is along the Ohio/Mississippi/Missouri river system some of the eastern costal regions generally towards the southern parts of the eastern seaboard. By this I mean its the largest contigious fertile area with excellent water transport. Other regions like the PNW and even the upstate New York/Maine region are a bit more isolated depending on how well we can use the Great Lakes region and the climate is tougher that far north.

Its a very wealthy country and for the most part I actually expect the western half to be basically abandoned as people move to regions with both excellent water transport and agricultural land.

We will see :)

The critical timing required to pick their turning points.

You left out a word needed to make that sentence complete. It should go: Critical timing is required to pick their turning points. And in fact you completely left out the first half of the sentence. It should have went: On a totally unrelated subject, if you wish to make a lot of money trading oil futures critical timing is required to pick the turning points.

Ron P.

Actually as far as the actual price movements go we may well see a fairly linear price increase but not because its exactly inherent in the system by default. Two months ago I would have argued that we could see large price swings similar to the peak whale bone graphs floating around. Price can behave very erratically with fairly wild swings even if the meta trend is upwards.

Large price swings going forward would almost naturally ensure that we are on a path that would take years to play out simply because of the nature of the oil market its not a completely liquid market underlying the futures market is a fairly large finite time for oil to move from well to tank say 8-10 weeks or so. I like to use three months as my sort of natural timescale for anything to do with oil. I've found that looking at it in three month blocks gives a clearer picture at least for me.

However we did get a very interesting development during the last price crash it looks like speculators have managed to take control of a substantial amount of real physical oil anywhere from 50 million -100 million is a number I comfortable with and of course if you believe everything you read a lot more. I'm pretty sure they control 50 million barrels world wide.

This is not chump change if they decided to drain it down they would be a major source of oil for a few months and certainly be able to effectively flood the system and crash prices.

But I don't think thats their intention instead it look like the plan is pretty much a traditional hoard play. Sell a little bit each month and try and buy more further out the futures curve for later delivery the expectation is that the futures market will underestimate the future price of oil effectively for quite some time.

I call this a oil bank.

Now whats interesting is if it does exist then given that the contango is now closer to normal then its now operational. Given that oil storage costs are fairly constant lets say between 1-3 dollars a barrel a month. As long as oil prices increase faster than this they make money. If oil prices fall by about five dollars or so they will jump in and start buying on the front month and stop selling putting a very hard floor under prices.

So what happens is because we have this oil bank formed we won't get into a panic situation with super rapid price increases but on the same hand we will see steady and relentless price increases as the hoarders adjust their selling and buying to continue to leverage the market swings. In exchange for ensuring that outright shortages are probably not going to happen in the short term we should see a surprisingly linear increase in price.

Who knows when this oil bank will end however even with my estimate it would take them probably six months or more to unwind this position without losing money. They would have to back out fairly slowly. However as long as its around as I said I think we will see price increases be very steady. This does not exactly prevent them from also increasing rapidly all the Oil Bank is betting on is that the market will underestimate the price of oil three months or so into the future by a substantial margin to make it worth while I'd have to say at least five dollars a barrel given the nature of the game and how bit a bet it its more like 10-15 is more realistic. For example right now crude oil for Sept is 63. I'd argue if I'm right about this oil bank then they bought Sept futures a few months back and they expect it to probably be at least 83 by the time this front month rolls around. Basically they are betting on a minimum of a 5-10 dollar a month increase in oil prices for the foreseeable future and maybe larger increases.

I'd have to think that this oil bank if I'm right is going to be around for the next 12-18 months or so. I can't see them winding it down soon given it just got running and when they do it takes six months to exit. For example this implies that the oil bank probably expects oil prices to be at least 180 dollars a barrel 12 months from now.

One of the reasons I'm actually concerned I may be right is if I'm right about this oil bank then it means some really big players have also come to the same consensus I have which enforces my position. Or I could be really wrong.

And of course what really interesting is the games needed to get this oil bank up and running where fairly drastic. Obtaining 50-100 million barrels of oil is not trivial.
Esp if you doing it because the market really does not have much oil and you have a short window of opportunity to set up your position.

With the luxury of looking back at the past six months and the concept of the oil bank you can now see how it was set up and how actions where taken to accomplish it. And before people accuse me of being crazy if you grabbed 50-100 million barrels of the oil market you by definition must take actions that cause big moves in the market happen. In fact as far as I know this is the largest speculative position that has ever existed recently. Pup55 over on peakoil.com mentioned that this happened once before back in the 1990's. Darwinian will like that last time they tried it they got wiped out and their head handed to them on a platter when prices crashed :)

In any event I expect this speculative position to have and undue influence on the market for the foreseeable future so it may be quite a while before we see "normal" market dynamics. So we will see this oil bank just became open for business and left its setup stage so now we can see the game they are playing. I may be right or a may be wrong but they are certainly in the drivers seat over the short term.