What happens when energy resources deplete?
Posted by Gail the Actuary on June 19, 2010 - 10:12am
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What happens when energy resources, such as oil, deplete? Many people believe that oil prices will just go up--but I don't see that to be the case. A more likely result is a future dominated by recession and debt defaults--similar to what we have been seeing recently, but trending over time to be worse. In the midst of this recession, the view may be that there is plenty of oil, if only the price were higher.
Views of Oil Prices
One view is that energy prices will rise, substitutes will be found, and prices will come back down again, perhaps settling at a somewhat higher equilibrium reflecting the cost of producing the substitute energy source. The economy will continue to function pretty much as before. The catch is that we aren't finding reasonably-priced, scalable substitutes, so this isn't happening. Oil prices are down, but not because of substitutes.
Another view, popular among those concerned about peak-oil, is that oil and energy prices will just keep rising. If scalable substitutes aren't found, some expect that oil prices will rise from their current price of $75 barrel, to $100 barrel, to $200 barrel, to $300 barrel, and eventually to $1,000 barrel or more.
The problem with this view is that it doesn't take into account the amount of money people actually have available to spend. Just because oil or energy prices rise doesn't mean that people will get additional income to cover these higher expenditures. In real life, prices can't keep going up.
I expect that what really will happen is oil prices may bounce up, but they will soon come back down again, because of recessionary impacts and credit crunches caused by high oil prices. Most of the time, oil prices will end up in the uncomfortable middle--too high for the economy to buzz along, but too low to encourage much new oil production, or much new renewable production. The result is likely to be continuing recession, getting worse over time, because of what will be generally viewed as inadequate demand for oil.
What really happens when energy prices go up
Energy expenditures are not a big share of income for high income people, but they are for the many people getting along on minimum wage, or close to minimum wage. If oil prices go up, these folks find the price of food and gasoline going up, and perhaps the price of home heating and electricity (because the prices of the various types of energy tend to move together). They find their budgets stretched, and they either
1. Cut back on discretionary spending, or
2. Default on loan repayments.
A similar situation happens to the many people who earn more than minimum wage, but live paycheck to paycheck, and pretty much spend all the money they earn. As the prices of energy-related goods rise, these people too find a need to cutback. Some will cut back on discretionary goods; others will default on loan repayments; some will do both.
Thus, when oil prices rise (or energy prices in general rise), we end up with two main effects:
1. Banks find themselves in worse condition because of many loan defaults.
2. The economy starts feeling recessionary impact, because so many people cut back on buying discretionary goods.
These impacts are likely to lead to others as well:
1. Banks become less willing to make loans, because of the problem with defaults.
2. Many people are laid off from work, because of reduced demand for discretionary goods (restaurant meals, vacations, new homes, new cars, new home furnishings, for example.)
The cutback in the purchase of new homes, new cars, new home furnishings and the like leads to yet more impacts:
1. The price of homes drops (because fewer are upgrading to more expensive homes, and because loans are harder to get).
2. There is less demand for oil (because oil is used in making cars, new homes, and many other things. Also, if fewer people take vacations, and fewer people drive to work, this reduces oil usage).
3. There is also less demand for natural gas, coal, and electricity, because all of these are used in manufacturing discretionary goods.
The next round of effects then becomes:
1. Even more people default on their loans, because with the decline in home values, they owe more on their homes than their homes are worth. This may also happen if people have lost their jobs, and can no longer afford their homes.
2. The prices of all energy products drop (oil, natural gas, coal, uranium, ethanol) because of reduced demand. Many fewer solar panels are sold as well.
About this time, governments come in with stimulus funds, bails out for banks, and the problem appears to mostly solved. It isn't really solved though--it is mostly transferred from private citizens and from corporations to governments. But governments find expenditures vastly exceed revenues, and debt is rapidly rising. Something needs to be done--either raise taxes and cut services, or default on debt.
Before we talk about these options, let's talk about timing.
When does all this happen?
The popular myth among people concerned about peak oil is that difficulties do not really start until oil production begins its down-slope. In my view, the difficulties start much sooner--as soon as oil supply cannot be provided at close to a constant price.
Oil prices were in the $20 a barrel range for many years, but then started rising about 2004, as Chinese demand began rising. So this was really the first sign of problems.
A second measure of when this happens is when the growth in oil supplies starts to falter. The world had been accustomed to a close to 2% a year rise in world oil production, but slipped onto a production plateau starting in 2005. This production plateau has lasted until the present time (2010).
So if we compare what production we might have expected in the absence of higher price or credit problems (green line), to the actual production (blue line), a gap started to appear about 2006. This is another measure of when we would expect symptoms of energy shortages to start affecting economies.
I know many will say, "Oh, but while we had problems with sub-prime mortgages about then, and housing price drops, it couldn't have had anything to do with oil prices." I would point out:
1. Recessionary effects happened around the world, not just where there were subprime mortgages. Japan was affected even before the US, and didn't have subprime mortgages.
2. The effects that we would expect from higher oil prices had to be manifested somewhere. It turns out the greatest manifestation was with lower income people, living in distant suburbs where the commutes were longest. These are precisely the folks one would expect to be most affected by higher oil prices.
3. The impacts of recession and credit problems have gradually spread more broadly than subprime loans, as we would expect, based on the foregoing discussion of the expected impacts.
I should point out that saying that higher oil prices being instrumental in causing in recession doesn't mean that there couldn't be underlying weaknesses, that would allow the manifestations to be in particular parts of the economy.
Also, we know that higher world oil usage is closely linked with world economic growth. One would expect relatively lower oil use to therefore lead to recession--and that is precisely what seems to be happening in the real world.
What is ahead?
We are now at the point where the recession seems to be better, because governments have bailed out private citizens and companies (particularly banks). But this leaves the governments with a huge amount of debt, and with a big gap between revenues and expenditures.
Figure 3 shows what a huge shortfall the US government now has in revenues. There are many other governments around the world with similar issues. In addition, state and local governments have serious revenue shortfalls.
If recession continues, it is difficult for governments to continue to borrow more, as expenditures outpace income. Eventually, governments are left with two options:
1. Raise taxes and reduce services, so as to get revenue and expenses back in line.
2. Default on debt.
Either one of these things will make the situation worse:
1. If governments raise taxes, the effect on citizens is pretty much like higher oil (or energy) prices. Citizens react by cutting back on discretionary spending or defaulting on loans, and we are back to more of the problems recessionary problems, plus loan defaults we had before. If governments also layoff workers, this increases the recessionary effect.
2. If only one or two small governments default on debt, the world can probably accommodate the defaults pretty easily. But if problems spread to a large number of big countries (UK, United States, and Japan, for example), then international trade is likely to be disrupted, because many sellers of goods will find themselves without payment. To prevent this happening again, the sellers of goods are likely to set stricter terms--I will sell you so much oil if you will sell me so much wheat in return, for example. The amount of trade is likely to drop precipitously, because of the cumbersome nature of such trading.
If governments mainly raise taxes and reduce services, I would expect the result to be more recession, more debt defaults, and lower prices for all energy products. Everyone will say, there is plenty of oil (natural gas, coal, uranium) in the ground. If prices were only higher, we would extract it.
If there are major international debt defaults, the situation is likely to be somewhat the same (recessionary impacts and lack of credit), but some goods may cease to be available for import. If these goods are critical goods (computers, replacement parts for the electrical grid, replacement parts for automobiles), the economy could spiral downhill rapidly.
A variation on defaulting on debt is attempting to inflate it away. This still leaves owners of bonds very unhappy, and can cause many of the same problems as regular default.
What would it take to ramp up oil production (or a substitute) so production is again on a trajectory where it is growing at, say, 2% per year?
I can see several ways such a ramp-up theoretically could be accomplished. (Some of these are more ways of circumventing the problem. Note that these are all temporary solutions. In a finite world, it is not possible to continue exponential growth forever.)
1. If conventional oil production is flat to declining, one could ramp up unconventional oil production (oil sands, oil shale, ultra-deep, and arctic for example).
2. If conventional oil production is flat to declining, ramp up production of other liquids--ethanol, biodiesel from algae, and coal to liquids, for example.
3. If conventional oil production is flat to declining, one can try to convert a large share of the auto fleet to electric, and ramp up electrical production.
4. If conventional oil production is declining, one can theoretically engineer cars to be much more efficient, and ramp up production of these new cars.
Regardless of which approach one uses, one needs:
1. A lot of time. In 2005, Robert Hirsch was the lead author or a report for the department of defense called Peaking of World Oil Production: Impacts, Mitigation, & Risk Management. This report showed that mitigation would take 20 years. If one stops and works through the details of any of the three solutions proposed above, one can see that each of these require long lead times. For example, scaling up oil shale would likely require new coal fired power plants in the area, new coal mines, new train tracks from the coal mines to the oil shale area, and new water supplies piped into the arid US West, not to mention building the facilities themselves. Perfecting the technology for electric cars, and building a whole fleet of these, would be a similarly slow undertaking, as would replacing the current auto fleet with more efficient cars.
2. A lot of capital. Unless oil prices are higher--a lot higher--it is hard to justify large capital expenditures, in ventures such as this. We have just seen that consumers cannot afford high oil prices, without recession.
3. Long term subsidies. If the prices of the new fuels are too high for consumers to really afford, one needs long-term subsidies. We have just seen that high oil prices seem to hurt the economy badly. High prices for substitutes can be expected to have a similar effect.
It seems like any one of these issues is likely to be a deal-killer. Since we are already at a point where conventional oil is falling short of demand, the time requirement will mean that scaling up will be very difficult. Progress to date on renewables has been very small, as shown on Figure 4.
Wind, solar, and geothermal are combined in the tiny red line at the top of the chart. Since these all produce electricity, not a liquid fuel, they are not good substitutes for oil. Biofuels are not shown, but are also a very thin line.
What is "Peak Oil"?
"Peak oil" is sometimes described as the time when conventional oil production begins to fall. There is still a lot of oil in the ground, though, but what is left is
1. Very slow to extract. It is necessary to ramp up huge amounts of production capability to mitigate the downslope of conventional production.
2. Expensive to produce. The easy to produce oil is gone.
So what peak oil really is, is a turning point. One can theoretically continue to produce the same amount of oil or more, if one makes huge investment well in advance. The problem is that it is really too late now. By the time new production finally gets started, conventional oil production will be down very substantially from its peak level. The fact that no one ramped up unconventional production (or alternatives production) before it was too late leaves us with precisely the problem that the peak oil community has been warning about--oil production capacity that can be expected to decrease over time, as individual fields deplete.
Peak Oil and Exponential Growth
Oil supplies are expected not just to level off, but to actually decline. Part of this happens because of the natural decline rate of conventional oil fields, as the finite amount of oil that is in the field is extracted.
The decline is likely to be more severe than historical decline rates (2% to 8% per year) would suggest, for two reasons mentioned earlier:
1. Declining credit availability, as high default rates continue among buyers. Lack of credit will tend to keep oil prices low, and discourage investment.
2. Higher tax rates on fossil fuels. Governments are short of funds and oil companies are temping targets. If tax rates are raised, this will likely cut back production, since oil companies base investment decisions on expected after-tax profit, and this will be lower for many projects.
Meanwhile, we have a huge number of variables growing exponentially:
• Economic growth
• Money supply
• Stock market prices (hopefully)
• Population
These variables are not independent of energy supplies. If nothing else, people need food to eat, and oil is used very extensively for food production. It is questionable whether these variables can continue their exponential growth if oil and other energy supplies are declining in quantity.
“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist”. Kenneth Boulding
Related posts and resources:
Delusions of Finance: Where We are Headed February 8, 2010
Gulf Oil Spill: With so Many Resources, Can't we Just Drill Somewhere Else? May 29, 2010
Peak Oil and the Financial Crisis: Where we are Headed March 25, 2009
Casualty Actuarial Society Climate Change Committee presentation - June 16, 2010
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Speaking now both as a sociologist and an economist, I think John Michael Greer got it right in his book, THE LONG DESCENT. I expect real GDP per capita to go down over the next 100 or 200 years--down in a stairstep kind of way, with considerable volatility which may disguise long-term trends for a while.
In the short term I agree with you that financial limitations will dominate the effect of declining oil production. In other words, demand is likely to fall faster than supply over the next four or five years.
We will see more downward social mobility. Real wages will fall. The unemployment rate will increase to levels not seen since the Great Depression. As government at all levels faces declining real revenue, I expect police protection to diminish, and therefore property crimes will increase--maybe violent crimes such as rape and murder will also increase, as they did in Argentina after their economic collapse of several years ago.
DS: The Long Descent: Sometimes referred to in European history as the Dark Ages (500-1100 AD).
E L said: The Long Descent: Sometimes referred to in European history as the Dark Ages (500-1100 AD).
Actually, Mr. Greer's opinion is that the Long Descent of Rome was from 166 A.D. to 476 A.D., at which point Western Civilization hit bottom and pretty much stayed there until modern civilization got rolling around the time of the Renaissance.
Rome is interesting in that it took 310 years to totally collapse. Other civilizations have collapsed faster than that, but they usually take at least 100 years (the Mayans took 150 years, for example).
Note that the event that triggered Rome's decline was the great plague of 166 C.E. that may have killed half of Italy's citizens and slaves. The death of all those slaves was a drastic loss of capital from which Rome and the Roman empire never recovered. They were able to find enough soldiers during periods of economic decline, though eventually they were forced to hire German mercenaries to fill the ranks of the Roman legions. Then the Germans invaded and outbred the Romans; the low Roman citizen birthrates were a key element in the decline of the Roman Empire--perhaps the main cause of this decline in the long run of centuries.
In the matter of sudden versus slow decline, please note that the last figure (5) in Gale's presentation is deceptive in its suggested slow-dipping future projections.
Typically in exponential growth and correction incidents in nature, the curve shoots up to a crisis point, then plunges just as rapidly down to a roughly symmetrical low point, then climbs back towards the original norm in a curve which is often symmetrical with the previous growth curve, though always in the negative part of the graph.
Translated into actual experience, this would seem to suggest a deep crash for population, industrial activity, food-production, etc. sometime in the near future, followed over a long period by a slow struggling back to levels of population, etc., that prevailed -- oh, three or four thousand years ago, maybe even longer back than that.
I've been much persuaded by John Michael's model of a long, slow, stepwise descent, with -- perhaps -- several brief, anaemic upticks in activity which soon self-strangle. He's no mean clearseer.
But such is the sheer imponderability of this current, entirely unprecedented situation in human history that there's no dismissing the possibilility of some black swan -- or flock thereof -- which pitch us straight into the classic 'steep-ramp/steep-crash/slow-climb-out' pattern instead.
We've already done much -- most? -- of the final fast shoot-up of any unsustainable exponential growth incident, so our vulnerability to black swans must be at its greatest now. And don't forget that John Michael says constantly that his guesstimate of how it will pan out is just that, since this situation is inherently imponderable for mere human intellect. We just can't tell for sure how it's going to go. I guess we just have to hope for the slow-stepwise outcome as being least bad for humans. Though a fast, deep crash for us would probably be a lot less destructive to the rest of the living world, in the long run.
One of my hobbies is mead, honey wine, making. There is one thing I'm sure of and that is those yeasts fed several energy sources eg honey, applesap and neutrients, ferment fastest and collapse quickest.
If its possible to compare the energy throughputs in winemaking to the energy throughputs of societal growth then it would seem that our use of several energy sources, fossil fuels suplimenting solar energy, would lead to a faster collapse than previous civilizations which were built on solar energy alone.
Very interesting observation,it makes me wonder if this could be characterized as a manifestation of the biological equivalent of Jevon's paradox. In other words it reduces the consumption of any individual component of the energy source mix, thereby allowing for more yeast cells to be able to exploit the individual energy sources resulting in a quicker population explosion and therefore quicker total exhaustion of all the energy sources.
Kinda scary if true and especially if it applies to our current use of multiple sources of energy.
Human slaves then and oil slaves now.
In general I too agree with Mr. Greer. It seems things always take longer than you expect. However, Mr. Greer's blog entry 'Endgame' back on February 3rd, suggests that even he thinks the feedback loops that Gail describes are in full swing. My concern is that the next step down might be a long one.
Exactly.
The near term situation will likely look something like below. The big step is a systemic failure with some sort of proximate cause but ultimately it was because we set up a silly, silly system that works only in growth mode.
While the long-term situation looks like this:
As Gail points out below, the big step down will likely mean a dramatic drop in international trade as everyone becomes afraid to accept everyone else's currency. Niall Ferguson points out in The Ascent of Money (four hour version, but there are six and two hour versions as well), money is just "trust inscribed" and trust can vanish overnight. Thus, so can large dollops of trade.
Also, in support of Gail's assertion that it wasn't just a few bad mortgages that caused this international slowdown, James Hamilton's paper puts some math behind it. He found that what started it all was the high oil prices, a finding he was surprised by.
After the housing slump was triggered by the oil prices, we have to ask:
How Did a Domestic Housing Slump Turn into a Global Financial Crisis?
Merril, do you have any interest in briefly summarizing it?
The Abstract reads:
The lack of a "direct contagion", rather than a "trigger", between the US housing bubble bursting and the financial crisis should not be taken as a positive thing. It indicates that the global financial system is highly non-linear in its response to changes in inputs. Non-linear systems often exhibit chaotic or runaway behavior.
OT:
Andre-
Transition Mill Valley is having a potluck this Saturday.
I will email you.
Thanks, Scott, but I'll still be in Winnipeg for my friends' wedding...have a great event. The last was one really well done and the energy in the room was infectious!
The big unknown to me is how well / how long our current international financial system will hold up.
If countries stop selling oil, first to say, Greece, and then to Hungary, and then to Britain, unless they have something tangible that is needed in return, then we have a serious problem in the making.
I suppose there are other ways the situation could play out as well--but we are so dependent on international trade, any serious disruption could be a major problem that is not factored into anyone's model.
The oil exporting country may use the earned foreign exchange to buy goods and services. But it may also use it for foreign investment purposes. For example, we might sell Saudi Arabia an F-15, or provide investment banking services, or sell them a mortgage backed security.
The investment aspect makes the system more fragile, since the desirability of investments depends on the market's rather fickle estimates of the borrower's creditworthiness. This is particularly true for foreign investments where the oil producing country's sovereign wealth funds need to consider country risk, currency risk, and political risk as well as ordinary commercial risks.
Is the ultimate question not how high will oil go but how low will the US dollar go? The rise in the price of oil from 10 cents a barrel to $2.00 per barrel to $78 per barrel was in part due to inflation. Will the government ultimately succeed in inflating the money supply to mitigate debt. Can it do this and still maintain the ability to buy oil with dollars? Or will it be required to acquire gold or some new fiat to trade for oil?
When things get really tough nobody will want anything from Greece , Hungary , or Britian other than food or raw materials such as timber or steel , or maybe machinery that can be used locally.
I don't know much about Greece and Hungary but the British manufacture some very good machinery, such as diesel engines.
But in a globalized world the British worker will have to work for the same wages as a worker in India or China, with the same benefits-or more accurately , the lack thereof.
Costly niceties such as vacations, safety regulations,pensions, and environmental controls will vanish shortly before the British job vanishes.
Ditto here and everywhere else , we are in a race to the bottom as far as wages are concerned.
And this scenmario does not even take depletion into account!
Hungary used to export an excellent cherry jam to the UK, don't know if it still does though.
:)
NAOM
I heard on the news the other day that travel and tourism globaly accounts for 8% GDP. When the average Brit cant afford a vacation except a long weekend in a tent at Scunthorpe then the travel sector is going to crash. This sector alone would drag down GDP throughout the rest of the economy if it tanks.
UK does produce oil. Not saying its going to make that much difference to UK but its not devoid of the resource either.
UK can always sell our royal family, potentially there are some big royalties to be had, there was a recent move to do just that ;-)
Does it count as part of our soverign debt?!
http://www.dailymail.co.uk/news/article-1281205/Duchess-York-Sarah-Fergu...
In WWII the UK cut its oil consumption by 95% with rationing. I'm not saying that number could be achieved now but they would be able to cut a significant amount if they introduced a rationing program.
"If countries stop selling oil, first to say, Greece, and then to Hungary, and then to Britain, unless they have something tangible that is needed in return, then we have a serious problem in the making."
I've been hammering away at this prospect for some time in various fora here in Britain. What, these days, have we got left to barter for oil, and particularly for the Russian natgas on which we grow ever more dependent?
For all the attention I've received I might as well have been shouting into a black hole. Kassandri are never popular, especially amongst a population of sleepwalkers led by successive bands of chickens without chimneys*, each more blind-but-certain than the last, such as we have chronically here. Dmitry Orlov is sure-as-hell right in his observation of the failure of central government, and of leadership generally, in his Third Stage of Collapse.
* Absolutely cluckin' flueless.
The Arabs are dependent on American and European engineers and machinery to keep the oil flowing. They saw how just a fraction of Western talent that left Venezuela has crashed its oil production. The same is true in many oil producing areas of the world. If the exporters want tangible goods in exchange for oil then the big importers would simply cut off the supply of engineers and machinery.
True. Every word of it. Aramco - Western contractors = zero
what Greer looks like ...
http://www.youtube.com/watch?v=ceRP8rSwlMc
He looks a little like Paul Krugman.
Perhaps I am a fuzzy headed type, but I do believe we can replace a lot of the energy through other sources. I am however, not completely fuzzy headed.
The US buys approximately $27B of oil from foreign sources per month. http://www.pickensplan.com/oilimports/
We are spending $200B/year on wars in the middle east. The bulk of this money is shifting to Afghanistan rather than Iraq, but that was basically an oil war.
A wind turbine costs about $2/watt or $3M for a 1.5Mwatt turbine. New solar panels cost about $2/watt installed.
( http://www.celsias.com/article/nanosolars-breakthrough-technology-solar-...) This means we could buy 9,000 of these turbines per month with the money being shipped offshore. Over time, that begins to generate a lot of power. (yes I get that the power grid is going to have to be substantially upgraded).
If you don't like wind, there is wave energy. This stuff is real and can be exploited.
I can't imagine how to make plastics or power a jet plane with electricity so we cannot replace all of our needs with some form of electricity. However, we can certainly extend the resources with have by substituting cheap, renewable power. It might even be possible to create this stuff in the US and replace some of the lost oil jobs with manufacturing and installation jobs.
The immediate response of governments and central power systems (as opposed to completely distributed ones) is to tighten the reigns of control, instituting rationing and ex ante coordination by an administrative bureaucracy.
This will disguise the magnitude and extent of the shortfall for a time.
Indeed, the North Korean, or Zimbabwe, or example from many other places suggest that the weakening can be disguised for a considerable period of time -- perhaps a century or more but certainly 1 generation -- which is beyond the time horizon of most politicians and systemic forces.
The sheer discretionary use of energy, "Let's drive to XYZ destination 500 miles away for a half day" will gradually disappear.
This process is subtle, and will not be noticed by most of the population for years.
I think the issue is whether there are major parts of the system that will not hold up.
For example, the US electric grid was built in the 1960s, and is in major need of upgrades and replacement parts now. With deregulation, no one has incentive to spend more than the minimum amount on upgrading the grid, even though many of the parts (transformers, etc) are approaching the ends of their useful lives. If we are depending on massive imports of parts, but run into financial problems, or China or whoever is unable to provide the parts (or rare earth minerals) that are needed, we could suddenly find our electrical system with major issues.
I expect that the US may make quite a few of the parts itself, but it still likely needs minerals from around the from around the world. So there is still vulnerability.
Suppose the upgrades are not possible?
What is likely happen is a slow motion collapse of the grid.
Less reliable power, power gradually rationed, prices spiral, people resort to self generate (and more stress on the fuel supplies), etc.
As the expectation of reliability declines, people get use to it.
All the way down to Zimbabwe levels.
Defining Peak Oil as the point in time when production reaches it's maximum doesn't seem to have been very effective at getting the urgency and risk of the concept across to policy-makers and the public.
For several years now I have been using a "better" definition: Peak Oil refers to the mountainous shaped "peak phase" of global oil production.
The focus here is on the change from exponential increase in oil availability easily recognizable on a production graph as the upslope, to the shape on the graph where the production starts to ominously shift.
My observation has been that scientific community has failed to convey the message that Peak Oil is an out of control risk mainly due to the failure to focus on the shift in production and instead spending effort arguing about the exact timing of the maximum peak.
Perhaps some insightful discussion and supporting math regarding the fundamental difference between the graphical maximum and the point on the graph where production begins to shift towards terminal decline would be a more intelligent mechanism to convey the risk of Peak Oil?
Enjoy!
There are umpteen different ways of describing the problem. And I have written quite a few articles describing the problem in different ways. This is an attempt at another way.
I have discovered that a lot of analysts just say, "So what" if you point out the problem of the world's conventional oil supply peaking and declining. They will say, "Well, that happened in 1970 to the US, and we pretty much got along fine." Or, "So what, we can just use oil sands, oil shale, wind turbines, solar PV, and electric cars." They just don't get the connection between the oil supplies declining, and there being a serious problem now.
But Gail, we do not have a problem with oil right now. There is excess oil production capacity in the world--somewhere between one (Darwinian) mb/day and six (conventional wisdom) mb/day.
Saudi Arabia has voluntarily cut back on production to boost prices to their $75/barrel target price.
Due to weakness in the global economy, I expect mainly falling oil prices over the next year or two. I don't know when we'll fall off the oil production Peak plateau, but oil production has not varied much since 2005. The plateau could last another two to five years; there is no way to know at this point.
In a global economy predicated on endless growth, you don't see a long plateau as, at least potentially, a problem?
And, as we are seeing, the cost of oil production comes in other terms beyond dollars, costs such as destroyed regions of the world.
I don't see a long plateau as even a possibility. The economy either grows, or the suddenly get a lot of debt defaults. The debt defaults (which have been partially hidden by government intervention) is where we are now.
I don't see any possibility of a long plateau--that is wishful thinking.
It seems to me that once the upward trend in economic growth is gone, debt defaults will pull the whole system down rather rapidly. Governments will try to hide the situation as much as they can behind their own borrowing, and behind funny accounting, that does not reflect the high probability of default on the financial statements of banks, and insurance companies, and pension funds. But eventually, the problems will no longer be able to be hidden.
As a result of the big defaults, I expect the amount of credit available will drop off greatly going forward--partly because interest rates will need to be much higher to reflect the higher default risk, and partly because lenders will be in poorer financial shape, and cannot afford to take on as many loans.
With less credit, people will buy fewer new cars and fewer new houses. Fewer new factories will be built. More people will be laid off from work. The price will drop, not only of oil, but also of natural gas, coal, uranium, and many other resources. All of this will make the economy spiral downhill, as suggested in Figure 5.
So instead of hitting a plateau, we will quickly shift from positive economic growth, to persistent negative economic growth, with essentially no plateau.
Yes, well, this was exactly my thinking until recently. But we now have a six year plateau--that is a pretty long one already.
I think we can be pretty confident about predictions ten years hence, but shorter term, there are just too many variables and, as you point out, games that the PTM can play to make this think inch along a bit longer. Don't get me wrong--I think we are headed down sooner rather than later. But I have given up predicting the month, year or even half decade when any particular result will occur.
By the way, I heard you went to St. Olaf. My sister went there too. Are you from somewhere in the Midwest, then?
I grew up in Wisconsin, where my mother's family was from. My father's family lived in Northfield, Minnesota. My mother lives in Northfield, Minnesota now, and I visit there quite often. Both of my parents graduated from St. Olaf, and one of the buildings is named after one of my father's uncles.
Note that U.S. real GDP has been increasing during the past three quarters. When do you think real GDP growth will go negative?
And we can also note that US oil consumption fell .1% from 1st quarter of 2009 to 1st quarter 2010 ( http://tonto.eia.doe.gov/dnav/pet/pet_cons_psup_dc_nus_mbblpd_m.htm ), while GDP rose 2.5% ( http://www.bea.gov/national/xls/gdpchg.xls ).
Note that real GDP fell during the first two quarters of 2009.
Yes, GDP fell 1.8% from the 4th quarter of 2008 to the 2nd qu of 2009. OTOH, oil consumption fell by 4.3%.
Oil consumption fell much faster than GDP. We see that free markets are doing what we would expect them to do: find substitutes for oil. Utilities are switching to natural gas and wind (wind is getting a bit of help from pigovian subsidies, of course); home owners are switching to natural gas and heat pumps; shippers are moving from trucks to rail; manufacturers are replacing oil for process heat with natural gas and electricity; car makers are ramping up EREVs and EVs, etc, etc.
And, the fact that GDP rose by 2.5% while oil consumption fell .1% from 1st quarter of 2009 to 1st quarter 2010 is still meaningful, despite intermediate gyrations. The fact remains: GDP was able to grow reasonably strongly, while oil consumption fell.
Nick,
Your numbers are right--but are they the right numbers? In the longer run of a several years of oil production decline will result in real GDP declining at very roughly the same rate. What substitutes are there for gasoline and diesel and jet fuel? Do these substitutes scale up. The only one I can see scaling up is coal to liquids (CTL). I think within ten years we will start going very fast into building hundreds of CTL plants. These I think will enable BAU to continue for some years thereafter, but at great cost to the environment.
I'm more skeptical than you that we'll be able to muster the capital for all those plants.
In a crisis situation, I don't think we'll be able to muster the capital for CTL to make a significant dent — not at $6.5 billion for just 80,000 barrels a day. That will seem like a lot of money again very soon.
The U.S. Treasury can borrow trillions of dollars from the Fed by issuing more Treasury securities and having the Fed buy them (to keep interest rates down). In the future I expect multitrillion dollar deficits combined with large subsidies and profit guarantees for CTL plants. $6.5 billion is practically peanuts nowadays. 100 80,000 bpd facilities would cost only 650 billion dollars--less than half what we spend on wars and about half of the current deficit. But I don't think we're going to stop at 100 CTL plants; I think about fifteen or twenty years from now we'll be building 400 to 800 of them. Yes, I know, that would cause us to go through all our coal reserves in only thirty to fifty years, but that fact won't stop it. The quest for BAU is an almost irresistable political force.
And when would peak coal happen then ?
Probably within ten years on either side of 2050. It is hard to say, because technology for mining coal keeps advancing, and at a higher cost of oil it may pay to even burn peat or convert it to liquids.
And for less than $650 billion I could create infrastructure for centuries that would include:
- Electrifying the railroad mainlines and busier branch lines (say 50,000 miles)
- Double track, build rail over rail bridges, smooth curves, dig some tunnels, some grade separation
- Add 14,000 miles of 3rd track for express freight at 90 to 100 mph and passengers at 110 to 125 mph
Above should attract 80+% of current truck traffic and save 2 million b/day (a barrel saved is a barrel not synthesized).
With most of the rest, expand Urban Rail enough to save another 1.5 to 2 million b/day and another 500,000 b/day from bicycles.
Use remainder for enough conservation to power all of the above.
Best Hopes for Properly Spending $650 billion,
Alan
Economists, engineers, and geologists can recommend, but politics rules. The voters are rationally ignorant. The politicians are ruled by money that comes from campaign contributions that that defend BAU quite fiercely, and finally there is the shortsightedness effect, which dictates that politicians focus only on benefits and costs of legislation that will be felt before the next election.
The U.S. national and state and most local governments are broken. In my opinion, they cannot be fixed. Hence, I'm predicting dictatorship, either an authoritarian one or a totalitarian one.
Not saying it's a bad idea, but whaddayamean "for centuries"??? The basic right-of-way might last a long time once it is filled/excavated but it seems like rail and subway lines that have been around a while are almost as subject to "construction" and "maintenance" disruptions as highways.
The Green Line I took to the ASPO-Boston meeting opened in 1897. Same rail bore in use today. The tunnel bore represents about half the value of the original subway. Still in use today !
The stations were rebuilt in the 1920s to accommodate larger volumes of people and are now again being rebuilt for ADA reasons.
The tracks and ties are typically rebuilt on a 40 to 50 years cycle, electrical comparable. cars 30 to 40 years.
Areas that stay wet have shorter lives for infrastructure.
OTOH, a number of tunnels and embankments built by Chinese coolies for the first Trans-Continental RR are still in use today. In other cases, the second track added in the 1920s has replaced the original (still 90 years isn't bad). When the "Summit Tunnel" was taken out of service in the 1990s, the steel rails were still the original ones. Many ended up as souvenirs.
The new TransAlp tunnels (58 km for longest one) are scheduled for a major rebuild of track, power and signals every 100 years. Planned for 300 trains/day (150 each direction).
Basically, rail is long lived infrastructure.
Best Hopes for the Huey Long bridge in New Orleans (built 1933),
Alan
Your numbers are right--but are they the right numbers?
Yes, I'd say they are. They fit with all of the historical evidence: our experience with the 70's oil shocks, and our experience since.
In the longer run of a several years of oil production decline will result in real GDP declining at very roughly the same rate.
It really won't. In 1979-1982, oil consumption in the US fell by 19%, while GDP rose. From 1979 to now, oil consumption in the US did not grow (although it certainly went through some gyrations in the meantime), while GDP grew by 150%, and domestic manufacturing grew by 50%. As our timeframe gets longer, replacing oil with substitutes only gets easier.
What substitutes are there for gasoline and diesel and jet fuel?
There are very good substitutes are there for gasoline and diesel:
The single largest use of diesel is long-haul trucking, and a move to rail reduces oil consumption by 2/3. The remainder can be eliminated by electrifying rail. Perhaps the 2nd largest use is local delivery, and that's easily replaced with electric trucks, like the Ford Connect.
Gasoline is easily replaced by the use of EREVs like the Chevy Volt, which reduce fuel consumption by 90%.
Jet fuel is the most difficult, but it accounts for less than 10% of oil consumption. Biofuels work, but they aren't very scalable. I think jet's will just have to make do with synthetic fuels (or things like liquid hydrogen) sourced from low-CO2 electricity (wind, nuclear, solar, etc). Those are, of course, much more expensive per liter, but with efficiency improvements (jets are likely to get about 3x more efficient in the next 30 years ( http://web.mit.edu/press/2010/green-airplanes.html )), aviation isn't likely to be significantly more expensive overall.
Do these substitutes scale up?
Sure. Rail is straightforward. EREVs don't cost signficantly more than ICE vehicles (with normal economies of scale).
For more info, see http://energyfaq.blogspot.com/2008/09/can-everything-be-electrified.html and http://energyfaq.blogspot.com/2008/09/can-shipping-survive-peak-oil.html
So - does that help?
Your data is right, but I disagree with your conclusions. If you want to know more of what I (or any commenter) think, just click on my name at the top of any of my comments; that will get you into the archives of all my comments during the past four years and twenty weeks.
Heaven help me, Don, but I've been reading almost all of TOD since it's beginning. Heck, I've been following all of this since Limits To Growth 1st edition came out more than 30 years ago, and I've been involved in this kind of thing professionally, as well.
I just like most of your thinking, so I thought we both might learn something. I think that if you take a look at the links I provided above, that you'll find it interesting. If there's something I've missed, I'm very curious to hear about it, but I think it will require some creative thinking on your part to identify it, and you'll learn things in the process.
Where we differ is not on the data but on the interpretation of the data. For example, I regard the datum I read in this morning's "St. Paul Pioneer Press" newspaper on the rate of job quitting now exceeding the rate of firings as strong evidence that we are recovering from the recent recession. Indeed, as more data come in, the NBER (National Bureau of Economic Research) probably will declare an official end to the recession as the end of this quarter--or possibly the end of the first quarter of 2010. Typically two quarters of positive growth in real GDP is required to call the end of a recession. We've already had that.
Now you may look at the same data I do and come to the conclusion that we are still in a recession. If you can do, all I can say is that when it comes to interpreting economic data, economists are the experts, just as petroleum engineers are the experts when it comes to drilling for oil.
Don,
That's a good example of differing interpretations. It may be illustrative in a way that you didn't think of: In this case, you're an economist, and you're disagreeing about a question with a very strong engineering component, with someone who has a technical background. Now, I'm not standing on my authority - I don't claim any, which is why I don't present credentials. IMO, credentials have a very limited place in a forum like this. They're slightly helpful, to help people understand one's approach and level of discussion, but they don't convince anyone (and they really shouldn't).
No, my point is that this is a technical question ("do good substitutes exist for oil?"), and no amount of information about economic theory, history or other subjects will replace a specific knowledge of the technology, products and industries in question. Until you spend at least a little time looking at specific substitutes for oil and their attributes, you don't really know what you need to know to have a really informed opinion on the subject.
So....I offer my discussions: http://energyfaq.blogspot.com/2008/09/can-everything-be-electrified.html and http://energyfaq.blogspot.com/2008/09/can-shipping-survive-peak-oil.html
I think when the government is forced to raise taxes or pay higher interest rates, the chickens will suddenly "come home to roost". Until then, stimulus funds and other "tricks" can make things look good.
And I agree that coal (both CTL and plain coal) is the one real source that might theoretically scale up, at great cost to the environment. This is what China has done, and its growth has been much better than that of OECD. I can't see this as a long-term possibility though, partly because of hitting limits in it too, and partly because oil seems to be a limiting factor by itself--one needs to transport coal with something, for example.
If necessary we can go back to coal-fired steam engines. I still remember those fine old firebreathers from the mid nineteen forties. We still have the plans needed to construct steam locomotives; building them would create a lot of jobs and hence be politically attractive.
Or if we go the CTL route we'll just make diesel out of coal, as the Germans did in World War II. They ran a mighty impressive mechanized army, air force, and navy on CTL. It didn't take them very long to build the CTL plants either--a few years at most, maybe only a year with wartime mobilization of resources. How long did it take to build Sasol in South Africa? Not that long, if memory serves.
In China, the major coal lines are electrified.
China is in the midst of electrifying an additional 20,000 km of railroads as well as building 20,000 km of new rail lines (the two 20K km have some overlap).
Alan
You failed to mention that here in the second quarter 2010 US oil demand is 6% ahead of last year. This doesn't fit in to your theory that oil consumption is falling faster than GDP.
Most likely the period of time you were using was distorted by a sharp inventory liquidation in that time frame. Since new product inventories were not needed by the retail market, less vehicle miles were needed.
On the other hand I am not sure if our recent experience in the last few months indicates a new trend.
Elsewhere on this thread I posted that I agreed with Skrebowski, that Peak Oil will probably be in 2014. Thus I am not surprised that first half of 2010 is 6% ahead of the same time period last year.
In other words, I expect us to climb a little bit upwards from the production plateau that we've been on for five and a half years.
For the decline after Peak Oil, I think that Westexas's Export Land Model will prove correct for U.S. oil imports: At first a slow decline, then faster and faster toward zero maybe by 2035 or 2040.
To make up for declining oil imports I think the U.S. will massively invest (with government subsidies and guarantees of profitability) in coal to liquid facilities--equal perhaps to 500 Sasols by 2040. Of course the CTL will wreck the environment; I doubt that we will capture the carbon because that raises costs, and environmental costs will be conveniently ignored or denied. At the same time, already China is investing in CTL plants, and I expect that China also will invest massively in these facilities.
One way or another, I expect us to use up all of our coal reserves no later than 2040 or perhaps 2050; in other words I expect a sharp turn toward coal as oil production diminishes.
James Hansen says it is a certainty that Earth will become Venus if all coal (and non-conventional oil) is consumed. I agree with you that CTL will happen if we can afford it. Therefore we should hope for a permanent economic crash.
I don't see 500 Sasol plants...their cost is too high. Not to mention that moving all that extra coal would mean building out more railway, not impossible but the problems keep adding up. See my comment above.
Got a reference? I'm not saying he hasn't said so, and I'm not saying the statement's untrue, I just haven't seen it in the handful of his papers and speeches / reports of speeches / presentations of his that I've actually read. (Essential reading for non-specialists with an interest in climatology.)
Storms of my grandchildren.
Actually he doesn't say it is a certainty (there's no way he would / could say that). But he certainly presents evidence that there is a non-zero risk that it could happen. His point is that even if it's a small risk, the fact that the risk is there means that we'd be crazy to go on burning all that coal and actually take that risk.
So, are we crazy? - ok, no need to answer...
Look at a 2008 ASPO article on (China's)coal use:
From what I read last year it is (also) because of tremendous amounts of water used in the process. And coal is needed in huge quantities. Could be that some countries start to build CTL plants when it is obvious that oil production is declining, that is if recessions don't mask the decline. Since one big plant like in South Africa produces about 80.000 bpd, I think CTL is another example of 'too little too late'.
edit: and see the costs posted by aangel
When the price of oil falls much below its current level, then Sasol type plants become money losers. On the other hand, we now have better CTL technologies than does Sasol with its forty year old technology.
I've heard it said* that at some point the importance of reserving oil for applications for which there's no substitute at present (air travel and chemical feedstocks, in particular) will occur to the world.
It will be interesting to see how many nations move that way (perhaps by heavier tax on oil for other uses, perhaps tax used to prime R&D into alternative energy) when the net effect will be not only to increase domestic costs (and reduce growth), but also to lower oil's market price thus reducing costs / increasing growth for freeloading countries happy to burn whatever's cheapest per joule this year, and worry about next year if it comes.
*I can't remember who said it, and it's driving me crazy! Something like 6 months ago, I think, possibly during the UK election. On BBC radio, most likely. Anyone?
You failed to mention that here in the second quarter 2010 US oil demand is 6% ahead of last year.
Could you point me to your source on that? I don't see it in the Bloomberg article ( http://www.bloomberg.com/apps/news?pid=20601207&sid=a98G32SkVdvA ). I like the EIA monthly numbers: http://tonto.eia.doe.gov/dnav/pet/pet_cons_psup_dc_nus_mbblpd_m.htm , as they're pretty reliable.
If you could extend that March monthly report up until June, you will see what I am talking about:
http://ir.eia.gov/wpsr/wpsrsummary.pdf
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_pe...
The most recent week is running about 1 million barrels a day ahead of early January.
Quite surprising, to say the least, and I don't remember anyone here predicting such a fast pickup in demand.
The numbers are odd, aren't they?
The summary says that motor gas, the largest category by far, has fallen .7%. The weekly report says that all common fractions: gas, diesel, etc are down, and the category that has risen sharply is "other", on line 32. What the heck is that, and why has it risen 47%??
I think there's a lot of noise in the weekly data - I'd stick with the monthly data series.
Farms operate on credit. A tightening of credit is likely to affect how much is planted, how may farms survive. The sharper the downturn, the greater the shock to a food system tied to both fossil fuels and the availability of credit.
-I don't see any possibility of a long plateau--that is wishful thinking.-
I'd say we have already had the "long plateau". Oil peaked quite some time ago and economies have been running on empty for a while.
True, but the various oil megaproject studies help us bracket that point. The public one seems to indicate we fall off within two years. SA likely does have some capacity to make up for the decline for perhaps 2 years (but not likely 6mb/d, in my view).
http://en.wikipedia.org/wiki/Oil_megaprojects
This correlates well with the work of Chris Skrebowski, who maintains another megaproject database through Petroleum Review. It is primarily his work behind the UK Industry Taskforce on Peak Oil and Energy Security.
In his talk at the 2009 Denver ASPO conference, Two Years Remission for Financial Misconduct (behind paywall, worth the purchase to get access to all the videos), Chris points out that the reduced demand and additional OPEC production delayed the peak by two years, to somewhere around 2014 or so.
The major oil consultants (like IHS) also maintain oil megaproject databases but they are expensive to access.
What we have a problem with is recession, inadequate demand for oil, and oil and gas prices that are not high enough to encourage renewables. That is exactly what I said we should expect--inadequate demand for oil.
If one thinks about it, low priced oil is high EROEI (Energy Return on Energy Invested) oil. For example, $10 barrel oil was available back in the days when EROEI was something like 75:1. We know that society cannot be run on oil that is too low EROI. It seems to me that what we are hitting against is EROEI limits. People cannot afford oil that is too high priced--that is too, low EROEI (at least for the marginal barrel).
So when we get to too low EROEI oil, the demand isn't there. We have more production capacity than is needed. This is the fundamental issue we are up against.
Another issue is all of the credit that has built up, while the economy was growing. That credit increased demand for cars, houses, and all kinds of products that used oil, and held the price of oil up. Now, as credit starts to unwind (because the level of credit we had in the past cannot be maintained without the economic growth we were getting from growing oil supplies), this lower credit availability also tends to hold down demand.
What happened was that for a while, we could use credit to artificially pump up demand (or use oil with lower EROEI than was really adequately sustaining society. Now, as available credit is scaling back, we are seeing what demand would look like, in the absence of the credit-induced bump.
Gail,
Available credit is NOT scaling back at this time. Long-term conventional mortgages are at or near a fifty year low in terms of interest rates. The Fed has pledged to keep short-term Treasury securities near zero for the foreseeable future. The dollar is strengthening against the Euro and the pound. The stock market is still generously priced. Despite all the debt out there I don't see any great financial crisis around the corner--maybe a milder one than 2008, but that is all.
The Fed can hide bad loans indefinitely. This was done during the Great Depression, when just about all banks would have been insolvent if they had had to price their loans and securities at market value. The hiding of bad debt worked for more than seven years then, and I daresay the current Fed can do as well as the one in 1933 did.
automaticearth.blogspot.com notwithstanding, I don't see a financial collapse coming over the next three years, partly because I expect oil prices to drop along with global demand for oil products over at least the next couple of years.
As a commenter noted above, various experts, including Skrebowski, are now putting Peak Oil at 2014.
I wouldn't be so sure about that, Don.
I'm with Gail regarding the money/credit supply.
M3 is now in negative territory.
http://www.shadowstats.com/alternate_data/money-supply-charts
I realize that the Fed no longer tracks M3, calling it "unreliable". Or is it? Perhaps the Fed has it's own self serving motives to reject a metric it formerly accepted for years.
My gut feeling on this (and I fully admit, I'm not an expert, but just basing my feeling on a pretty good grasp of the fundamentals of human nature) Ben Bernanke and the rest of the elves at the Federal Reserve have constructed a very convenient alternative universe in which M3 doesn't matter and gold's price movements are "puzzling". If one chooses to think that M3 does matter, and that gold's price movements are not puzzling, than the conclusion a logical thinker arrives at is; DEFLATION.
If price deflation is upon us, then why is the Consumer Price Index higher than it was a year ago or six months ago?
As do most economists, I use the terms "inflation" and "deflation" to refer to changes in price level indexes such as the CPI and the GDP deflator.
Deflating for the last two months.
http://www.bls.gov/news.release/cpi.nr0.htm
But to the larger point of GDP, I no longer trust GDP to be a reflection of real growth. I suspect that counting 'debt financed consumption' as part of the GDP distorts it as a measure of real productive growth.
Two months does not a trend make.
You can use the official numbers or the shadowstats numbers; it really doesn't make much difference, except that shadowstats emphasizes (correctly) that the Consumer Price Index understates inflation. Most economists much prefer the GDP deflator to the CPI as a measure of inflation. Almost all economists know of the limitations and shortcomings and questionable procedures used in constructing the CPI.
Yes, it doesn't really seem to matter much how the problem is phrased. The capacity for people to ignore it seems infinite.
In a conversation a couple days ago I was asked how many people, when confronted with the peak oil problem, accept it. My answer was, "at best, one in 50, and they tend to be the science types; business people and the rich dismiss it in higher proportions; people who have been laid off are more receptive."
The grooves that people think along are deep and have been formed over the past centuries, particular the groove "mankind always progresses."
Until an event happens in the physical world, preferably to the listener on a personal level (such as a job loss), it is almost impossible to get the human brain out of those grooves.
And even then, if they don't have an alternative frame available to them, most will just accept the common misunderstanding and blame themselves for the job loss...
We have about as visible and enormous a physical example of the horrors our oil dependency inevitably generates--yet most have made little to no change in their use of oil, as far as I'm aware of (I would love to be proved wrong on this, by the way, if anyone has any relevant data).
I have some anecdotal evidence from a non representative sample of the public that leads me to suspect that the average American doesn't make any connection whatsoever between their lifestyles and what just happened in the Gulf and furthermore they are completely oblivious to the possibility that they need to make any changes or even minor sacrifices.
Yesterday, after walking to the supermarket in the 95 degree heat and almost 90% humidity of a typical South Florida afternoon, I was struck by the number of SUVs in the parking lot that had their windows rolled up with their engines running so that the drivers or passengers could sit in air conditioned comfort while someone one they had dropped off was at the supermarket buying groceries.
I found myself having a hard time keeping my self from banging on their windows and shouting at them...
"I found myself having a hard time keeping my self from banging on their windows and shouting at them..."
A daily struggle for self control that I face, too. Though I try to remember my many inconsistencies to keep me humble.
I have some equally anecdotal evidence.
In response to the Gulf of Mexico/BP-oil-well-monkeyf*&k, some folks call for a renewable energy economy. When they do, they often get shouted down by those who say "if you hate oil so much, stop driving/buying consumer goods/enjoying the fruits of industrial civilization!" and completely miss the point.
(They rarely use multi-syllable words, but hey, who's keeping score?)
Point is, I would guess that if some kind of collapse happens (as opposed to a long descent), the public will only perceive or understand the proximate cause (for instance, a nuclear conflict between Israel and Iran). The myth will probably persist for many generations that the collapse was caused by 'certain elements' not allowing full throttle oil exploitation (since oil is so valuable, I assume someone will continue to pump it, or maybe make bio-diesel for a long time). Whoever the public thinks of as 'those elements' (be they environmentalists, Jews, Muslims, etc...) will receive much of the blame, and the privileges that go along with being a scapegoat...
Whoever the public thinks of as 'those elements' (be they environmentalists, Jews, Muslims, etc...) will receive much of the blame, and the privileges that go along with being a scapegoat...
Ah! The privilege of being a scraped goat...
My guess is that illegal immigrants will be the next scapegoat in the U.S. We already have detention camps built for them. A hundred years ago "detention camps" were called concentration camps, e.g. in Britain's war against the Boers in South Africa. Then came the Nazi Final Solution, and concentration camps got a bad name. Hence, be politically correct and call them detention camps.
I don't think we'll have death camps, however--at least for the next thirty years.
I would like to see some unequivical documentation of the existence of such camps.
I am WILLING to believe in them, BUT I don't , for the moment.
The world is a Darwinian place, and if the handle weren't taken I would be Darwinian.
There are millions of [people who are suffering to some extent or a great extent due to the presence of so many immigrants, legal or not.These millions are more than ample in numbers to fill such low paying jobs as are available.
The immigrants also force up rents in cheap nieghborhoods, etc.
I have personally profited by the presence of illegals , but I know many , many people who suffer as a result of thier presence.Some of them are kin to me, others are nieghbors and friends.
I strongly question whether the economy as whole benefits-we are facing a population problem and a resource depletion problem here as well as in other countries.We are constructing a permanent underclasx that will have to be supported permanently thru entitlements.
My personal perhaps provincial view is that every liberal I know reflexively assumes a pro immigrant position without seriously considering the evidence as to the harm or loss to the country as a whole.
Furthermore I don't know any liberals, except a few poor people, who like or associate with or understand poor people or ever spend the day with any, except in the context of running some sort of govt program or a charity of some sort.
I spend a lot of days with such poor people, and I can say without a doubt that they have been used as pawns by the liberal establishment to at least as great an extent as they have been helped, for whatevver help they get breeds dependency..
The average bleeding heart does not understand what I am talking about,simply cannot understand.
Of course the conservative establishment is worse in many respects, but in this one respect, there is a conservative school of thought that endorses keeping industry in and immigrants out.
Please understand that I am not so much TAKING sides as simply telling the other side.
The existence of these camps has been publicly announced by spokesmen for the U.S. government. It is no secret where they are or what their total capacity is. I believe it was the Department of Immigration (or the department that Immigration is part of) that made the first announcement about these camps. They are not huge in size nor great in number, but I think if you look in back files of newspapers you can find this news. Like you, I tend not to trust anything I read online, unless I can check the primary source. Especially, do not believe Wikipedia.
Yes - immigrants will be gone. Contemporary immigration levels have been nuts, they're why any long term extrapolation shows the U.S. turning in to Mexico and England turning in to Pakistan.
Don,
Do you have any URLs which I could research?
If you have coordinates, I could search for these using Google Earth.
Cheers
I don't use URLs for research. Instead I go to the library with fountain pen and lined paper and make notes from newspapers, journals, books, and microfilm files.
With Google you might find some reliable URLs--then again, you might not.
ICE Detention and Removal Operations Program
marketwatch.com 2006
Operation Endgame
http://www.fas.org/irp/agency/dhs/endgame.pdf
And may I say: "Wow"
Never heard of "Endgame" before today.
Thanks for the links. They appear to be reliable and creditable.
Right Gail,
I'm in healthcare and there's no shortage of brainpower or scientific training to inhibit grasping peak oil. It leads right to limits to growth and Americans are socialized to find no-growth absurd and impossible. I recently got comments on a peer reviewed paper in which the reviewer said "Where have I hear this argument before? Paul Erlich was wrong about population (I made no mention of Erlich or his argument in the paper), the oil embargoes ended ..." and so forth. He did not address the evidence in the paper. Eventually reality -scarcity, economic decline- change minds, but it is not a marketing or style of presentation problem. Peak oil undermines the American way of life that is to many non-negotiable. That's why it's ignored; and some smart people actually cannot process the information rationally.
I find it a bit scary that people who have been exposed to the scientific method can still be victims of cognitive dissonance but I am encountering it more and more... I would have hoped that scientists would have been inoculated against irrational memes, but perhaps not.
http://arstechnica.com/science/news/2010/05/when-science-clashes-with-be...
Interesting link.
Notice the point on geology. I am pretty much convinced that geologists themselves are very reluctant and resistant to change their thinking about some subject in their field. If you then try to understand why lots of people have trouble accepting some obvious point concerning geology, such as peak oil, it starts making sense. I can understand people not understanding astronomy, but for something as tangible as geology, blame has to be placed on the shoulders of geology teaching. If that is their thesis, I can come up with no other rationale since it is such a tangible topic, unlike astronomy. But these authors also suggest it is creationist dogma mixing up with the geological timeframe. If that is the case, we have no hope.
One unexpected (to me anyway) effect of the financial turmoil resulting from oil production plateauing is the actions of banks to increase interest rates wherever possible to obscenely high rates at the same time as the Federal Government is doing its best to keep interest rates as close to zero as possible.
For many people, credit cards have become the only source of credit available, whether it's for working capital for a small business, tuition for a college student, or unexpected home repairs. Since 2008 the "going rate" for credit card interest has gone from about 12% to about 30% (usually concealed in a much lower "introductory rate" for a few months.
The result of this is that for many people a large part of their disposable income is transferred directly to the bottom line of a few large banks. No wonder consumer expenditures keep dropping.
What you are arguing for is for consumers to simply swear off credit, and live on what they have.
That is precisely what they're doing, but because interest rates have gone so high it will take much longer for them to pay off their credit cards and start spending. My point is that much money which would otherwise be spent supporting local businesses is being siphoned off to a few large banks.
I know of over a handful of people who barely make enough money to pay all their bills, in fact are inches away from homelessness. I know other people who are homeless, more so than were in the piles of the homeless before 2008.
I live on just under $9,000 US per year. Though I live in a paid for house, and share bills with my parents. But there are people out there, that make less than I do, and work (I don't I am living off of Social Security Disability, but worked 25 years before the illness.) Granted If the Gov't goes belly up, any money I paid into the system and any money I'll get out in the future could go bye bye. But if the Gov't goes belly up, that will be the least of my problems.
But living within your means has been something that my parent's taught me from ages back. I have a credit card, and so does my dad. Buy something, but pay it off at the time the bill comes due. Recent house upgrades put a dent in my Dad's style, but he is paying the debt off by double payments. Most people pay the lowest they can on the cards, and never get them paid off.
New rules have them stating on the Invoices each month, the time to pay off the balance in a nice little box That is new, as well as Xing out the number but the last 4 digits, all of that is new this past year. The top rates are loan shark rates, killing the golden goose, skinning it and frying it up for breakfast, with a side order of eggs over easy.
Serfs we are, serfs we will die, long live the serfs. Ra Ra Ra. Those that have the money are making the new rules. But was there really ever a time that that did not happen? In the US you can own land, but the Gov't can take it, for lack of paying the taxes on it, so you have to have some kind of income or else you are homeless. I know employed people who are homeless, which is kinda sad in this day and age. Oh and public lands, are not public lands, because the public can not live on them without premission and rarely get that unless camping for a fee, or signup.
Gone are the days of land that no one owned. When if you lived in a tent you weren't labeled homeless riff raff, and shoo'd away by the police.
Rant off.
Charles,
BioWebScape designs for a better fed and housed future.
Hugs from Arkansas, already heat index of 95.
If you have a good credit rating and never make a late payment you can get interest rates much lower than those you mention. "Money" magazine rates the best credit cards from lowest interest to higher interest. Nothing (except possibly your credit rating) is stopping you from getting lower rates.
Each month I pay off my credit card balance in full--have been doing this since 1961--and have never paid a dime in interest.
Why not just abolish most forms of consumer credit and transact in cash?
That would actually benefit the great majority of working class people, crash asset prices --esp. real estate-- and deprive the banking cartel of most of its power over us. Which is exactly why it won't happen. People living within their means and only buying stuff they can afford? Prices within the reach of mere mortals? un-American.
Don,
I expect people who are middle aged and older, who have had good paying jobs with health insurance, and have not had to deal with major lay-offs can pretty easily do what you are suggesting--keep good credit ratings, and get credit cards with low interest rates. (It helps, too, if you are on the frugal side, and don't over-spend your income.)
There are a lot of folks who can't do this though:
1. Young adults just out of school, with low paying jobs and a lot of college debt. I expect their credit ratings will be pretty low, no matter what they do.
2. People who don't have health insurance. If they happen to have an injury or medical problems, they often end up behind on their payments.
3. Families where a one of the spouses has been laid off from work, and the family was depending on both incomes to pay the bills.
Once someone gets behind, or starts having to pay interest, it is very difficult to get rid of the cycle.
It's been true for poor folks since the economy was 'invented'...
You load 16 tons and whaddya get?
another day older and deeper in debt.
St. Peter dontcha call me 'cause I can't go,
I owe my soul to the company store.
One thing I keep talking about is how much harder it is for people to pay back loans when the economy is shrinking than when it is growing. Interest rates charged by banks until recently reflected the expected default experience when the economy was growing. Once the economy is not growing (lots of people being laid off from work; housing prices underwater, so pulling equity out on an annual basis no longer works), defaults go way up. To compensate for this, banks need to charge everyone higher rates.
These are some of the graphics I have shown:
Note that conventional mortgage rates right now are at or close to a fifty year low.
Don this is highly artificial if the Government was not basically making all home loans and aggressively pushing down interest rates the down payment requirements and interest rates would have risen substantially for home loans.
All the interference is doing is creating more loans that will default at a later date. The current imbalances don't solve problems they simply prolong the agony.
Eventually of course either this will cease or the market will adjust to the interference.
Since interest rates are not set in a vacuum I'd argue that the ability of the Government to keep rates low forever is questionable.
I just don't think the US government is capable of running the housing market like it wishes for that long without impacting the rest of the economy.
As I said to Gail in my reply to her several comments above this one, During the Great Depression the Fed hid bad debts held by banks for seven years, from 1933 to 1940. I expect the present-day Fed to do what was done in 1933 to avoid bank failures and financial collapse.
Be happy, don't worry. (Jamaica is one of my favorite places. I like the attitude of the locals.)
Don - I just have to say after reading a bunch of your comments, you are oblivious. I am happy for you that you have a big family that is doing well and can take care of you but that is in no way indicative.
There is a huge amount of people experiencing real pain...around the world and here at home. I know of many who have lost most of what they worked for their whole life. These numbers are soaring and about to go "hockey stick".
Yes the Gov can hide bad debt and bail out the wealthiest 10% but all that does is ensure more pain for the masses.
I understand you have a following here at TOD but I for one think you are clueless.
Look Don is far from clueless I assure you.
The issue as I see it is that in general Sailorman is 100% right if we are really BAU.
Indeed in my own thoughts where are quite different I still get a nice economic boost following peak credit if one assumes the bad debts can be hidden.
As long as everyone is willing to fake the books its still basically party on for the foreseeable future. And with that there is a very good reason to kick the can down the road for as long as possible. Time does heal all wounds. Defaulted debt need not be accounted for immediately as long as you have time you can eventually solve a debt crisis. Even in a peak oil environment as long as the oil supply is not declining past a certain amount and debts are hidden the economy can go into a sort of long emergency state. Eventually at some point renewable, EV's should allow growth to become viable.
Nothing wrong at all with his arguments. However thats assuming that the data we have is roughly correct.
If its not then the situation will be different. I work of a quite different set of assumptions and as I said I do get the same result as Don
over the short term i.e months but not past that.
Whats missing in these discussions is points at which certain models fail. Obviously mine is being tested right now and will fail fast.
Don's of course will fail if mines right. Gails is a sort of middle ground case that does not do a good job of including extreme Government action.
I tend to favor what Don says over Gail as yes the government can and will pump the hell out of things as needed it does not make sense to assume they won't take ever bolder steps. Basically we can readily convert our market economy to a sort of socialist or fascist one and keep things going for longer than most people think. The government can effectively absorb losses for decades if needed.
So absolutely nothing wrong with the models presented however are the assumptions correct ?
If the real economic situation and the real oil situation are not as portrayed then we
Note that Leanan also thinks BAU can continue for a considerable time. To a large extent, my thinking has followed her comments over the years.
To be clear I think you do a better job of taking into account the extremes the government will go through to prevent any negative short term consequences.
Gail is a bit too laissez-faire. I expect that the money pumps will crank as needed. Also in my own theory down at the bottom I claim that the sharp financial collapse was on purpose not natural. Given my theory I don't expect it to be attempted again. Instead expect government attempts to keep things from unraveling to reach unprecedented heights. At best a few economic indicators will be allowed to tick down slightly to justify both expansive stimulus and increasing control to move to a command economy.
Perhaps to some extent I'm overstating your position but control is just as important as the stimulus itself. Indeed in many ways more important.
I have the control aspect becoming increasingly more important if the stimulus efforts fail fast and the system follows my model.
So although you don't really state in in so many words I take your position to be the move to a controlled command economy while Leanan and Gail are assuming something closer to freemarket.
I don't disagree just think that it will fail as the system has fundamentally changed.
Mr Sailorman:
STATED interest mortgage rates are low at the moment but often are very, very hard to get. Low rates and liquidity are to completely different things. In MV=PQ the government can control M, but not really V.
Several people close to me attempting to get mortgages with an LTV of around 50% and a income to loan ratio of less than 1 can't get them (and some decided to just pay cash then).
Additionally, as some other people have pointed out on this site in a way one can argue that deflation (specifically in the form of decreasing housing prices) effective bumps up your interest.
As an aside, I suspect that one of the reasons the Chinese are changing their currency reference basket is so they have to buy fewer USD bills. Rates may start going up faster than is expected.
WeekendPeak
The Chinese are planning to let the yuan become more valuable against the dollar because of intense and prolonged pressure and arm-twisting by the U.S. We want Chinese imports to be more expensive for those in the U.S., while our export goods to China will be cheaper. This will help to narrow our balance of trade problem with China.
From the few realtors and real-estate agents I've talked to lately, plenty of people in the Twin Cities area of Minnesota are getting 30 year fixed interest loans at the quoted low mortgage rates. Partly this may be a regional phenomenon: Minnesota had a much milder boom and bust in the housing market than did most of the country. One realtor told me that in Hennepin county (largest in Pop. of any MN county) current housing prices were only seven percent below their all-time high of a few years ago. The Twin Cities also has either the lowest or one of the lowest rates of unemployment of any metro area in the U.S., so your mileage may vary.
It seems to me that these low interest rates are mostly a government give-away to try to stimulate sales of homes. We have Fannie Mae, Freddie Mac, and the VHA as the big home lenders. They can provide unrealistically low rates, to further a government agenda. In this article, Fannie and Freddie are described as follows:
Even with all of this stimulus, and hidden losses, people aren't buying new homes:
Once the extent of the losses on Fannie and Freddie become clear, and mortgages need to be financed with something like realistic interest rates, home sales will really be depressed.
Here is a point, Gail, on which we will have to agree to disagree: I think the Fed can hide the bad loans in Freddy and Fannie indefinitely. The Fed could buy up commercial paper if they wanted to. Its charter is very broad and allows it to lend to almost anybody and to buy up pretty much any kind of securities it wants to so as to stabilize financial markets.
People are not buying new homes now because the price of the housing stock is expected to decline. Why buy now when houses are likely to be cheaper in a year or two?
And note that relatively few of those who are underwater on their mortgages are doing strategic defaults--partly because they hope that home prices will go up again, sooner or later. And indeed, house prices will go up when the Fed decides to increase the rate of inflation, perhaps two or three years from now.
Far fewer existing homes are now for sale than was the case two or three years ago.
Clearly, more signs of deflation in the real estate market.
This pattern is especially apparent in far flung suburbs.
I did look at a 'bargain priced' 1100 sq ft apartment in San Francisco last December. Energy use for the place looked to be fairly low. It didn't even come with a parking space and street parking was almost non-existent. The price $650K.
This might not help, either:
"Diane Westerback, S&P's managing director of global surveillance analytics, told SNL that the previously reported 30% to 40% redefault rates typically only count borrowers after two or three months of payments. A year after the modification, Westerback expects redefaults to hit between 60% and 70%."
http://www.calculatedriskblog.com/2010/06/s-expects-up-to-70-redefault-o...
My position is that the losses to the Fed on Freddy and Fanny will be concealed for at least the next seven years--and possibly much longer. It took economic historians more than sixty years to figure out what really happened during the Great Depression, and some things they are still arguing about.
Never underestimate the Fed. Look what they have done to promote inflation since 1913; now the dollar is worth only about 4 cents--four cents in 1913. And they did all this without permitting hyperinflation at any time--or any inflation rate much in excess of 10% in a year.
I can't find the quote, but I think it was Smith in The Wealth of Nations who said that a house is no more a store of wealth than a pair of trousers is.
(Did he wear a kilt?)
No, he did not wear a kilt. Adam Smith wore the robes prescribed for a professor of Moral Philosophy. His two books, THEORY OF MORAL SENTIMENTS and its sequel, THE WEALTH OF NATIONS are well worth reading today. In THE WEALTH OF NATIONS, Smith makes it clear that he favors government intervention in the economy--for example, to promote public education. Of course today's conservatives never quote the parts of Smith's books that show that he favored what is now called the mixed economy. He was against mercantilism, but he was by no means an advocate of unrestricted laissez faire. For example, he worried a lot about oligopoly, though he did not use that word because it had not been invented in 1776, when WEALTH OF NATIONS was published.
The Founding Fathers of the United States had mostly read or knew about WEALTH OF NATIONS, and you can see its influence in The Federalist Papers and in the wording of the U.S. Constitution.
Don,
In the local paper in the Business section in a little block about the size of this post, was a tidbit of info.
http://money.cnn.com/2010/06/16/real_estate/failing_HAMP_mods/?postversi...
Great that people could get a nice low mortgage, but if they default, what is good about it.
Charles,
BioWebScape designs for a better fed and housed future, where homes are cheaper than today, but also smaller, and more energy sipping than ever. Passive Solar, Earth Shelter, tiny homes, and the like.
Hugs from Hot Arkansas.
Without any numbers attached your graphic end up being meaningless. We are given no point of reference on which to discuss or debate.
Your graphic is just scaleless visual noise.
These symptoms are the classic effects of deflation. Essentially, under deflation, the money used to pay back a loan is worth more than the original loan.
The US government and the Fed are trying mightily to avoid deflation. In some areas, their efforts seem to be working (the price of dairy products for example seems to keep going up). In other areas, principally, real estate, their efforts have been severely ineffective. The pattern of futility is especially apparent in locations that require large amounts of fuel for access to jobs and services.
Adjustments to land development patterns, and transportation infrastructure seem to be happening, but the pace is frightfully slow.
A bit of proactive leadership might be a bit of a help.
By taking over Freddy Mac and Fannie Mae the Fed has acted effectively to keep house prices from falling even more than they already have. A few years ago every economist knew that the housing stock was overpriced due to irrational exuberance.
Credit card rates are heavily influenced by the default rate. A rule of thumb is that the default rate equals the unemployment rate. Therefore, credit card issuers are writing off about 10% of outstanding balances each year. This is made up for by charging interest rates on outstanding balances of well over 10% on average.
Credit card customers who default are heavily subsidized by people who carry balances on their credit card. The bank's ideal customer is one who keeps his credit card maxed out, but never defaults.
Great article. I have posted it for journalistic review at NewsTrust.net. This is the kind of analysis we need more of, an attempt to use facts and logic to find the realistic middle ground between "we are doomed" and "the market will find a way to maintain growth".
Thanks! That is really helpful.
If others can post links to this article from other sites, that would be helpful.
I have written quite a few posts on this subject before, but I thought I would take a different "tack" this time, that addressed some of the criticisms one often hears.
Oh, yes. Off to the world it goes.
Reading Gail's article and the thread to this point has given me the oddest feeling: quiet relief. When the picture can be painted with such clarity, the story told so succinctly, it just *might* be possible to effectively spread the word. I haven't felt that way often in the 13-or-so years I've been wrestling with this.
Really fine work, Gail!
And great comments, everyone.
~Doug
excerpt from an earlier post, http://campfire.theoildrum.com/node/6598
The gap is already very easy to see:
http://en.wikipedia.org/wiki/Oil_megaprojects
That's why Lloyds of London and Chatham House in the UK just issued their warning:
"WE ARE HEADING TOWARDS A GLOBAL OIL SUPPLY CRUNCH AND PRICE SPIKE."
They further say:
"Traditional fossil fuel resources face serious supply constraints and an oil
supply crunch is likely in the short-to-medium term with profound consequences
for the way in which business functions today. Businesses would benefit from
taking note of the impacts of the oil price spikes and shocks in 2008 and
implementing the appropriate mitigation actions. A scenario planning approach
may also help assess potential future outcomes and help inform strategic
business decisions." (emphasis added)
http://www.chathamhouse.org.uk/publications/papers/view/-/id/891/
If the economy is divided into only a few energy using sectors, it is possible to see with some clarity what is oterwise extremely complex. Try four sectors or boxes where the energy flows from one to the other in sequence, each having energy flows that feed back upstream to pump energy their way: (1) the actual in place energy resources, (2)the ongoing, in-place process of producing, upgrading, transporting, and markerting energy, (3) the capital constructing industry and infrastructure devoted to producing the steel, pipes, rigs,drillbits, powerplants, etc. for the energy delivering industry, and (4) the rest of the general economy which feeds back goods and services (via energy use) to sectors 2 and 3, but consumes most of the energy it receives for its own "enjoyment" and maintenance.
Now as the EROEI on the first sector drops, more of the inflowing raw energy from sector 1 must be used by sectors 2 and 3 with considerably less energy finally passing through to sector 4, the general economy. If sector 4 gets less energy, this results in a recession or depression. Yet this is the sector that is the prime driver of energy DEMAND, as measured by the money that this sector is willing and able to feed back to sectors 2 and 3. With less economic activity in sector 4 due to declining net yield on the energy from sector 1, how will it be possible for sector 4 to keep paying more and more for the energy it receives?
In short, I am in complete agreement with Gail's presentation. It seems very counter-intuitive, but declining energy demand and declining real prices (inflation remeoved) for energy may be the real harbingers of peak oil, i.e. post low EROEI oil, having arrived.
Really, what we need is a better measure than price. If average income is stable, change in price is a useful indicator. But if income is dropping rapidly, even a stable or more slowly falling price does not reflect the difficulty most will have in getting the product.
So has anyone come up with an "Affordability Graph" for oil over the last few year? I would guess it would match the price graph fairly well up to the financial crash then start to diverge increasingly.
klrwtr,
You describe the situation well. It is very counterintuitive though.
Other people have tried to put together graphics, showing how the outflow of energy to society (which is really what is behind demand) goes down over time. At the same time, the amount of energy that needs to be invested in new energy supplies goes up, leaving the consumer trapped in the middle.
Prof. Charles Hall has a whole series of graphs by year, such as the one shown above, showing the problem as narrowing energy output arrows and broadening energy input arrows, with less energy left over for society.
Dr. Dennis Meadows of "Limits to Growth" fame uses the illustration shown above. He describes the situation as follows:
Gail, I would like to remind you and others who read this thread that your comment about solar and wind renewables after Figure 4 misses a large point. Sure, these renewables make electricity. So does hydro power, which is another renewable, but you left that one off your list. Furthermore, nuclear power also produces electricity and the same comment also applies to that source of primary energy. But, we have found that nuclear and hydro are good sources for our electric grid. Why is that? Well, hydro has an inherent advantage over other renewables in that the source of the energy can be stored behind a dam. Nukes are used to provide baseload power, that is, a constant source running flat out all the time.
The big problem with solar and wind is that they are not a constant, controlable source. The energy from them must be stored, if there is a need for use during periods when there is no supply. Funny thing, nukes are also in the same bind, but from an opposite direction. If a large fraction of electric generation were to be produced by nukes, there would be excess capacity during night time hours. Again, this energy could be made available with storage or offered at low prices to users who could schedule their use.
The point is that the problem is storage, not supply. Our fossil fuels are already available in a form which includes storage in high densities. We take this for granted and think the renewables must fit into this same paradigm. However, with improved storage of electricity, both electricity from renewable and nuke sources become much more viable as replacements for oil and other fossil fuels. That's one reason that progress in electric cars is so important and represents one of the major efforts in energy research. If advances in solving the storage problem occur, your comment will no longer apply.
E. Swanson
Currently, midnight to early morning load is well below the daytime peaks. Therefore, there is generation and distribution capacity in the existing network to charge EVs overnight. Furthermore, a lot of low value outdoor lighting could be discontinued if additional capacity is needed.
Well put.
One thing putting it this way brings out--solar (especially as prices come down and EROEI go up) is ideally suited to supplement nuclear.
Natural Gas plants can also serve as a kind of "storage"--they can be relatively easily started up or ramped up as need demands. And NG is relatively abundant, and produces less CO2 per BTU produced than other ffs. (Not that it is problem free, but it will surely be an important part of any rational transition strategy--though rationality does not really seem to be in the cards.)
As to the chart you refer to, it strikes me that the first thing that needs to be done is reduce use by about half. This would take out pretty much all the coal, which we must do for the purposes of minimizing the intensity of the GW catastrophe we have already unleashed. Then NG could start to step in for some current uses of oil--converting large trucks... and wind, solar and others could step into some of the gap left by coal and NG.
The main point is that vast reductions in use mush be the priority. That means industrialized countries taking the lead with reductions even larger, US and Canada need to go down to a quarter of current usage or less. Chindia's coal use will be the hardest to handle.
And we need a new economic system to facilitate all this and new media/advertising/propaganda system to promote it. This can actually happen quite quickly as was seen, for example, in WWII.
I know, I know--nevagonnahappen. But I think it's valuable to point out what could be.
The Odums in A Prosperous Way Down point out that we need to fully embrace contraction otherwise all else if for naught.
I think they are correct.
I think the issue on any of the "renewables" is that subsidies are often have been justified by "but the cost of fossil fuels will be higher later". That simply is not true, based on my analysis. The price of fossil fuels will only go as high as the economy will allow. If wind and solar aren't competitive now, they won't be competitive later, either, because there is only so much consumers can pay, and this is pretty much determined by EROEI. If the economy can't afford high priced oil because of low EROEI, it can't afford high priced solar or wind. The fact that published EROEIs for solar and wind look pretty high seems to me because EROEI do not consider a lot of things--timing, variability, similar system boundaries. If they did, I expect EROEI differences would correspond pretty closely to un-subidized cost difference (where high cost = low EROEI).
Certainly one can add a fossil fuel tax, but if one does that, and does not redistribute the proceeds of the tax so that consumers are no worse off economically (for example, tax gasoline at the pump, but send a check each month to cover essentially the cost of the average tax) then the tax will induce recession, and we will be back to more debt defaults and more layoffs.
Notice that in Spain, now that recession and debts are a problem, they are cutting back on wind subsidies--even retroactively. It really takes subsidy from the fossil fuel industry to make renewables viable.
"The price of fossil fuels will only go as high as the economy will allow"
Yes. As one of my friends always says, "It's not $10/gal gasoline you have to worry about; it's $2/gal gasoline that you can't afford."
I think it gets into something I’ve mentioned before : what you use a resource for matters. A gallon used to drive a soccer mom to a playdate has a different impact from a gallon used to drive somebody in a pickup truck to fix a wind turbine.
Alternatively: a gallon used to drive the soccermom to a playdate is different from that same gallon driving 3 people on a scooter from their village to call center where they work.
WeekendPeak
Gail, a fallacy.
EROEI does *NOT* include the "time value of money". Financial costs do.
Property taxes and leases are financial costs for wind, but zero energy costs.
Wind has a more or less constant payback (both energy & financial) over 20 to 25 years but 80% to 90% of the lifetime financial cost is front end loaded in the year or so before it goes on-line. And a big chunk of the residual 10% to 20% is royalties to the farmer and property taxes (with ACH deposits about zero energy costs).
Financially, Year 19 revenue is deeply discounted to almost zero.
If a manufacturer came in with a more durable wind turbine, with a 30 year expected life and a 10% higher price, they would find no buyers. Yet a 30 year WT would have a 50% to 20% higher EROEI than a 20 or 25 year WT.
See the disconnect between financial return and EROEI ?
Contemplate that when you assume that financial costs imply EREOI.
The reality is that 18 years hence, we (as a society) will have wished that all of the WTs installed in 2010 had been 30 year models and we will be grateful for each and every WT installed in the days of plenty.
Financially, NG generation has cheap capital costs (up front costs) but higher fuel costs (no property taxes on fuel used). So there lifetime cost of operation may be 5% to 10% on opening day and then escalate over time as NG costs increase over time.
But because wind needs a 15% financial subsidy to maintain rapid expansion (some wind will be built with zero subsidy) does not imply AT ALL that they do not have high EROEI.
Best Hopes for Rethinking Positions,
Alan
Alan,
Do you know what interest or discount rate is assumed when computing the present value of wind turbine investments? As you know, assumption of a high interest rate would bring present value way down, while a low interest-rate assumption values cash flows twenty years out as worth something (though not much).
In talking about expected financial returns, one must always specify the expected borrowing rate of interest (or the cost of equity capital).
Jerome a Paris (EU contributor to TOD) is in the banking business financing wind. Years go in Texas it was 10% discount, more recently I have heard of 9%.
I will eMail him and find out.
Alan
Thanks.
Per Jerome, non-recourse financing for 60% to 80% of total project cost can be had for 6.5% on-shore in Europe and 7% to 7.5% offshore EU. US rates a bit higher.
The residual 20% to 40% of equity would be looking for higher returns due to higher risk (bank gets paid first) and entrepreneur reward (putting deal together from initial survey for site to financing).
Gross average ROI for total project (financing + equity) of 9% seems reasonable for me.
10% is the normal discount rate in the oil field.
Alan
Thanks again. The numbers you quote seem most reasonable--realistic assumptions. I'm a little bit surprised that 10% is the normal rate in the oil field; I would have expected a higher number. In the oil field do they also use a payback period of five years or so in which a well is supposed to pay back the original cost of drilling and development? I would think that it is most likely that most companies use a payback period in addition to the present-value method--either a formally stated payback period or most often an unstated but implicit rule of thumb. Finance journals and books really hate the payback-period method, but it is widely used in the real world for many and probably most industries.
The discount rate is usually a closely guarded corporate secret, if you're in the business of buying & selling assets. If I know the discount rate you're assuming, but you don't know mine, then I can work out exactly how much you value an asset whereas you can't work out how much I value it. This gives me an obvious advantage in bargaining...
I think 15% used to be a fairly standard discount rate for assessing big high-profile high-risk developments, by the IOCs at any rate. I remember Shell used 8% for small low-risk incremental projects, i.e. debottlenecking & suchlike. I have no idea what the NOCs use - Saudi Aramco, PDVSA etc - but suspect it varies considerably depending which way the political wind is blowing.
15% looks about right for a high-risk (but not terribly risky) project.
Do you know if there is a typical payback period that the company requires? Four years???
My wife works for a windfarm and from what I understand it isn't quite that as simple as just a point estimate.
There are assumptions qua the tax credits, the amount of (floating rate debt) which has to be swapped into fixed, the amount of power which is hedged, and the rates at which it is hedged / sold forward etc, the cashflow waterfall used in determining payback to equity, debt and tax investors etc.
WeekendPeak
Do you know the number of years in the payback to equity or debt?
"It really takes subsidy from the fossil fuel industry to make renewables viable."
Most renewables, yes. However, while it is not a substitute for any of our currently depleting resources, the sun is still available. And if we use other natural energy sources directly, wind is also viable, as with windmills. But these are local considerations, and not implementable on large scales in the necessary time frames.
There are certainly locally made renewables, like small wind mills, and local water power. These have worked through the ages, and can easily continue.
And wood in small quantities has been used through the ages.
The problem is trying to replace all of our energy uses with these sources.
The FF industy is arguably massively subsidized so a transfer of subsidies would seem so out of this world.
if you were to fully allocate the military budget to our gas consumption the subsidy is something like $5/gallon. Take whatever reasonable fraction you want - it still is significant.
WeekendPeak
By this logic, early 20th century automobiles were destined to the dustbin of history, because most consumers back then could more easily afford a horse.
Really, fossil fuel's EROEI is still high enough compared to solar or wind to make the latter not competitive. When fossil fuel's EROEI drops, renewables should be competitive. Whether or not energy of any type will be affordable to rank and file citizens is another question, and Gail here is conflating the two issues illogically. Renewables will be competitive at some point. The real question may be whether or not there will be so many angry, desperate, formerly middle-class people that there will be no escaping the pitchforks for those who still know how to get a PV panel manufactured.
At some point (which I am afraid we have pretty much reached) the EROEI does not support society's infrastructure. If we were just using a tiny bit of oil, and our infrastructure consisted of a few bikes, and some simple homes, we might still be able to purchase the little oil we needed, but with today's massive needs, it causes huge problems.
If $140 barrel oil is too high, renewables which cost anywhere near there in equivalent cost are likely to be too high, regardless of the cost of oil. Our society cannot support investments which have huge cost to provide relatively small return--it is the issue of too little return coming through Charlie Hall's "cheese slicer" I posted elsewhere in this thread.
Gail, your reply ignores my comment completely. Your previous comment regarding electricity from renewables was not addressed. Why do you continue to make such clearly incorrect (should I say, stupid) statements? Are you intentionally denigrating solar and wind renewables, thus promoting nuclear?
You jump into a discussion of subsidies for renewables as if only renewables have been given subsidies. Nuclear power has been given subsidies for decades in the form of government research and development funding. The funds for research into renewables was cut substantially by Ronny RayGun in the 1980's and so the research efforts have lagged. Does your accounting include that perspective? I think not.
Your world of economics has long ignored many costs, placing them in the category of "externalities". Fossil fuel pricing is based only on the cost today to recover these energy sources. The "cost" of collecting and storing the solar energy in the form of hydrocarbons appears nowhere in the price of fossil fuels. The cost to the environment of the extraction is ignored. The long term cost to the environment which results from using the atmosphere as a dumping ground for CO2 and other pollutants is (usually) ignored, except where the costs associated with pollution control are available.
Also, the use of EROEI as an accounting tool does not directly translate into economic computations. That's because your economic calculations are based on perceived prices from earlier periods, not long term reality. EROEI is not about economics, but you draw conclusions in economic terms from various EROEI relationships. You wrote:
Fossil fuels are stored energy, which is like a large store of capital. Once that capital is gone, the activities which depended on the use of that capital will go away as well, unless other sources of energy are installed to replace those energy sources. Economics only quantifies and guides the division of the energy flows from fossil fuels and attempting to use older notions of what is "economic" and what is not distorts the real picture of what is actually happening on Earth. For more than two centuries, our economic calculations have been able to ignore the fact that the fossil fuels are finite. You thinking is trapped within that economic system and you won't get it until you can "think outside the box" of economics.
E. Swanson
Gail is not pro-nuke. Nor is she pro-major conservation. She wants to burn coal, oil and natural gas (until we collapse) because they are "cheaper" (i.e. value a rapidly changing climate as zero cost). OTOH, "cheaper" includes property taxes and land owner royalties on WT# as an expense even if they just transfer wealth.
And after collapse we won't burn them any more.
Alan
# All privately owned power plants pay property taxes in proportion to their capital expense. OTOH, since we have no carbon taxes, no taxes are paid on fuel.
Fuel is a tax free good, even if it has negatives greater than tobacco or alcohol (two negative goods with taxes to match).
Wind is almost entirely a one time capital cost, all subject to property taxes. Coal is a mix of capital and fuel costs and NG is mainly fuel costs.
Taxes on capital investment, no taxes on fuel distorts the market.
So taxes distort the true costs (financial, social, environmental and other) in fuel.
A very fair use of a % of carbon taxes would be to reimburse wind turbine owners for 100% of property taxes paid.
Alan, I do not think that Gail "wants" to burn all the coal we have. On the other hand, she thinks that we will burn all the coal, and on that point I am 100% in agreement with her.
If I were emperor, coal mining would be immediately banned, even though that would cause a lot of blackouts and even more brownouts. But I'm not emperor. Maybe one of my children or grandchildren will be dictator of the U.S. in another ten or twenty years: That is what it would take to stop the mining of coal in the U.S.
That is what it would take to stop the mining of coal in the U.S.
Actually not. A carbon tax that progressively increases over time will first reduce and then eliminate (almost) the burning of coal.
Creating virgin steel (not recycled, which is done today with electric arc furnaces#) will be the last major use of coal IMO.
# Since electric arc furnaces run in batches, they would be ideal sinks for excess wind (or solar) power. And recycling steel would be promoted since it would be low or no carbon and virgin steel high carbon.
Recycling steel (especially collecting & sorting it) is labor intensive. Perhaps a good thing post-Peak Oil. And many millions of tons of steel are moving about today, powered by oil.
Best Hopes for Seeing the Possible,
Alan
My SWAG is recycling plus 5 million tons/year of new steel could support a better economy and lifestyle than today.
But Alan, do we have the political leadership and will and public support for taxing carbon emissions or other enlightened approaches to reducing and eliminating the burning of coal? I think not.
One has to start somewhere, and TOD is a good place to start IMHO.
Not trying is the surest way to fail !
Alan
PS: When the USA panics is the best time to implement such changes. But the ground has to be prepared beforehand.
I agree that neither the US nor other countries is going to move to reduce coal consumption as quickly as is needed to prevent large CO2 emissions.
OTOH, I think that the growing consensus among sensible people that such a thing is desirable is going to make a difference. Wind power will grow quickly, nuclear will grow slowly, and coal consumption will fall slowly.
Further, we have enormous amounts of burnable fossil fuels, including coal, "shale oil", peat, etc. Alaska probably has several trillion tons of coal, and Australia may too. We're not going to run out of things to burn any time soon.
I'd say that the problem is as much that we have built our society around having constant or controllable sources of energy. A few centuries ago, the Dutch milled grain when the wind blew.
As for storage, this isn't a problem with solar and wind yet. It becomes a serious problem when these sources start producing more power than is demanded by the grid.
Actually, this has started to happen.
Germany has had cases where the nightime electricity price has gone negative, because there is more wind than there is total demand. (www.theoildrum.com/node/6418)
Of course, it is easy to produce power with a negative value when you are being subsidised to do so, and wind is first in the "loading order" so it MUST be used in preference to other sources.
Bonneville Power Administration has reported that it has periods when wind is causing grid instability.
The tipping point seems to be 20-30%, and wind sometimes reaches this at nightime.
So with utilities starting to report stability concerns, I would say the time for a storage, or load shifting solution is now. This will give a continuing market for nightime wind power, otherwise utilities will start to reject it and/or let the prices go negative, and the will bring wind development to a shuddering halt.
The challenge is not finding windy sites, or bringing down the cost of turbines, it is to find a way to sell wind power when it is needed, or move the demand to when the wind blows. There is a huge opportunity there, and it seems to be largely ignored.
The Swiss, with their 12 GW build out of more pumped storage (on top of existing) see both late night French nuclear and German (and other, such as French) wind as potential sources.
Worldwide
http://www.hydroworld.com/index/display/article-display/3551037273/artic...
Alan
In the end, the simplest and best way to think about wind power is that it CONSERVRES fossil fuels.If a country is spending megabucks for expensive fuel,especially imported fuel, even relatively minor savings can mount up and are quite worth while.
I lack the time and proper technical vocabulary to make my next point so please be gentle folks.
The nature of wind power is such that every part of the system is a compromise and nothing can be utilized fully or on a REGULAR basis.
First off a given turbine only produces a variable and intermittent amount of power.
Next off an expensive transmission line to deliver the power must be built;now building this line is also a compromise due to cost.if it is capable of delivering the full load the wind farm can put out on a very windy day, it is WAY overbuilt for a TYPICAL day.Hence there is a very good reason to build it to a lesser standard.If the turbines must be run at less than thier max out put occasionally, this is just part of optimizing the ENTIRE SYSTEM.
The interconnection of the wind farm and the rest of the grid has to work the same way;in order to deliver all the power available from the wind farm on the VERY BEST WIND days,it would have to be way over built for all the other days and therefore excessively expensive.
Think of this if you will as the farmer and his truck, and his private lane and bridge across a stream to a remote corner of his farm.He doesn't need a truck big enough to do every single bit of his hauling, because such a truck would not be used to its full capacity, or on a regular enough basis.
He can most profitably and rationally simply let a part of his exceptionally good crop crop rot in the field(shut down a few turbines on a high wind day) rather than invest in a bigger truck only seldom needed(larger transmission line), and a stronger bridge again only seldom needed (intertie arrangements).
The home built bridge problem on the farm is solved by only running a less than fully loaded truck across it and making more trips.
This is not a really good analogy but it should get the point across to some extent.
I'm one of those who contemplates a collapse scenario at some point. Industrialism and global capitalism are a system, and evolved as a system. There were bunch of synergies on the way up that will work in reverse on the way down. There is a point at which the system stops working as a global system, breaks down and breaks apart. Capital stops flowing around the globe, bombers no longer are able to "enforce", a global currency ceases to exist.
In one sense there is certain legitimacy to the panic that gripped the elite(s) at the outset of the crisis in '08. There was a real fear for the global system. It is now mounting once again.
And I don't think this collapse is 100 or 50 years off. I'm almost 70 and am worried I'll get to see it.
As an aside, I don't believe the bell curve for global depletion will be a symmetrical bell as it is (more or less) for individual fields and regions. It will be sharply skewed to the right, i.e. with a rapid descent. The population in 1900 was less than one quarter and resource consumption a tiny fraction of that. The bell cannot but drop off sharply.
One more aside. Lessened demand, inventory backlog, can temporarily depress oil prices. But cost of production sets a floor over the longer run, and that cannot but go up. Until, of course, total collapse at which point we give up trying to get the stuff altogether.
Back in high school their was a chant by the cheerleaders at football games "the bigger you are the harder you fall". I think that applies to economies and countries as well except that you could add the bigger and more complex you are... I also think collapse is quite near, and that the collapse of the Soviet Union is just a tame example of what can happen. I am applying for Social Security this year. I am just hoping to enjoy at least a few months of that retirement benefit.
Remember a few years ago when a bridge in Minneapolis collapsed. People drove over the bridge right before it collapsed. One minute whole, the next gone. Signs of problems with bridges were available to the general public after the fact. But obviously the people who drove over it daily did not expect it to come down. And apparently even worried bridge inspectors didn't feel worried enough to close the bridge. I expect the collapse of industrial civilization will be equally surprising to most, and much quicker and harder a fall than Kunstler and Greer or most Peak Oiler expect. I don't have charts and numbers to support this, but just a general sense that the warnings have been around for some time and not heeded and therefore the chance to create a more gentle collapse is past. Of course Hirsch did his much cited report and said we needed 20 years to prepare before Peak and here we are at Peak and still doing precious little so the conclusion is that we are already 20 years too late.
I live just North of Montreal on the island of Laval.
We had not one bridge collapsing but TWO within the last 10 years.
Do you have links? I may be on The Current tomorrow morning and it would be good to be able to talk a little bit about the Canadian situation. I've been in the U.S. for the last 10 years but am a Canadian citizen.
Plenty of links here ... http://www.google.ca/search?q=laval+bridge+collapse
As for the Canadian discussion on energy, please take a look at this blog/book.
http://www.jeffrubinssmallerworld.com/blog/
Thanks! (I asked because sometimes folks know the best ones...)
Ok, it's a go. I'll be on the show tomorrow with Colin Campbell and Michael Lynch.
I'm with you, Dave. A never-ending credit squeeze will mean the $560 million dollar deepwater rigs will become more and more scarce.
Making the problem worse, net exports will decline much faster than overall production as producer countries use more oil for themselves and, soon, begin to hold it back from the market. They will sensibly wake up and say, "Exactly why are we selling all our children's oil to other people?"
(Above is Jeffrey Brown (westexas) and Samuel Foucher's fine work.)
The result is something that looks more like the white line, which accounts for the net export problem (but not the "fast production drop" scenario).
Add to that the fact that all the fancy enhance extraction techniques just make the fall off that much quicker when it does happen, IIRC.
These 'scary' future oil production charts have to go, IMO.
The top one has daily production dropping to 40 mbpd in 2080, the lower one in 2044 with an especially ominous white line reducing oil exports to 0 mbpd in 2040.
The gap is based on $50 per bbl oil prices from 2000. That 'fact' should go away if $200 per bbl becomes the norm when the world moves away from oil and toward biofuels, natural gas and electricity.
Of course, being dependent on oil world GDP will decline as energy use and GDP are correlated.
The white line is another view of Brown and Foucher's work:
I agree that collapse is a real possibility. I think instead of a Hubbert Curve as our only model, we need to think of overshoot and collapse as a real possibility.
The problem is that as debt contracts, the reduced demand hits all fuels simultaneously--oil, natural gas, coal, uranium, wind, solar, geothermal. Output goes lower, and there are even more debt defaults and contraction. The danger is if international trade is adversely affected, because that could mean a real spiral lower, because we our cars could suddenly be without spare parts, and the electrical grid could be missing necessary replacement components.
the reduced demand hits all fuels simultaneously--oil, natural gas, coal, uranium, wind, solar, geothermal
Per se, that is a good thing, especially for coal and natural gas. I am encouraged to see less energy demand.
At least part of that reduced demand is coming from increased efficiency which is slowly filtering into our economy.
And if individuals keep there homes hotter in the summer and cooler in the winter out of economic fear, so much the better !
Less consumption is basically good, less investment in viable long term sustainable projects is basically bad.
Alan
Correct, individual field production curves are not normal, Gaussian, or bell curves.
They are curved up until a period past the peak, and then production ceases. It collapses. Because the limiting factor, money, won't allow for production of a resource that costs $20 to produce and sells for $18, due to a market with other easy-to-get oil.
Yet, many individual fields do not collapse, they continue to supply oil for long periods of times. These include stripper wells, etc.
Yesterday I put together this tutorial on how accelerated extraction rates eventually lead to a Hubbert Peak.
http://mobjectivist.blogspot.com/2010/06/hubbert-peak-in-five-easy-piece...
It gives you an idea of how an individual reservoir can deplete but it does rely on the fact that extraction tails do occur, as that is pretty much a natural law of proportional draw-down, in other words, the law of diminishing returns.
I believe that with off-shore that we see more of these collapse scenarios, because the cost/benefits of maintaining a rig for stripper value is much more starkly delineated.
Do any of these long-producing wells produce at a cost above market and sell at a loss? The extraction tail occurs only if the infrastructure, if the system as a whole, allows it.
We should probably go by what we see statistically. Based on lots of data, I would consider the average extraction profile to look like the smooth line that runs through this set of normalized curves:
http://mobjectivist.blogspot.com/2008/09/observation-of-shocklets-in-act...
Some reserve growth has to play a factor because there is never 100% certainty that they have predicted the exact amount when they start extracting, erring on the conservative side. So there is usually a ramp-up due to what I would call maturation.
And what is interesting about this plot is that it is from the UK North Sea, where the benefit/cost decisions are critical when a well starts declining.
So in general and on average, there is always a tail. But perhaps this is the kind of curve you were imaging? One man's tail may be another man's collapse?
The US case and the global case need to be analysed separately. With respect to the US case, we import about 2/3 of our oil supply. It accounts for about 1/2 of a very large foreign trade deficit. We are likely to run into Peak Foreign Debt, and therefore Peak Imported Oil, well before the globe runs into Peak Oil.
Our second biggest trade deficit after oil is the deficit with China. The solution favored by the US is to have the Chinese revalue the yuan so that it becomes stronger against the US dollar. This would cause the price of Chinese goods in dollars to rise, making them less attractive to US consumers, and slow the imports. It would also make US goods more attractive to Chinese importers.
However, this also means that oil becomes cheaper for China relative to the US, and it will cause the price in dollars to rise if the oil exporting countries adjust prices to keep the purchasing power of their exports constant.
Good points.
The US and the rest of OECD has transferred the majority of our manufacturing capability abroad. If we have international trade problems, we will have a heap of difficulty obtaining the goods we need.
But I am not sure that China necessarily does all that well. They have more manufacturing capability than their country can absorb, without OECD buyers, so if OECD has problems, they will see big manufacturing layoffs. They now have a surplus of well-educated young people without jobs, and this will get worse. I understand that growth is an expectation in China, and I am sure that credit is at least to some extent involved in buying all the new real estate there. Even a small downturn may cause problems in these areas.
So they may run into problems of their own--perhaps not as bad though.
Perhaps their problems will be worse. The Chinese leadership seems to know the time bomb they are sitting on. They have a very large, very well educated work force, that they have promised prosperity in return for supporting the government. If the prosperity doesn't happen, life could get very nasty very quickly.
Due to the crashing of their real-estate bubble, I think that China will be in a full-fledged recession with negative real GDP numbers within twelve months. The Western countries were not the only ones to have huge real-estate bubbles.
Here is an example how peak oil impacted on a toll-way in Sydney:
27/1/2010
Peak oil brought forward moment of truth for Lane Cove Tunnel
http://wwwcrudeoilpeak.com/?p=998
I didn't get your link to work, but Love Cove Tunnel seems to be a big toll tunnel whose operator went bankrupt recently, because traffic levels were below projections.
According to that article, Transurban paid 630 billion for a 3.6 kilometer tunnel!
Maybe Sailorman should learn to trust wiki more ...
wiki: "Transurban, a company owning several other toll roads in Sydney purchased the tunnel in May, 2010 for $630 million and became the new operators of the tunnel"
Wikipedia isn't always wrong or even usually wrong. The problem is that it is quite wrong enough of the time that I just don't use it because I can't rely on it or verify who wrote what.
As budgets for public education at all levels contract this year, it's becoming clear that peak oil and consequent economic distress will also translate into a "peak education" crisis of some magnitude. I think we'll ultimately undergo transformation of the traditional public educational system. Unless we are to devolve into a nation lacking educational opportunity (a circumstance which will further our economic decline), we will have to engineer an overhaul of the educational system to create more opportunities for people to learn on their own, online, at little or no cost. Credentialing will have to change, too. Successful completion of apprenticeships and/or passing scores on online examinations to demonstrate knowledge may offer alternatives to producing a diploma from Such-and-Such U.
We already see a need to undertake thorough-going education in critical areas not yet embraced by state educational systems, which are always slow to adopt tomorrow's curriculum in place of yesterday's.
InKyDo,
I'm writing a piece right now called "Societal Switches and The Impending Collapse of Higher Education."
The premise of the piece is that the transition from growth to contraction more or less instantly makes the product of institutes of higher education — workers trained in specialized skills — largely unnecessary. This isn't a gradual process, it is what I'm calling a "societal switch." One day it's needed, the next it mostly isn't.
The result will be an amazing contraction of higher education in the latter part of this decade, possibly earlier if the prospective students realize sooner that the economy isn't coming back.
Edit: a further premise is that we simply have more people than we need in every area, largely because we are firmly in the machine age, and that the current people will push off retirement as long as possible. There is little need to train more people in any almost any field you care to examine, soon even the so-called "growth fields" like healthcare.
We will look back at the 30% unemployment rate from the Great Depression with longing, wishing we could get it that low somehow.
Contraction has consequences.
Aangel, as a prof at an institution of so called higher ed, I would be very interested in seeing this.
I am involved in trying to get our smallish college to refocus on urban ag, food prep and storage, and other hands-on knowledge that will be needed in the coming collapse (assuming that the methane super bomb in the Arctic doesn't go off in a big way this year).
I'm going to submit it here and hopefully the Editors will feel it's worth posting. Stay tuned, it's almost complete. I may even be able to submit it today, since it's a rainy day in Winnipeg.
I look forward to reading. Please point us to it when you make it available.
People will have to learn a bevy of practical skills in a world where jobs are hard to find, easy to lose, and unlikely to offer substantive benefits. There will be an economy that operates mostly outside the world of salaries and consumerism, and people will have to learn how to configure that economy at the local level to meet basic needs.
August-May job is teaching high school English, though I'm doing a summer gig teaching for the local community college. I expect both institutions to be transformed over the next decade. While I admit that I hope I will still have a job, the bigger question becomes what education should look like and how it should be made accessible.
"what education should look like and how it should be made accessible"
Topic for a campfire??
I think the subject merits thorough-going consideration.
These subjects would be much more appropriate for high school and middle school. By what bizarre reasoning can anyone conclude that college graduates need to know these subjects--but high school graduates don't?
Sustainability skills studies begun in middle or secondary school need not end with high school graduation. Many of the skills applicable to sustainable living begin with accessible fundamentals but quickly segue into complexities worthy of in-depth exploration. I may raise a beginners' garden with my high school students, but apprenticing myself, even as a home gardener, to natural systems opens out into several avenues of advanced study that are beyond the scope of a high school course.
Sustainability studies programs in colleges will seed sustainability programs in secondary schools. They should also serve as resources or even work in partnership with middle and secondary schools.
Thanks, Gail.
Another superb article on the likely outcome of energy depletion.
Since governments have few choices, and certainly default will be
avoided at all costs, some reckon that debt is likely to be dealt with by printing money leading to Weimar type inflation.
Others argue that we are headed into extraordinary deflation as
any/everything sell-able is pressed into the market to service debt,
and price collapse will occur across the board.
It is also imaginable that both may occur at once, depending on the commodity and its scarcity. Or, fluctuations may occur, similar to
the price booms and busts of oil, as we go down the staircase of economic collapse.
What is your opinion? The topic can be quite complicated, and confusing.
Also, someone (an ecological economist - I can't remember specifically) proposed that a new (national) currency should be introduced, in parallel to the the existing currency, but have the former currency only redeemable for ancillary goods. The new currency would be ultimately energy based. Is this feasible/advisable in your view?
It appears that the transition from fossil fuel to a replacement fuel will result in a drop in the standard of living. This lowering of the living standard can be immunized if the government makes a major investment in R&D to develop the most economically viable replacement energy sources.
One factor that will help the employment picture in America is the fact that wages in China are rapidly raising. The one child policy is causing a labor shortage. Out sourcing will be less attractive in the future as the gap in labor costs narrows. It is essential that we replace fossil fuel with an alternative fuel that is competitive in the world market place. We must produce goods that are competitive at world market prices.
Until we fully implement nuclear power, we have not probed the depth of the earth’s abundance. Nuclear energy is provided by the earth. It is terrestrial energy and with it we can continue to live the good life for centuries to come. It cannot be exhausted in the time remaining until the sun engulfs the earth. Unlike fossil fuel energy nuclear energy is too abundant to run out and its energy density, on an atom for atom basis, is 50 million times that of coal. The spent fuel of today's reactors will be an abundant source of fuel for 100s of years to come. Our hysteria about ionizing radiation must be overcome with education.
Forget about renewables; they are diffuse and intermittent and come from 93 million miles away. They cost far too much, take up way too much space, and too much of our earth’s resources must be invested in their construction and maintenance.
With abundant and cheap nuclear energy the poor countries of the world can and will industrialize. Birth rates in many industrialized countries have dropped below replacement. When all countries become industrialized it is likely that the human population will return to a sustainable population size because women in industrialized societies choose to have small families. The population bomb threat will recede into a distant memory.
Terrestrial energy in the form of nuclear power will make possible the recycling of minerals needed for agriculture and industry. Minerals are not used up. Only fossil fuels are finite. The fear of GMO crops and genetically engineered plants that tolerate the application of herbicides that kill weeds is completely unwarranted. GMO crops and herbicide resistant seeds are in the process of creating the most environmentally friendly, sustainable agriculture ever practiced on the planet. As a plant physiologist looking at the coming developments in the science of agriculture, I am optimistic that we will see unheard of abundance of food that is safer and more nutritious than today’s food. It's too bad that ignorant Greens frighten starving Africans from accepting GMO crops.
With population growth about to turn negative we are looking ahead to a period sustainable abundance, enjoyed by all the citizens of the world. The key is to develop terrestrial energy, that is, generation IV nuclear power. We must overcome our paranoia!
I knew after the first paragraph that this was going to turn into a nuke promo piece.
So are nuclear plants:
Quick to build?
Cheap to build?
Immune to terrorist threats?
Not dependent on a finite fuel source?
Not dependent on a toxic fuel source?
Not going to produce toxic wastes that stay dangerous forever (on any human time scale)?
Able to display a history free of major catastrophes?
.
.
.
.
All these can be said of wind, solar and most other renewables.
And of course you tipped your hat when you referred to 'ignorant Greens.'
GMOs have not done anything so far to vastly increase food availability to the poor, and they are highly unlikely to do so any time in the future.
I would also like to know how you define "about to."
Your ideas smack of technofantacy and cornucopianism. Have you read any of the threads on this site?
Yes, I have been reading this site for about two years. Checking it on a nearly daily basis. The site fills a needed perspective. It is by nature of the subject, pessimistic. That's okay, but I think that from time to time someone needs to inject a ray of optimism. I see a world that benefits from both big government and big corporations. I am an environmentalist at heart. My reach on groundwater played a role in getting a ground water protection act through our State legislature. I blame big oil and big coal for the stagnation of nuclear power not the environmentalists. I have respect for both govenment and corpoations. I am currently enjoying reading Truman by David McCullough. I hated to put it down to compose my above offering. Truman and FDR are among my favorite presidents. Since retirement ten years ago I have spent at least two hours/day studying our energy situation. I have concluded to be competitive in this world we need to embrace breeder reactors and the science breakthroughs in modern ag. To fail to follow that course is a ticket on a fast train to the third world.
"Not dependent on a finite fuel source?"
Well, not if we build fast breeders. Plutonium cornucopia.
I'm pretty sure I sound like a broken record (nobody here too young for that analogy, right?), but: We're already importing more of the nuclear fuel we use than the oil we burn. Half of that is from Russia (swords to plowshares).
And, finally, it's gonna take a lot of increasingly low-EROEI oil to build those nukes. What was the lead-time, again?
IAEA Helps Developing Countries Plan Their Energy Future
Nuclear energy will be developed, with countries like France, Japan, China and India in the lead. It's not clear whether, after its long hiatus, the US would even have patent rights to current nuclear technology.
Maybe 'badly skipping CD' is more current, but soon to be replaced by something else, to be sure.
:)
1,
ah , you found my rose tinted glasses ! - can I have them back please?
2,
I see someone from the government has found TOD !!
3, and allthough I support nuclear power I an well aware it produces electricity and a waste problem we havn't solved yet , and there are many thing we can do with oil that electricity cannot.
4, GMO have so far been a prpblem in that all we've done is make people use more herbicides and pesticides - killing of wildlife onland and in the sea - sorry you;ll have to do better than that and we you do I'll beleive you and support you if we can keep the seed corn and not have to buy sterile crops off you every year - because thats a crime against humanity
Forbin ,
Considering that you've changed the subject to generating electricity, rather than motive power, please explain why you favor deployment one of the most costly electricity-generating technologies, nuclear, instead of those that are less costly. Thanks.
Source: page 11 of http://www.ferc.gov/legal/staff-reports/06-19-08-cost-electric.pdf
Those are construction costs, not costs of generation over the life of the plant taking into account fuel costs. One of the reasons nuclear plant costs are high is the return on investment cost of money expended during the planning and construction phase prior to commissioning. This can be greatly reduced by rationalization of regulation and approvals and by standardized plant designs.
Your response points to operation & mainetnance costs over life of the infrastructure. So what are your comparative O&M numbers for renewables vs FF and nukes? Please start with the respective cost of fuel.
Electrified rail uses electricity (very little though) for motive power.
Nuclear power reduces the oil consumption to mine coal and haul it thousand(s) of miles. It can also free up natural gas for other uses (gap filling for renewables, fertilizer, NG powered garbage trucks and buses, home heating).
You chart looks only at first cost and that is a fallacy !
What are the annual costs to operate ?
What is the expected lifetime of the investment (20 to 25 years for wind, 60 years for nuclear).
Prior experience has shown that building more nukes (I favor building only Gen 3, (such as EPR, AP-1000, etc.) for next 15+ years) gets cheaper when experience is gained and some economic level (not too many or too few) is maintained.
IMO, the cost per MW of new nukes started in 2020 will be half of the cost/MW of those 8 or so completed by 2020. Make the upfront "investment" now because we will need new nukes after we get 40+% of generation from renewables.
Best Hopes for a Rush to Wind and an economical build-out of new nukes,
Alan
I agree with your balanced, logical approach.
Base-load modern, much safer nuclear electricity generation combined with a huge build-out of wind, solar CP, solar PV, maintaining/upgrading existing hydro, and a huge energy efficiency push.
Or we wreck the land, water, and air with a massive push increasing reliance on coal-fired generation...
While I used to oppose nuclear power; this was not based on a good understanding of the potential negative impacts of carbon emissions. While nuclear power has risks; these are potential risks. Fossil fuel, especially coal result in an ongoing assault on the environment all the way from extraction through burning, and disposal. With nuclear power, thousands could end up dying; with coal, thousands have and most certainly will die.
Bring on nuclear, solar, wind, geothermal, conservation, efficiency, hydro, bicycles,walking, more compact and better zoned cities, less highways,less people, light rail, street cars, trains, and everything else we can possibly think of to lower our carbon footprint. What are we waiting for? Start by freeing up trillions of dollars for investment by cutting the defense budget in at least half. Or do we need that to fight for the last few barrels of a dwindling resource.
And this is not some sort of cornucopian fantasy. Of course we cannot have business as usual; not should we want to do so.
You do have to adjust those capacity costs by the percent of capacity utilized, you know.
This is a graph I made after adjusting for capacity utilization, back in this post.
There is a big range for wind though. Offshore wind is especially high cost. Some of the onshore, near where it will be utilized, is perhaps not too high cost. But we are running out of those locations.
You also need to figure lifespan of the resource. Forty years is often used. That is too long for wind and too short for nuclear.
Lots of questions.
What's your source that the population is stabalising? 70 million a year doesn't look like it to me. Try the OPT for figures, UN etc.
This looks like economies are near a systemic collapse. If not, what would you be looking for, what signs would concern you?
Western infrastructure is FF dependant, nuclear does not fill all that gap. Have a look at Saul Griffiths (and he's and optimist) numbers on Long Now.
GM crops are a solutions? If your plant physiologist, the evolution of GMO is a moving target and nature looks to get around it, human succession is energy intensive, nature always has time and energy to get what we've acquired back.
I read this and realise how deep the denial of our problems are!
Stewart Brand in "The Whole Earth Discipline" makes a case for population stabilizing by mid century. Scientific American on Line had an article with a similar projection last week.
According to EPA’s core policy analysis of Senators Kerry and Lieberman’s proposed legislation released yesterday, nuclear energy is projected to generate 44.2% of the US’ electricity in 2050, more than any other source. Total nuclear capacity is projected to more than double from 101 gigawatts in 2010 to 256 gigawatts in 2050 (assuming 90% capacity factor).
We do need to move toward fast breeders that operate at ambient pressure inorder to hold down cost and solve the waste problem. Russia and China are planning to add a total of 3 BN 800 breeders. They may go on line in about 5 years. Russia has had 30 years of very success operation of its BN600 breeder and France ran its Phenix for 37 years. Japan and India will also join the breeder group. These are small numbers but the world is ready to move.
I am completely surprised by the response to my support of GMO. I have a plant biochem background that allows me to follow the chemical mechanism of herbicides like Round-up. I can see absolutely no threat to humans or crops from its use. We have seen only the tip of the iceberg with this very promising technology. I can't figure out where your fears are coming from. Ehrlich's projection of massive starvation was wrong because he underestimated the power of science in the green revolution. Is it a distrust of large chemical corps? I know that I have painted a bit too rosy picture, but there is so much pessimism on TOD that I thought I might add a breath of fresh air. Maybe small breeders like LFTR will not produce in the end produce energy cheaper than coal, yet it appears the most promising solution to our climate change threat. I pay a two cent premium to my utility to purchase extra wind generated power. I am not in favor of government subsidized including nuclear, ethanol, and renewables. I have done research for the DOE on ethanol from alfalfa and I have done research on a high temp Chlorella (algae) for NASA. None appear as promising as nuclear.
I am completely surprised by the response to my support of GMO. I have a plant biochem background that allows me to follow the chemical mechanism of herbicides like Round-up. I can see absolutely no threat to humans or crops from its use. We have seen only the tip of the iceberg with this very promising technology. I can't figure out where your fears are coming from.
HERE, possibly...
Thanks for Monsanto video link its really good, but also very depressing :-\ how MSM doesn't air this stuff.
http://en.wikipedia.org/wiki/Monsanto_Canada_Inc._v._Schmeiser
Nuclear is a zombie kept alive by politicians.
233 Mwe Phenix is a waste reprocessor that doesn't make electricity.
http://en.wikipedia.org/wiki/Ph%C3%A9nix
563 Mwe BN-600 actually does make some electricity from U-235. A BN-800 will come online in 2015.
280 Mwe Monju just got restarted and will supposedly feed the grid in 2013.
This is the fruit of the 50 year worldwide breeder program---a technological failure.
The future of nuclear fission is in its past--the 1000 Mwe light water reactors that provide around 15% of world electricity(3% of energy).
4 million tons of uranium resource using 50,000 tons per year gives an 80 year lifetime for nuclear power at current rates, so newly built nuke plants will end up running out of fuel before they reach the end of their operational lives.
Nuclear riding to the rescue of BAU?--total idiocy.
The French are successfully reprocessing part of their spent fuel today.
Today, virgin uranium is cheaper than recycled or MOX (mixed oxide) fuel so their is not much incentive (other that getting rid of waste) to expend reprocessing capacity. For the French it is cheaper to just store the rest of their spent fuel (it gets less radioactive over time, and hence easier to reprocess) and wait for the cost of mined uranium to climb.
I see lack of uranium as being a non-issue for new power plants (which get more MWh/ kg of U than older plants). Reprocess fuel and find more ore after 80 years. And another go round with breeders a century plus into the future.
Alan
Another PR joke.
MOX is a proliferation threat.
http://en.wikipedia.org/wiki/MOX_fuel
There are 30 plants in Europe that can handle reprocessed fuel and most of those are using 1/3 MOX.
So at best you could stretch the overall supply of
uranium by a few years.
There is a MOX plant in France that makes 100 tons of MOX(fuel) from 850 tons of waste a year after the waste cools down for 15 years. The cost of MOX/waste reprocessors on top of nukes must be titanic.
Today MOX provides <2% of all nuclear power.
The US has a few MOX capable reactors like Palos Verde but is only now building a MOX plant at Savannah River.
Your devotion to the concept of nuclear/MOX powered trams is to say the least unusual.
Have you considered horse-powered trams? :^>
I've seen some of Stuart Brand's comments. He is clearly not interested in Malthus from a scientific understanding in regards population, but would he be so ready to discount Darwin, who gained major insights from Malthus's writing.
If you love Stuart Brand stuff so much you can go to the Long Now website and listen to Saul Griffths as he lays out the numbers including nuclear.
I agree, Ehrlich was wrong about his projections (he does too), can I suggest you listen to Bill Rees
http://www.ecoshock.info/ is Humanity Unsustainable.
What you call pessimism is disbelief from looking at the data and not understanding why the so called optimists/delusional can lead us into an abyss.
If you needed to complete a really risky journey who would you prefer, the so called 'pessimist' who points out all the possible hazards and what to mitigate risks or would you prefer the blind faith 'optimist' who lacks the capacity to admit that life is full physical limitations. I like new technology and many of the goodies, yet what I've got is due to a one time gift of fossil fuels, there is nothing on the horizon to scale up. It would be fairer and cause less conflict to for humans to contract in a planned manner. I don't expect it to happen.
We'll both find out in a couple of years time who is closer understanding reality.
If I was "a blind faith optimist", I wouldn't be a regular reader of TOD. I am a realist. The probability of our grandchildren enjoying the standard of living that we have taken for granted is very small, I would say nil.
China has a good balance sheet. They are moving ahead with planning for a broad base of future energy sources including nuclear power. I predict that they will continue to be leaders in both nuclear and renewables. They will produce nuclear for domestic use and renewables for export.
China is starting to feel the pinch of a shortage of workers due to the one child policy. Wages are raising rapidly. As the wage gap narrows the pressure should go off outsourcing. Our economy is so intertwined with the China economy; they may try to prop up an American economy to prevent an American market crash.
Energy is at the base for a productive economy. Nuclear fuel is 50 million times more energy dense than coal. Common sense should tell us that diffuse and intermittent renewables cannot produce power as cheaply nuclear power. Government subsidies kill innovation and handicap a nation's ability to scale up the most economically competitive energy source. I oppose government subsidies for all energy sources, but I recognize the value of energy diversity, so I allow my utility to add an extra charge to my bill for the purchase of more wind generated power.
Fifty seven years ago, I began taking graduate courses in radiation biology. I am not optimistic that our national fear of ionizing radiation will allow us to match the Asian enthusiasm for nuclear power. Radiation hormesis is real and most Americans have not even an idea of the difference in radiation hazard between, alpha, beta, and gamma radiation. About three weeks ago an old man who had a collection of cream separates, had a display on the street for his town's annual celebration. Since, I have the cream separator that I cranked as a child, we had a common interest. As our conversation continued he mentioned that he had just returned from a two year Peace Corp term in the Ukraine. He produce a large chart, the periodic table, in Russian. He explained that grade school children were taught a detailed knowledge of the elements. Yes, you have good reason for pessimism about our future. Let's hope it is not self fulfilling.
Radiation hormesis is real
Translation: Radiation is good for you.
BS !!
Nukes can be no more than a secondary, "clean-up" part of the effort to get off FF.
Such supporters do nuclear power more harm than good.
Nukes are *NOT* a cure all, and good for you besides.
Alan
Sorry Alan, your denial of radiation hormesis without supporting evidence confirms my point that American's unfounded fear of ionizing radiation is preventing the development of the one currently available technology capable of replacing fossil fuel. I retired from teaching immunology ten years ago. Our species evolved in a world that had much higher levels of radiation. Radiation exposure induces several mechanisms of the immune system that function to actually lower our incidence of cancer. Among those are killer T cell and apoptosis that eliminate cells with damaged DNA. Such cells are a risk for becoming cancerous. Cells are damaged from a variety of source, including chemicals in coal smoke and free radicals that are a product of our own metabolism. Radiation induced surveillance reduces the risk of cancer occurrence from those sources as well. It has been shown that populations who live in areas of high background radiation have an increased level of DNA repair enzymes. It is no coincidence that the seven states with the highest background radiation, year after year appear on the list of the ten states with the lowest incidence of cancer. Background radiation varies over a wide range. Evidence suggests that increasing exposure to the upper part of that range would tune up the immune system for better overall health and reduce the incidence of cancer in the population. In short radiation hormesis and that is backed by the science of biology. IT IS NOT BS!!
Our species evolved in a world that had much higher levels of radiation.
Utter BS !!
A half million years ago, when homo sapiens was developing, natural background radiation was much lower.
No C14 from atomic bomb tests (a significant uptick in background radiation), no medical X-rays (very significant), no radiation treatment for cancer, no radon in drinking water (water has to come from wells for that to be an issue). Cave dwelling was not yet in vogue and few if any humans lived at higher elevations (more cosmic rays).
Alan
I think there is more evidence for hormesis than LNT response! I agree, however, that we don't need to sell a message "radiation is good for you!"
Nevertheless, studies of populations with annual background radiation dose 10 times higher than the N.A. average (30,000 mrem vs. 300 mrem) have shown no evidence of increased incidence of cancer. The take-away: the fear that ANY extra radiation, 5 or 10 mrem, or even an extra 300, will cause cancer and that there is no such thing as a safe dose is utter BS!
The problem is that this fear is built into regulations and the politics. That will have to change before nuclear power is can help us get off of FF in a big way.
John, we all have narratives or stories about the way the world really is, the question is what are the consequences of believing in the stories.
I believe we already have all the technology we need to deal with the energy problems, but this is a question about culture and values.
We live in a world where 1 billion are obese and 1 billion are starving or malnourished. We have all the technology and capabilities to feed everyone, but not the inclination to do so. Western countries provide health care for gluttony. How far would that money go for health and food in a 3rd world country.
As for self fulfilling prophecy, I find it hard to believe that is the best you can do on rhetorical debating, you should really brush up on dialogue. If your right everyone will see it in the years ahead, if I'm wrong it is my fault for creating a future by saying the wheels are coming off the economy. At what point do you take responsibility?
bloomingdave,
What I think happens is that imports will start becoming hard to get. If there are things that are entirely made internally, they may be reasonably priced, but these will soon disappear from the market place, as necessary components disappear.
So I see the problem as more a lack of things to buy, then necessarily high price. Also, if a very substantial share of the population is laid off from work, no matter what the price is, it will be too high for the unemployed to pay.
I can imagine things happening like banks going out of business because they don't have electric power--and thus don't have a good way of dealing with the financial records that used to be stored on their computers.
I wonder if inflation/ deflation is really the right question now.
With respect to using energy as a form of money, I am doubtful it will happen, unless the energy is the energy of, say, one pound of beans. Otherwise, the concept is too abstract, and too removed from day to day activities.
You propose:
"In real life, prices can't keep going up."
I do not believe that you are correct. The rare item moves from being a commonplace to a luxury to something only for the rich. A good example of this is saffron, which has moved from a household seasoning in Elizabethan times up to an object of enormous expense. Whale oil -- except that we have banned whaling for the most part -- would be in the same range. Whale oil was once the core lighting fuel for many Americans; it would now be something brought out at Christmas if you were the local centimillionaire.
"If the prices of the new fuels are too high for consumers to really afford, one needs long-term subsidies."
And where are these subsidies supposed to come from except the taxes paid by the same consumers? The same people will end up paying, one way or the other, but with subsidies it will be less obvious that one should avoid waste. Your solution I suggest will actually make matters worse, not better.
I am old enough to remember the 1950s, and my parents remembered 1920 or 1930. A 200-mile auto trip was a major event, and a mechanic checked the car in advance. There was in 1920 electric light for reading...one 60-watt light bulb, carefully diffused, my father recalled, shared by several family members. When goods became more expensive, they were used far more carefully.
"If only one or two small governments default on debt, the world can probably accommodate the defaults pretty easily. But if problems spread to a large number of big countries (UK, United States, and Japan, for example), then international trade is likely to be disrupted, because many sellers of goods will find themselves without payment."
There is a considerable gap here in the argument. Defaults do not happen without advance warning, as the Greeks have demonstrated even without defaulting. As default becomes more likely, the market premium on borrowing by the defaulter goes up, and the willingness of suppliers to supply goods and services other than on a cash and carry basis declines. The latter is reflected as an increasing hazard premium on delayed payment, rather than a simple no cash, no carry. Also, sellers become much more interested in plausible Credit Default Option arrangements, though most will conclude for a large government that there are no such options available that actually work.
The path toward generating very large investments in a timely way is straightforward, namely you allow prices of the scarce item to rise. You also make sure that the investment climate is legally stable; for example, tax laws do not change radically from year to year. We have done this, and the results are evident; for example, investment in wind power is rising close to exponentially.
Good points. And many here expected just such an endless rise to happen.
The difference between oil and your examples is that it is arguably the or one of the central bases of industrial civilization. So when it becomes expensive, it doesn't just shift to use by the elite--it grinds the whole economy to--if not a halt, at least a major slow down.
I will try a different spin.
What do we call the process of billions upon billions of prehistoric organisms getting crushed and perfectly cooked and then the results moved around by entropy until they form human-accessible reservoirs?
The greatest subsidy ever known to mankind!
definition subsidy: a form of financial assistance paid to a business or economic sector
Essentially a fluke of nature and good fortune (why wouldn't entropy just disperse the oil?) subsidized the great industrial boom of the last century.
Now its our turn to subsidize and we have to work together on that.
Stoneleigh of Automatic Earth gave a good talk on the economic aspect of collapse at the Transition Conf in the UK
http://www.j.mp/Stoneleigh
thanks.
i could only get the first 25 min. or so. i checked AE[most recent]. any other links. thanks again!
What does it take to be able to build a Geothermal power station anywhere in the world ???
1.) Enough water to generate steam. If you recycle the steam, limited amounts of additional water is needed.
2.) A couple of holes in the ground, of at least 10 km (6 miles) deep for 80-90% of the world.
With conventional drilling methods, how deep can one drill ???
- About 4 to 5 km max, but that's not very economical at the moment.
Please take a look at the new drilling technique in development by potter drilling.
If they succeed, they will be able to drill 10km+ for a fraction of the price compared to other drilling methods.
http://www.potterdrilling.com
http://www.guardian.co.uk/environment/2010/may/19/google-drill-geothermal
Unfortunately, Potter drilling is not a public company.
I follow their progress because I think it's the best hope we have to solve a large deal of future energy shortages.
Unlike most other alternatives, Geothermal energy will ALWAYS be available in overwhelming amounts when we learn how to capture it.
Enjoy !
A new generation of geothermal plants uses a working fluid other than water for boiling, allowing use of lower temperature geothermal sources.
Also, geothermal today is optimized for lowest capital cost/MWh. That means a 100% capacity factor. With larger generation "on-top" daily cycling can generate more during peak demand times (and stay on "low" or "off" all weekend).
Inertia on the underground water limits the responsiveness and varies from project to project. None-the-less, most geothermal projects can go from 30% or 50% to 100% of the maximum. Just drill more wells and have larger generators topside.
Best Hopes for More Geothermal,
Alan
How to Offset 2% (or 4%) Annual decline in oil/energy ?
This is at the heart of a series that I offered to write for TOD, forwarded to Prof. Goose, but no response to date.
In a word, increase efficiency at a substantially greater rate than 4%. Pay for it by diverting a smallish % of consumption towards long lived energy efficient and energy producing infrastructure.
Multiple fronts, *ALL* "affordable".
In no particular order:
Water Heating - Solar or natural gas tankless required for new, incentives for retrofit
Retrofit housing for efficiency
- New units SEER 20 heat pumps minimum (26 SEER best available), retrofit 17 SEER (Up from 13 SEER)
- Increase appliance efficiency (no refrigerators sold that use over 500 kWh/year for example).
- German type standards for new housing (R-48 walls in northern areas, triple paned standard, etc.)
- High incentives for retrofits insulation, windows, doors, weather sealing
- MASSIVE public education and at home visits by experts plus efforts to "make it cool" and "do your part" to be efficient
- Surtaxes on high electric & gas bills
Massive reduction in commercial space (currently 10x 1950 levels per capita with MUCH longer hours than 1950, reducing to 7x 1950 would shave a few % off US energy consumption, goal should be 2x 1950 levels or less).
BIG push for renewables, preferable with Carbon Tax that phases in higher and higher C taxes with feed-in tariffs that keep wind growing by a minimum of 30% compounded (if it fails to grow that much, new direct subsidies automatically come into effect next year).
Massive subsidies (by various means) for pumped storage and HV DC lines from high wind areas. Perhaps assign TVA and Bonneville to this task for direct gov't ownership via competent utilities.
Microhydro gets renewed emphasis. Likewise geothermal and solar.
Make deal with Canada for 40 GW of new hydro (25 GW Quebec, 8 GW Newfoundland, 4 GW Manitoba, 3+ GW BC (?)) Revise Niagara Treaty to allow less water for tourists, more for hydropower.
Electrify 35,000 miles of mainline railroads in 7 years, add back double tracks, build rail over rail bridges when N-S crosses E-W, straighten curves and dig tunnels where it will speed or add capacity, reduce at grade crossings, the bulk done within ten years. Transfer 80+% of current truck freight to electrified rail within 15 years (20 BTUs diesel to 1 BTU electricity is a major gain).
Add train passenger service to above to help offset impact of much higher aviation fuel taxes.
Build Urban Rail and encourage Transit Orientated Development. 5,000 miles of Light Rail in ten years (= to French effort) plus 800 miles of new Metro (subway type) and 3,000 miles of streetcars in first ten years. Shift to more streetcars in second decade.
The direct savings from shifting from cars to Urban Rail is smaller than the changes in Urban form. Washington DC Metro saves over 100,000 b/day today and more Urban Rail (15 identified lines, all types) can easily expand that to 250,000 b/day.
Bicycling, if made safer and more convenient, can be a "no energy" safety valve if oil becomes a problem. It also significantly reduces consumption (buying cars, maintaining cars, fueling cars are major areas of consumption). Said consumption can be redirected to investment.
More later,
Best Hopes for Seeing the Possible,
Alan
Build 8 new nukes in USA by 2020 (and offer incentives for 2 in Canada if possible, perhaps US Gov't brokers deal for New York State buying % of new Ontario reactors). Another ten completed by 2027 and then ramp up.
Alan, I hope TPTB are listening to you. I fear not because what you described makes, quite simply, too much sense. I would add to your list only that:
- we revamp how nuclear power is regulated as excessive bureaucracy and unsupported fear of radiation (thanks to the LNT - based dose-response models) is probably the biggest single impediment to ramping up. It can take many YEARS before any new reactor design can get certified under the current NRC mess. Thanks to the NRC regulatory landscape, it is almost impossible for venture capital to make a go a selling new reactor concepts into the U.S. market. That MUST change.
- we encourage development of small modular reactors. Making small reactors on an assembly line, and ship them whole via rail or truck, would make deployment a "plug-and-play" affair and slash capital risk. Production would benefit enormously by rapid series manufacture of small units with shorter innovation cycle times supporting faster evolutionary rates of the technology, and faster learning-curve progression in manufacturing process resulting in greater progression in cost reduction. A SMR environment would also foster competition between reactor concepts (liquid sodium fast reactor, vs. lead-bismuth fast reactor, vs. U235 molten salt, vs. liquid chloride breeder, vs., liquid fluoride thorium breeder, etc.) so the market could help sort out the best designs that deliver results at the best cost. SMRs could also be deployed in a diverse range of applications: process heat for industry, district heating, etc. With this we could ramp up nuclear at an incredible pace from 2020 onward...
Steve this just seems like techie-cornucopianism to me. And as for the idea of shipping lots of little nuclear reactors all over the place. . .
I think the people of the GOM aren't that happy with
as you put it.
Sounds to me as though you're describing exactly what BP just did.
Yup, we now know where the cost/benefit boundary is for deep water drilling. Lets try it with nukes too, is that your proposal?
Fear of nuclear power is unfounded. Misplaced fear of the technology, and misplaced assessment of the risks it poses compared to, say coal or oil/gas, per unit energy delivered are what drive hostility in the nuclear debate. A molten salt reactor, for instance, operating at atmospheric pressure is intrinsically safe, i.e. the physics of fluid core expansion with heat guarantees a negative reactivity response - a.k.a. self-regulating and automatically load following. It CANNOT melt-down. The old AECL SLOWPOKE (low power, a design suitable for district heating) was certified for unattended operation given intrinsic safety features, IIRC. I can go on. Small modular reactors is what the U.S. Navy has operated for, what, 50 years! Is it techno-cornucopianism to point out that well-known science and engineering is sitting there, capable of preventing an energy-collapse of western civilization? Or, would you prefer we just throw our hands up, say we can't do anything and welcome the collapse? A unit that could fit on a rail car could deliver at least 50MW of continuous power for, with some designs, 20 years on ONE FUEL LOAD. I'll place my bets on that kind of EROI than anything else under a scenario of energy descent.
Exactly the point I was going to make.
Many seem to think that we would be fine if we would just stop listening to the silly concerns of those paranoid greenies.
Well, it was mostly the greenies warning about off shore drilling.
They were ignored.
We can all see the consequences.
So now we should also ignore environmental concerns about a big nuke ramp up?
Reeeeealy smart.
Even though that's a logical fallacy, I agree with you. We "greenies" are right about nuclear power, and I don't think that has any logical connection to the fact that we were also right about offshore drilling.
For instance many of my fellow "greenies" think that cellphones cause cancer. Which is complete bullshit.
I consider myself a greenie! Interesting how assumptions work... pro-nuclear = non-green. I would say that assumption is completely false: pro-nuclear = green.
I believe we conserve, doing everything along the lines of Alan FBE's prescription, as the first threat is a LIQUID fuels crisis. Nuclear power, or wind turbines or whatever, won't help unless transportation is electrified on a large scale - esp. with rail. Conservation yields immediate benefits and social transformation is required to achieve this most effectively, i.e. we must change the cultural paradigms away from growth / conspicuous consumption / consumerism to thrift, economy and respect the environment. Such attitude shift will be necessary to sell Transit Oriented Development, away from the suburbia paradigm complete with big honkin' SUVs.
OK, assume we've done all that. We still have this problem of coal. We still have the environmental cost of gas. To stop ourselves from frying the planet COAL is enemy #1. Reduction goals to REDUCE GHG concentrations to 350PPM are in the 85% range. That means we have to be on a trajectory to virtually ELIMINATE fossil fuel use by 2050. Looking at erudite analyses at Brave New Climate, I am completely convinced that wind turbines and solar panels WILL NOT be able to reduce our emissions globally by 85%, especially since energy use in the 3rd world will likely rise (we have fat to cut. They don't.). The only thing left is nuclear power after everything else has been done. When you look at the waste stream per GW-year of energy produced of CLOSED fuel cycle designs and stack that up against ANYTHING ELSE (keeping in mind how much resources it would take to produce 1 GW year of power-on-demand via wind), yes nuclear is the greenest approach humanity can take to run an industrial civilization. Factory-produced small-modular reactors are probably the best way to scale up fast to provide MASSIVE amounts of distributed power systems for electricity, heat, transportation (shipping) here and abroad. SMRs also offer the best path to cost reduction and maximizing flexibility in deployment .
Siwmae Ben! No point in arguing with techie-conucopians, especially North American ones. Just leave them to continue to fantasise, until the carnivorous black swans come to get them. Soon if the most frightening portents are true, over the next four hundred years if John Michael is right. Take regular doses of Orlov to ward off any tendency to swallow the fantasies. Hwyl fawr! RhG
When it comes time for the Big Die Off, I'll let you go first LOL.
Seriously, if someone told you 25 years ago what computers and digital electronics would be doing today, you wouldn't believe it: BAH techie nonsense I hear you say...
Just as the physics behind semiconductors supported unbelievable growth in capability, so does the physics behind nuclear fission with stunning capability to produce virtually limitless amounts of energy. It is hard to grasp the meaning of the FIFTY-MILLION-TO-ONE advantage in energy density over the nearest rival, so much so that many simply cannot believe the almost magical nature of fission.
This is not fantasy.
It is called science, PROVEN science and engineering documented over the past 50 years.
A peaceful planet with a STABLE population will need tremendously MORE energy, not less. Energy starvation is a prescription for collapse, without a doubt. Fission provides the solution to ramp up energy supply on a global basis without frying the planet. It is as simple as that...
Alan, right on target. 2 quibbles and one comment:
You should reduce your number for refrigerators: check out http://www.topten.info/index.php?page=without_freezer_free to find a number of fridges using ~100kWh per year (do you really need walk-in-fridges on the other side of the atlantic?).
Japan's top runner program (http://www.worldchanging.com/archives/011179.html) is a nice way of ensuring that appliances are always top-notch, by simply forbidding all appliances that are worse than the current top appliances - survival of the fittest!
It would seem to me that you have forgotten the easiest and most important item in the list: change CAFE standards (http://en.wikipedia.org/wiki/Corporate_Average_Fuel_Economy) to get 50mpg (it's possible, right now, without hybrids). Typically, cars last 10 years, so within 10 years the US fleet average mpg could be twice what it is now, saving approximately 5 mbpd of oil consumption; massively reducing US oil imports, massively improving US trade deficit. Gail claims that nothing can be done quickly, but this would be real quick...
All of the refrigerators noted did not have a freezer. A separate freezer shoves energy demand up substantially over a combined frig/freezer. I also strongly suspect differences in the way the EU measures electrical demand and the way that the USA does.
And a freezer is a necessity in any practical sense of the word.
I bought a combo 388 liter refrigerator with a 150 liter freezer (no ice maker to save a bit of energy and create more freezer space). By USA standards, 396 kWh/year, about 8 kWh more than the most efficient comparable size unit tested by the gov't.
Given that a number of EU manufacturers alos sell in the USA (I bought also bought a Bosch washing machine, a USA only design and the most efficient one sold here) and there 60 Hz, 120 V models use more electricity than the one I bought, per US Gov't tests.
Best Hopes for Energy Efficient Appliances,
Alan
welcome to the debate...
the problem with most solutions is that they do not survive contact with the economic system (never-mind whether they would actually work).
your list of good ideas is in of itself fine(perhaps) but implementation would probably require somesort of command economy... Ie radical changes in political and social mindset
some would argue the real problem is even deeper and resides in the reward centers of our brain and is mostly related to sexual competition of one sort or the other..
really the solution is just to ration everything of import and get a economy that works with-in sustainably per capita rates ...which may or may not include some of the many bright ideas banded about.... what ever solution one ha in mind a absolute per capita value will exist...irrespective of how it is parceled out
your thinking will probably be attacked as a BAU solution based around uncosted tecno solutions that ATEOTD dont really address the problem
Exactly. I've been reading this thread too, and amazed how people will try anything and everything in a communal effort to keep the ball rolling, BAU. What if we could, and what if we just, and oh, maybe we could also. No, the world has gotten to where it is on fossil fuels, namely oil and as oil depletes the economic system breaks down.
No extent of comradery or nuanced mincing of words can change that outcome. There is a trajectory that is in motion, a momentum that is several decades in the making with unfortunate resultant outcomes probably in the nearer future than most of us realize.
An unending growth in efficiency. Sounds like a capitalist model or a religion.
Alan,
I register my vote/wish right now to be able to read your intended series someday soon.
In my more ideal world, you or someone like you would be the Secretary of the U.S. Department of Energy, and you or someone like you would have broad license to enact positive change.
Excellent Gail. Did find a sentence that should be changed:
But other than that it makes a good case for the effects on the economy of higher priced oil. I'm starting to think even a price of 75 dollars a barrel is too high to keep the economic engine moving as needed to maintain BAU. Seems like it needs to be 70 or less. But then again too low a price reduces investment in exploration and so on. Tough situation as the cheap, easy to get oil depletes.
Yes, the price needs to be in the Magic Price Incentive Band. See my piece You've Bought Your Last Car.
Thanks! Fixed it.
In a capital intensive enterprise such as oil production, there are two pricing regimes: (1) Capacity is sufficient to meet total demand and (2) Capacity is insufficient to meet total demand. If capacity is sufficient to meet demand, the product price will rise with the "marginal cost of production", the price needed to pay for the most expensive barrel lifted (and shipped, refined, etc.) to get it to market. As peak oil is approached, this price rises. When capacity is insufficient to meet total demand, the marginal production cost is no longer the price driver, there is a finite amount of oil in the market and those who want it must bid it away from others who want it; the "marginal value of product" sets the price. Those who benefit most from having the oil will set the price. The market-clearing price will become that of the least valuable user who is willing to pay a highest price to obtain product. If, after peaking, production begins to fall, the price will either continue to rise as users bid for less oil or it may stabilize and eventually drop as users change to other technologies (wind, solar, bicycles …).
In a macabre sense, it is amusing to watch politicians attempt to negotiate with physics and economics. Both have rather firm positions and are implacable negotiators.
You have repeated one version of the theory. The problem is that the higher prices don't necessarily "stick", if consumers have to default on their debt or cut back on discretionary spending to pay them. The credit system very much affects demand. If too many debt defaults cause lenders to raise the "insurance charge" component of the interest rate, and may also change lending standards. With fewer people qualifying for credit (or able to afford it), demand drops back, and prices drop.
The way I understand it, a constrained oil supply puts an upper bound on economic throughput (GDP).
Renewables cannot compete because whenever oil prices get high enough to make them competitive, recession is triggered, oil-prices drop, and investment shrinks.
Is it possible to break the correlation between oil supply and overall economic throughput?
What if we increased taxation on non-renewable resources and reduced taxation on individual income (labor) to compensate for the higher cost of goods?
How fast could renewables 'pick up the slack' once they are cheaper than fossil fuels?
Conventional economists say we'll substitute 'something else' when oil gets too expensive. Turns out they are right, but the problem is we're substituting 'negative growth' for oil.
Ultimately we must balance our resource use with the regenerative capacity of the planet, but how do we get there without going through the Dark Ages?
Peak oil means peak GDP, in other words, a continuous recession for the West. See http://www.jeffrubinssmallerworld.com
The only real alternative to oil I see at the moment is electricity from Geothermal ... that is IF new the new potter drilling technique really works.
As a transition source, Nuclear would be my second choice, but like oil, uranium is also very much in a limited supply.
The more you start to rely on it, the faster you will get peak uranium ! The same for natural gas and coal.
- Geothermal is the only source that will ALWAYS be available (say for at least another billion of years).
- It is not seasonal and or doesn't work part of the day (like wind and solar).
- And it's the only source available in an unlimited supply ... provided you have enough water to make steam.
- If you develop the technology to capture it, you can build clean power stations where you need it most, in the middle of the cities.
- Except for potential cooling-water problems, it is very environmental friendly.
The world is capable of putting people on the moon. It should also be capable of making 10km+ holes in the ground !!!
Deep drilling for geothermal caused earthquakes in Switzerland and we believe caused a moderate 4.5 earthquake in our neck of the woods here in California, before it was stopped by the Dept. of Energy. Deep fracturing has its risks.
May not be the panacea many thought just a few years ago.
There is lots of room to improve on absolute energy efficiency.
Think of your average auto that basically hauls around 4,000 lbs for 200lbs of payload.
I predict that the way renewables could continue to be deployed would be as was done during the depression of the 1930s: by gov't using a lot of otherwise unemployed labor.
If the prices of the new fuels are too high for consumers to really afford, one needs long-term subsidies
VERY bad public policy !
The exact opposite should occur (although politically difficult). Citizens (as opposed to "consumers") need to adjust their lives to use less, or none, of the "unaffordable" energy.
Government should raise taxes on "unaffordable" energy (thereby extracting funds from consumption) and use these funds for investment to help develop alternatives that it's citizens can migrate to.
The change over is inevitable and the longer we wait, and the smaller our investment, the more painful it will be. But delaying the inevitable does no good, ONLY harm, in the long run.
Alan
Good catch, subsidies never solve problems, they are only moved around.
Oil product price subsidies would create shortages, and from the shortages we would get both price controls and eventually gasoline and diesel rationing with marketable coupons--except that instead of using paper coupons we'll use electronic cards like credit cards or smart cards.
I do expect to live to see the day when we impose price controls on gasoline and diesel. Sooner or later after the price ceilings have created shortages we'll see the politicians grasp at rationing in the name of "fairness."
By the way, I'm seventy years old now. (But my health is very good.)
So I'm guessing you consider capitalist market pricing to be ""fair""?
Market pricing clears the market and prevents both surpluses and shortages. No price other than the market equilibrium price (where supply and demand curves cross on a graph) can make that claim.
If you want shortages, then by all means, let us have price ceilings on gasoline and diesel. As surely as night follows day, a price ceiling below the market equilibrium price will create shortages. Price controls are not a new idea. Hammurabi tried them about four thousand years ago, mainly to hold down wages. Despite the death penalty for ignoring the ceilings, they did not work. The Roman emperor Diocletion tried price and wage controls late in the third century: They failed and contributed somewhat to the decline of the Roman empire.
Price controls with rationing may work reasonably well for short periods of time during wars (e.g. World War II), but in the long term they always cause gross economic inefficiency through the misallocation of resources.
Economists know few things for certain. One thing they all agree on--socialist economists, Keynesian economists, Austrian economists, monetarists--price controls lead to either surpluses (from price floors above the equilibrium price) or shortages (from price ceilings set below the equilibrium price).
See any economics textbook. Or Google "price controls."
It depends on the market situation. If you have a market where there are strong barriers to entry and there is a single supplier (or if there are a few suppliers with "follow the leader" pricing discipline), it is in the supplier's interest to increase prices so as to capture the "monopoly profits". Price controls will actually increase output, so long as the supplier is making a return on investment that is attractive to investors.
That statement is reflected in some economic models. What I'm looking at is economic history, including American Economic History, which is a course I used to teach.
The economic historians know things that the math-model economists do not. Unfortunately, most economists will not listen to or talk to economic historians.
We have a rich 4,000 year history of currency inflations, interrupted occasionally by price controls that attempt to stop inflation. Invariably, and with not a single exception, price and wage and rent controls have failed to achieve their objectives. I challenge you to find a single real-world counterexample. The closest one I can come up with is the price controls on American Telephone and Telegraph, which were in place for many years without notably bad results. Eventually, however, AT&T was broken up, and now we have a free (oligopoly or perhaps monopolistic competition) market in telephone communications, with generally falling real prices due to technological advances. Long-distance phone service used to be horrendously expensive, especially between countries. Now it is much cheaper in real terms, correcting for past inflation.
Almost any regulated monopoly would be a real-world counterexample, not just AT&T.
Between WW II and deregulation, the cost per voice channel mile decreased exponentially. Long distance rates were held high by regulatory policy in order to subsidize local service, especially rural service. The breakup generally raised costs. For example, competition and an incoherent standards-setting process resulted in three incompatible wireless standards being deployed. Generally, telecom equipment suppliers and large businesses benefited. Consumers did not. Temporarily, a number of competing local and long-haul carriers made a lot of money for their manangers and early investors before going bankrupt or being acquired as the industry reconsolidated.
In real terms phone service (whether landline or cellular) is much cheaper than it was fifty years ago or thirty years ago or even just twenty years ago. Just as the cost of television sets has declined dramatically since 1947 (when I saw my first TV) the cost of telephone service has also declined in the past and probably will continue to decline in the future. Technological advances have trumped concepts such as monopoly and oligopoly--both of which lose their price-setting power in a very competitive market. As Joseph Schumpeter pointed out long ago, what matters in the long run is creative destruction caused by capitalist markets. The distinctions between monopoly, oligopoly, monopolistic competition, and perfect competition shrink to insignificance over the long term due to technological advances. Look at the monopoly the railroads once had for passenger traffic in the U.S. Now long gone.
The assertion that telecommunications is cheaper now because of the reorganization of the industry by the government in the '80s is a post hoc, ergo propter hoc fallacy.
Prices were declining rapidly prior to the reorganization. Where prices were not declining rapidly, it was due to regulatory distortion for social purposes. Deregulation was pushed by businesses who would profit from arbitrage opportunities resulting from these distortions.
Much of the decline in telecommunications costs are due to innovations occuring prior to the restructuring, especially in digital technology and integrated circuits. This innovation occured not only in Bell Labs. The '56 consent decree required the licensing of AT&T's patents at usual and customary rates and on a non-discriminitory basis. This requirement resulted in widespread licensing and cross licensing agreements which allowed rapid innovation in information techonology industry as a whole.
You are correct in your facts. Nevertheless, intense competition tends to cut prices--in addition to the long-term cost reductions from innovation and the implementation of technological advances across the industry.
I do expect to live to see the day when we impose price controls.
We see a soft version of that today, with "jawboning" of prices, and laws against "gouging", and "predatory pricing".
OTOH, I think that the US experience with Nixon's price controls, and rationing-induced gas shortages taught most policy makers in the US a strong lesson. I think the US has been pretty well immunized against "hard" (offical) price controls and rationing - I don't expect to see it.
I don't expect to see price controls and price rationing until global oil production falls by at least ten percent. Skrebowski sees Peak Oil in 2014. Now apply the ELM model, and U.S. imports will fall by significantly more than ten percent when total oil output falls just ten percent from Peak. I expect to live at least to 2020, and by then I think global oil production will have fallen more than ten percent from Peak.
High or very high energy prices also have their advantages.
Shipping goods from Asia will become too expensive, so jobs will have to come back to the West, giving Westerners more buying power to pay for higher energy prices.
$200+ oil prices might become a blessing for the West, as long as it doesn't accelerate the likely coming hyperinflation.
What happened when "peak gold" occurred? What about when "peak lumber" happened at various centers of commerce, and so on. The point being, that adaptions occur. And, further, since included is the notion of "peak" is the more sensible fact that much, much remains. Thus, the sensible norm of "gradual shift" which includes the concept of conservation of capital. We have much invested in it, throwing it out overnight is foolish, financially.
Many have wondered why there seems to relatively little progress made in the finding of other types of energy sources. There's a number of reasons, but here's some big ones...
1. The lack of ability to exploit it. Ok, so suppose I came up with some great idea and it converts the gasoline engine into a consumer of X. Cool. Except nobody can use it cause it's illegal. I don't just have to come up with the idea, I have to surmount the EPA and Congress, in order to get any kind of motion towards using it. And that still leaves me without having marketed and profited, in order to pay back the investors.
2. The institutionalization of current forms of energy. Ok, so I find a cool way to make electricity. Great. Now, how to do I generate and sell it? If you're the size of Joe Blow's farm, you can - but it' so small scale it doesn't matter adn nobody will pay attention. If you're the size of local farm Co-Op, it'll never happen. Why? Because the regulators of the electrical system, the players in it, have built a monopolistic system that doesn't lend itself to freely buying and selling on the basis of demand. Until you get a UTILITY to use your idea, you can't profit, thereby cannot attract investors.
3. Protection for existing methods, in the form of massive beaurocratic hurdles.
There's three good reasons why so little progress is made. And why the "mandated" things like Ethanol and biodiesel make so little sense. They're just pork barrell projects for the politicians. And, ineffective at that.
Someone posted that the way to the oil cleaned up in the Gulf was to offer a bounty of $2k a barrel for that collected and turned in for a bounty. With a way to profit, every method known will be employed, and the effective ones rewarded the most. We've done the opposite, by removing the reward... and enhancing the punishment for trying.
Peak Gold won't occur like Peak Oil as it is reusable.
Peak Lumber won't occur like Peak Oil as it is renewable.
We can't reuse or renew oil. Just need to clarify for the new people to this site.
You forget that much gold and silver are actually consumed in various industrial processes. Though gold can be melted down and re-formed into something else, the gold that is used up ... is used up. We WILL run out. Same with silver. Same with platinum. Anyone in a rabid scare over "peak platinum"? It's what makes your emission controls work.
Lumber is "renewable", but you did not respond to what I said about it. Please read and reply in context, or your answer is bogus.
Its not the same depletion process and we spend time here clearing up misconceptions, so I don't see how my response is bogus. Just how would you prove Peak Lumber in a mathematical sense will occur?
Now if you brought in the extinction of some species, that would be more analogous. So you could have said Peak Passenger Pigeons and I wouldn't have a problem. Calling something peak doesn't make it so.
The scariest part of Gail's article is the idea that oil prices may *not* continue rising. She describes a "fatal middle" scenario in which oil shortages hurt the economy so badly that demand falls rapidly enough to keep oil prices too low to promote alternative technologies, but too high to afford.
But there's a key element missing to this story: the availability of *labor*. As the oil economy contracts, people will get forced out of it, not just as consumers, but also as workers. Where are they going to go? We can expect real wages to decline as these people seek employment at any price.
One of the reasons renewables are expensive today is because installing them is labor intensive. Lower the cost of labor, and renewables become much more competitive against fossil fuels, even if fuel prices remain constant.
Re nuclear:
Quick to build?
Quicker than a carbon neutral coal plant.
Cheap to build?
Cheap in the long term - current plants are receiving approval for 60 years life - newer designs are simpler and likely to last as long.
Immune to terrorist threats?
Very much safer than America's many soft targets, e.g. municipal water supplies. Multiple layers of surveillance, armed security, immensely strong containment structures in the US and most of the world. Triply redundant safety systems, which themselves have triply redundant power supplies. And many new designs rely on physical principles to create intrinsically safe systems that do not rely on intervention if the core overheats.
Not dependent on a finite fuel source?
Not dependent on a toxic fuel source?
Not going to produce toxic wastes that stay dangerous forever (on any human time scale)?
Able to display a history free of major catastrophes?
America's nuclear power industry is remakably free of major catastrophes. Three Mile Island, Brown's Ferry, if these had been coal plants and had caused 100 times the mortality, you would not remember them. Death rate per GWH associated with nuclear is orders of magnitude lower than with coal, in fact non existant in the US. In fact lower than wind. Google "wind vs nuclear power: Which is safer?" Hard to wrap your mind around it.
Not dependent on a finite fuel source?
No. Not dependent on a finite fuel source. A matter of definitions - the sun is finite but beyond the scale of civilization. So is nuclear fuel.
Not dependent on a toxic fuel source?
A relative risk. More people by far die due to coal. More die from particulates from our vehicle exhausts. More die from dam failures. More die from wind turbine blade failures. More die from malignant melanoma. I am unaware of any real risk from geothermal. There must be some.
Not going to produce toxic wastes that stay dangerous forever (on any human time scale)?
Again a relative risk. The CO2 from your vehicle is more dangerous - measurably so - a recent paper - sorry, don't have the ref, also, only read the article on it, Science Daily, I think, stated there is a 5% risk, due to atmospheric CO2 momentum, that large areas of the world will sustain wet bulb temps of 35C or above, which are unsurvivable without AC. This concerns me as GW science has consistently underestimated ice melting, etc for years. This individual paper may be in error, but it is clear that CO2 is a much greater risk than spent fuel rods - the world's spent rods could be buried under the coal ash of one large coal power plant. The spent rods will eventually be burned for fuel anyway - over 90% of their energy is remaining, they simply lost efficiency in the current gen of plants and were removed because they are very cheap as fuel.
A couple points -
We live in a representative democracy - the idea is to elect competent people who will professionally govern for the greatest common good - once elected, they need to make the right decisions to the best of their ability whether we like the decisions or not. To the extent they pander for reelection money, the system doesn't work. I think an electoral system with a long single term of public service and with a relatively easy process to remove lawmakers for malfeasance may be superior.
The working person does not have the time resources to independently understand all the issues effecting good governance and relies on the media for a summary. The media is of mixed competence and mixed, hidden bias. It is difficult for the public to discern underlying truth in virtually anything nowadays. At this point we need government to make the correct choices whether the public goes along with it or not. We need leadership that doesn't pander to narrow interests. It seems to me our government has allowed nuclear power to be stymied by multilayer-ed, inefficient regs and bureaucracy that greatly increase the costs to build new plants. It seems to me that public opposition has played into the hands of vested energy interests who oppose nuclear power due to its ability to provide cheap baseload. Lots of bad, obfuscating info out there that confuses the public discourse & makes it difficult for the court of public opinion to operate properly. Oddly, there is a laundry list of items the public opposes that the government allows, sometimes quietly, sometimes not - eg mountaintop removal for coal, drilling in deep water (which will continue) come to mind.
I hope that our government will begin to make the unpopular choices which are necessary and ultimately most benefit the people as a whole.
It seems to me that "techno Utopian" is a phrase that is sometimes used to dismiss a large body of hard facts re nuclear power. The energy source is so power dense the public as a whole does not grasp how little fuel has been burned for the power generated over the last 50 years, how tiny the waste issue is compared to the horrendous issue of fossil fuel waste, how little environmental impact a uranium solution mine has, miniscule compared to coal for comparable coal generated. The public does not seem fully aware of how incredibly reliable our nuclear fleet is for power gen (ref in an earlier post).
I agree nuclear power takes too long to build and is rather too expensive capitol wise so long as the left hand of our society blocks the right hand that is trying to do something about the gathering clouds on our energy horizon. This needs to stop. It is one energy source that ultimately we will be able to rely on.
"Not dependent on a finite fuel source"
What is current global Uranium production?
And how many potential sites are there around the world?
Is nuclear power infinite?
I think we should be building more reactors. The French have a good nuclear industry, create a good design and build many of them. All the same.
In the UK we tried to improve the design for each reactor. The result? 20 Bespoke nuclear power stations. Which really screws up the decommissioning. as we basically need 20 different solutions.
This means the budget for the NDA is hideous and it's a real problem when trying to justify new builds. Ergo, let the French build them.
Uranium has a lot of the same problems as fossil fuels.
If we could get the price up high enough, and get it to stay there, there would be no problem with production. The problem is that uranium price won't stay very high, so it remains to be seen whether production will ramp up to meet needs.
Taxes imposed by governments play a big role in what prices are needed. Australia has recently recently raised its mining tax, and companies are cutting down on new investment as a result. Mining is an easy thing to tax. If countries need revenue, they may try this elsewhere as well.
BHP’s Uranium Project Under Review on Resources Tax
Thank you for your excellent responses to questions intended as a put down to my post in support of nuclear powers as a FF replacement. You made an excellent defense for nuclear power. I have saved a copy of your post. China starting from a small base may have increase their total nuclear capacity to an amount equal to ours by 2020.
We must settle on FF replacements that are cost competitive in the world market place.
You also brought up the need for a single longer term of service for our political leaders. I completely agree with you that making that change would produce better government.
I, too, was bothered by the "techno Utopian" slur. I took that as a slam or distrust of science. While TOD serves a good purpose of bring home the realities of "peak oil", I find a that a fear of cutting edge science is frequently apparent. We benefit from big corporations and big government which exercises controls on corporations. There is a lot of distrust of both in our country and unfortunately it usually follows party lines causing a lot of gridlock.
I thank TOD for hosting a range broad enough to include nuclear power in the discussions.
Well, this site seems to be overly focussed on two sources of energy, and one method of delivery. Both sources are fossil (oil/NG and coal) and the delivery method is purely that of a large companies with a subscription model -- as if no one makes their own, ever, and no other form of energy is really useful or out there. It's true that the norm for most is that food magically appears at the grocery store, and what they want just comes out of a hose or wire (with a bill of course) but it need not be so true, or the norm even with what is available now.
As one who has been off the electricity grid since 1979 -- it jus ain't so that it has to be that way.
I use roughly 475 gallons of liquid hydrocarbon fuel a year, about half and half between transport (cars) and farm uses from chainsaws and tractors to backup generator for the solar system as for now (until vanadium redox batteries get practical for small systems -- or even available) battery capacity is limited and we sometimes have long periods of "dark" -- think February in the eastern mountains. As I run a company from here, I don't commute, I use all the transport gas going to the grocery store, and could switch to the 200mpg all weather go-kart I fought and won to have be street legal in my locality. Not real comfortable, or particularly safe -- you'd lose a head on collision with a dog, but quite usable to go get groceries if needed.
Though it's about the nastiest stuff for the environment there is -- we're nowhere near "peak coal", which I could gasify if needed, or I could make my own liquid fuels with things freely available on the farm, perhaps including electricity when we have spare -- which is often -- now when we have too much, we turn on an air conditioner to effectively waste quite a lot -- but in our climate, we rarely feel the need for it. My only real *need* for liquid fuels is for work out on the woods with a chainsaw (for heat from my woodlot). And even there I've been using an electric one lately -- less weight for the operator, more torque and the truck or tractor holds the battery/inverter to run it. That doesn't consume enough fuel that if it were $100 a gallon I'd be hurting from that. It's the most gain you can get from gasoline, chopping up dead trees for BTU's, and in a good sized woodlot, that's all you harvest except for some odd thinning.
I am not ignorant that a lot of what I depend on for a nice lifestyle nevertheless has a big fuel footprint -- if it weren't for Fedex and UPS, this would be a hard place to live -- a Trucker brings it all. Or DID -- I now have enough of most things to sit out quite a long drought of basic materiels.
We have unfortunately built a society where the production of just about everything is remote from the users of it.
That's the real problem here. WE have also gotten so dense in cities that the alternative energy schemes that work just fine for me, won't work there -- not enough room for solar panels no matter how good they become for example, and no woodlot to make the heat in winter.
So it's maybe not going to be so much the drive to work that's going to cost you when fuel goes up -- it's going to the be shipping costs of *everything else* you need to live. You shouldn't be driving to work anyway, except in some special cases. I've been a telecommuter since the '80s with only an occasional face to face meet with customers. There are other jobs where you just have to be there, sure, but why not live near there, then?
Half of this country wouldn't be considered habitable by most people without air conditioning...and was built up on the basis that this would always be cheap, even though it's a MAJOR waste of energy. On a trip not too long agoe, we had to go to a hotel near an airport in North Carolina, a bit south of where I live. Believe it or not, they were air conditioning a 50 yd square overhang at the entrance -- huge, no walls (so vehicles could come through of course) and then had the audacity to charge us an energy surcharge -- air conditioning the out of doors (which didn't mitigate the diesel fumes from the airport buses)! Clearly, that sort of entitlement mentality will have to stop at some point -- that's beyond ridiculous.
But be it known, some of us are already nearly as ready as it is possible to be -- I have facilities to even make my own tools for example (machine shop runs on solar power), grow food, get heat from a sustainable and sustained bio source, and so on. It wasn't easy and it took some money and work. So? If you're looking ahead to a future where this model of energy subscription that drives everything is going away -- you should be planning to join me somehow. Because those who wait for the last minute are going to run into a huge obstacle -- there are too many people per square mile on this planet for us all to have this, and you don't want to be the last to be ready.
Now, I'm an alt energy buff, not for green reasons especially, but mainly because of a major screwing I once got from the aptly named power company. But hey, it's working fine! The BS often mentioned about how it's going to get cheaper and better reminds me of the oil companies boosting a hydrogen economy to thwart immediate attempts as something actually do-able now, from CAFE standards to things not ideal, but do-able. So far, the only fuel cells that really work right with Hydrogen (ignoring all the other problems of that energy carrier) need at least a monolayer of platinum/palladium catalyst and if you look at reserves, that means enough fuel cell cars for say, Pennsylvania - and it's all gone. That is and was always a distraction from anything that can work (and yes, I am a scientist, and I can do simple math).
Batteries will NOT continuously improve unless new elements appear on the periodic table -- unlikely. The energy density of Li-Ion batteries is already competitive with the highest energetic chemical processes known -- about the same as high explosives. So forget that, at least in capacity for size/weight. We're there, folks, unless and until something completely different (not based on chemistry) shows up.
The big advantage of carbon or hydrocarbon fuels is that you don't have to carry the oxidizer, which in the case of gasoline, is about 15/16 of the weight -- so hydrocarbons rock for portability. Batteries, so far, can't do this, or at least not at significant power levels. yes, there are such things as air cells, but if you look into the processes involved to get that to happen, you're still talking about microamp, not 1000's of amps out of them.
So the bottom line is -- for living at home, not going out too much, not being too dependent on things from far away is going to become the norm rather than the exception -- there won't be much choice. As a stock trader, I look for ways to make money on the inevitable transitions, but I don't see them happening anytime soon. It's just going to have to hurt real bad first.
Ditto, a society that is built on the idea of moving large things long distances fast is going to be hurting. But we only built it that way because at the time, it was the *cheaper* way -- not the only way. That won't stay true. The trick is going to be how to transition without collectively going out of business. It takes time, and investment to make the change. But if the current way is cheaper, who will do it, having to raise prices so they get reduced market share? This is really a political problem, or a sociological one, and human nature being resistant to change, it's the biggie. It's not new tech we need so much, it's a better plan for living.
For some alt energy fun, here's my hobby: http://www.coultersmithing.com You might find it interesting how an "amateur" can surpass governments and billions of bucks on alt energy research -- lose the bureaucracy and things can get done a lot faster...no need to justify to someone clueless why this test should be next, no one trying to delay things till they get tenure -- you name it, all the crud drops away when it's your own money going into it.
Dc, what kind of motor/engine do you have on your cart?Any details concerning it's construction would be welcome!
You should not be cutting up any trees on your place that have died for firewood if you care about the ecological health of your local woodlands and countryside;dead trees in this part of the world are an absolutely essential part of the food/shelter equation and are essential to the survival many species of birds, animals and insects.Some of these, such as bats, are critically important.
Just cut down a few less desirable living trees here and there a few months ahead of need so that the wood has time to dry and your firewood will actually be of much better quality;most of the time a tree that actually dies was invaded by various fungi years and years before , and a lot of the wood will be partially or fully rotted already.This results in a MAJOR loss of heating btus.
DCFusor,
That's a very interesting post. I'm going to come clean up front and say I work in the upstream oil industry as an engineer.
Also I haven't been posting on this site for long, but please dont take that as a reason to dismiss me.
One question I would have is that do you ever feel as if you're simply way ahead of your time?
From your post I can see that you're an intelligent guy, but you're sitting in a contrarian position (not for this website), for an unknowable period of time.
I personally understand that fossil fuels are finite, and that one day, maybe soon (maybe it's already been), production will fall. Permanently.
But the dynamics of the oil supply/demand debate are highly non-linear.
I mean it has only been in the past five years that the price of oil v's the price of labour has risen. And this curious move has done strange things within the oil industry, e.g. deepwater drilling (let's not go there).
But there are seemingly several significant oil provinces that are virtually unexplored, because prior to the recent price dislocation they were considered uneconomic e.g. the Falkland Islands, which based on pre-drilling estimates could contain 60-100bn barrels (that's somewhere between Nigeria and Kuwait), they have since started drilling and the data on which those estimates were based now seems pessimistic.
New subsea technology, will open up the arctic during this decade. The arctic ocean is estimated to contain reserves comparable to the middle east. Riserless subsea completions will one day realize that oil, albeit at a price.
And perhaps that's the crux, the low hanging fruit is gone and whilst the tree is far from bare, it was perhaps only the low hanging stuff that elevated us from poverty.
The volume of oil to market is one thing, but what about the volume of economically viable oil? That's a constantly moving target and depends on activities within an economy. For example an economy weighted towards financial services might be less vulnerable than one weighted towards ship building. But who knows.
On the flip side (I'm not sure how much this is debated here), what about peak revenue (for oil companies that is)?
Surely Peak Revenue comes after most of the easy oil oil from the ME is gone and the Western Super Majors with their vastly superior technology once again get a monopoly on the world oil supplies?
I'm thinking out loud here as I haven't been down this thought train before, but surely the people who control that technology will be.. sought after?
I guess we are in opposite corners of the same fight? Although whilst initially it seems you have the moral high ground, I'm not so sure... After all the reason you have your current lifestyle is because you're concerned you might lose out to someone else and be shut out in the cold.
I'm quite happy with my place in all of this and I think that the thermodynamics mean we can't really replace internal combustion on the required scale.
For me the whole thing is an ecology problem. I always remember my year 7 Biology classes regarding, what happens when one organism gains access to a positive step change in a suitable food source. Population explosions are interesting because they are always temporary.
I think via mechanization and petroleum fertilizers we eat oil, and lots of it. It might not be our primary use but along with plastics, we will sorely miss the fertilizers we rely on for the crops to sustain our populations.
Just another point, I don't think society will collapse or that there will be mass panic. I think peak oil will mean the people at the bottom will
As to nitrogen fertilizer, a thermochemical process of splitting water with heat from a high temp breeder reactor or from thermal solar has been shown to be more than 50% efficient. We should use natural gas to heat homes not to make fertilizer. There is evidence that with industrialization and urbanization human birth rates drop. It is not a given that a catastrophic crash in the human population is inevitable.
It is not a given that a catastrophic crash in the human population is inevitable.
Yes, but we are going to have to work damm hard, VERY smart and be lucky to avoid it !
Alan
there are seemingly several significant oil provinces that are virtually unexplored
This is the second go at the Falklands. If there were massive oil reserves there, the first try should have worked.
The arctic appears to be mainly gas (Shkottmann (sp ?) in the offshore Arctic Ocean is a large gas find. So is MacKenzie delta in Canada. Canadian Arctic has been drilled and is a bust.
Yellow Sea and South China Sea are held up by competing claims on whose oil this is. In any case, very little will find it to USA (China is one of the claimants).
Drilling soon in Greenland.
A 100,000 b/day find in Uganda. Half interest sold to China for $2.5 billion.
We are quite literally "at the ends of the earth" !
And there was only one Ghawar in all the world, and it is almost drained.
Alan
I think one of the most obvious things to do is to get out of the big utilities mindset, and promote a more decentralized and distributed power generation grid, bought for by individuals. The subsidies that are being thrown around for big oil, big banking, big everything, would buy a HUGE amount of small solar pamels, solar water heating, small wind generators, small biodiesel manufacturing plants, and so on. If a sizable percentage of the pop could generate a reasonable percentage of elctricity (at the cost of partially subsidizing them), even if it doesn't cover all their usage we would be all the better off.
1) the grid would be more stable, would last longer;
2) a lot of needed ff could be spared;
3) people could scale back on their usage and know that they might be able to avoid going all the way to zero power usage. If there's a blackout, at least you'df have the option of running your fridge and a couple of lights.
How could that be effected? i don't think it will. It would require eitehr a command economy (politically unfeasible, and perhaps simply not efficient enought) or a high tax on oil as well as on consumed kWh to urge people to buy their own electrical generation.
As an aside I note that few apliances seem to be crying out so much for solar panels than air conditioning... I mean, it seems like a match made in heaven...
There are pluses and minuses with distributed solar PV. All the other options are a waste of capital.
Home scale wind turbines may give 1% of the power that utility scale WTs do for a given investment as an example. Home bio-diesel generators will use twice as much fuel and cost MANY times as much as utility size units will. Any savings on grid will be minimal.
For the distribution grid, with more efficient appliances, better insulation, etc. we should be grossly overbuilt.
Alan
Ah,but the power companies need a bigger grid so they can sell you more power to keep up their growth plans and keep investors happy. By becoming more efficient and using less grid electricity the consumer is being very naughty in spoiling their, the company's, future. :)
NAOM
I took time to read most of the posts and I'd like to offer my own viewpoint.
What if we have made some big mistakes in our assumptions ?
First lets start with economics in general everyone focus's on debt and inflation vs deflation. What if the real problem is not economics at all ?
For oil what if the problem is not the absolute level of supply ?
My understanding of collapse has brought be to the conclusion that there are probably a number of effectively boolean logic switches that get triggered past certain thresholds. Once a threshold is crossed the system adopts a new path. Often these are described as positive feedback loops but its better to think of them as switches.
If we actually have such thresholds then smooth models fail. The system starts to jump between states on its own accord.
Next complex systems in stress would by definition lie about their condition before this state change things look like they are not changing once the threshold is crossed the system changes rapidly. In general these threshold variables are opaque internal states and not easily discovered.
Primarily I think because people don't expect them therefore they don't look for them. Instead most projections about future behavior are based on some state in the past. I.e the system will evolve along one of the routes its already gone through. Every now and then a surprising new route seems to open up aka stagflation of the 1970's and its eventually absorbed as a possibility.
However these are rare events and unpredictable without something like threshold analysis which allows new states to occur.
For oil and money the expectation is that the current value system can and will persist into the future. The switch if you will is intrinsically a fundamental shift in the valuation of the worth of "things".
Famine, War, Economic crashes, and bubbles are all examples of where valuation changes rapidly. Positive feed back loops trigger a change in valuation which triggers a rapid change in the overall system.
Its seldom that the onset of these triggers is predictable simply because most measurements don't or often cannot identify the trigger mechanism.
Nations routinely come to the brink of war but in the end its practically random if one happens and afterwards the outcome can be based on events that can only be understood in hindsight.
That does not mean the triggers cannot be discerned indeed with rising tensions leading to war they are often pretty clear it simply a case of if they are pulled.
The same goes for our economy.
What if things are not as they seem ?
What I find really fascinating is how people are willing to accept the crash in oil prices as some sort of foreordain economic event that was certain to occur. And yes of course people "predicted" it but people in general predict a wide range of outcomes one has to be true.
So take my own prediction with a grain of salt :)
What if it was not a natural event ? What if just for the sake of argument our governments faced certain disaster if events continued on the course they where on aka rising oil prices and collapsing housing bubble. I'd argue it was pretty clear in the first half of 2008 if things did not change then they would probably have blown up within a year or so. Oil prices where going exponential and the economy would have simply collapsed.
Drastic situations require drastic measures. If so then at least for a time they basically worked. We had a painful recession and flaccid growth as a result.
Obviously I contend that a trigger was pulled on purpose choosing a path that was considered painful but livable.
The problem is this did not solve the problem if events are the result of systematic action then the underlying untriggered changes still exist.
Indeed several more dangerous triggers where probably created.
Now you see the heart of my argument attempts to prevent the system from collapsing not only don't remove the old feedback loops that could have caused collapse they add new ones. Eventually the system starts tripping all of them. And this eventuality is over a really short time scale measured in months.
As these triggers fire each one causes a dramatic valuation change that itself serves to trip other triggers in a cascade.
I think the peak oil issue is real and dire. I think that oil production numbers are bogus and all thats happened is that slamming the economy has bought a bit of time. However in exchange for this if you pay attention to your surroundings the global economy is far less friendly then it was in 2008. War rhetoric and fissures are painfully obvious now that would not have even been considered before. We kept the ice from breaking at the expense of making it much thinner.
So finally my prediction.
The real trigger has already pulled the critical trigger event was making a decision between servicing debt and living for the day. Once enough people have crossed this threshold the results are certain. Its the Rubicon of the 20th century.
Given this event is in the past then I see the following future. Oil demand will remain robust at all price levels indeed levels most don't believe are possible. Debt of all sort esp mortgages will be default on the moment people have to decided between paying the mortgage or maintaining their daily lifestyle. The default pattern will be fairly standard.
1.) Purchase new car if you still have good credit.
2.) Run up credit cards a bit default on Mortgage
3.) Blow out the cards buying what you deserve.
4.) Default on credit card debt.
5.) Move to rental/friends/family when forced.
6.) File bankruptcy.
7.) Oil usage remains fairly constant even as prices rise.
Five is repeated as long as needed as lowering housing expense allows you to maintain other expenses.
You keep making the car payments and generally keep using gasoline and buying food and small luxury items.
Only when you hit the threshold on the housing side i.e finally decide that you can't live cheaper do you cut back on other expenses.
Thats the microscale economy and it will show up in our indicators.
I think we are at this level now. These are the trends given the above trigger event.
1.) Mortgage defaults will rise steadily.
2.) Automobile purchases will for a while remain robust.
3.) Gasoline prices will rise steadily.
4.) Parts of the economy will do ok.
5.) Hotel bookings will do ok people will take those vacations.
6.) Rents will at first remain steady.
-------------------------------
Phase II.
1.) Gasoline prices will rise increasingly sharply as supply dimishes (ELM alone is enough)
2.) Auto purchases my well spike and surprisingly probably for SUV or dream cars. ( The southern shotgun house Cadillac principle)
http://www.lyricsbay.com/welfare_cadillac_lyrics-guy_drake.html A mans got to look rich and the truck/suv/caddy is the last enhancer.
3.) Mortgage and Credit card default will increase sharply.
4.) Vacation will dwindle and rents fall as people seek living with family/friends over the fixed cost of renting.
So end the end what happens is Americans will give up on the home and retreat into keeping the dream car. Just like most poor people in the US who first get that cool car then other trappings of wealth. In a real sense things will simply run down with people adopting the behavior of the poorer classes below them.
As long as they have that nice car then their circumstances are only temporary and they can and will rise above them.
Phase III
This retreat to the automobile as a status symbol once people throw in the towel on housing creates and obvious feedback loop that is self fulling.
However eventually of course even this fails as gasoline prices continue to rise. However now most Americans no longer have access to credit their shiny
SUV in front of the shack becomes a heavy weight. Its value collapses as finally it dawns on people that these status symbols have no value.
You cannot give them away. Now at this point people are buying bikes, motorcycles, used fuel efficient cars anything but the SUV.
And gasp taking public transport. And they let finally let the SUV go back to the bank and stop making payments.
Phase IV:
Now everyone is basically broke and simply trying to stay alive. People have to live and entering Phase IV where your basically just poor will be done
kicking and screaming and be a very sticky process. I think this will continue to keep gasoline prices high but finally leveling off as oil usage finally flattens and declines. However here is when political and social strife start too become triggered in earnest so at this point its no longer and oil issue but a broken and shattered social system thats and issue. And finally all bets are off.
How long ?
I'd argue that in the end it all depends on oil prices the rate at which this feedback runs depends entirely on oil prices what the government does or does not do to stimulate the economy does not really matter as you can see oil demand is becoming decoupled from debt and financial games via default.
And thus the timing in the end depends entirely on what our real oil situation is. If I'm right and the current production numbers and storage levels are a huge lie well then it will occur in months. If I'm wrong and oil prices remain low the the trigger I claim fired did not really fire perhaps call it a misfire or its feedback loop turned out to be week and not the big one I claim. Well then government policy does matter the debt system is not dead and its just a matter of kicking the can down the road and allowing inflation to solve the problem.
As usual, memmel, I agree with what you have written. There will be serious discontinuities in The Long Descent. I do not, however, buy into what Greer calls the myth of the apocalypse.
BAU for several more years is my best guess. Out and out fascist-populist is elected president of the U.S. in the year 2020--dictatorship follows, and what we hope is that we do not descend into totalitarianism as prophesied in Orwell's 1984. To avoid that totalitarianism we will need some luck.
Sooner or later the U.S. will break up into smaller units. My guess is that these units may well be city states. Note that ancient Greece kept the city-state for a good many centuries, until Alexander the Great conquered them.
I also think that slavery will be introduced when we can no longer fuel our machines with fossil fuels. Most societies were slave societies before the Industrial Revolution. Ancient Greece and ancient Rome could not have existed without many slaves to do what machines do today. The slaves will probably be prisoners captured in battle rather than Blacks.
It is hard to visualize what society will be like in 200 years, but I think Greer does as well as anybody can with this visualization.
Have you had a chance to look at "5 Acres and Independence" yet?
No not yet I'm planning on driving to Arkansas to see my parents soon if I can raise the cash. In the interim I'm in the middle of a software project and to be honest spending a bit to much time posting here but I think its important. But I plan on taking that book and The Long Descent with me on the trip.
As far as BAU for several more year I think the time scale is controlled by oil prices the mechanism of descent in general seems clear to me. And I expect oil demand to remain robust across a surprisingly wide price range. If I'm right about oil then oil will force the system to collapse relatively fast.
If I'm wrong then I agree there are a number of years of what on the surface looks like BAU but its increasingly propped up. Eventually of course debt and resource constraints will send the system down but it could well last longer than many think.
I will say that outside of some sort of systematic failure that simply blows up before it can be controlled if oil is not the limiting factor or if its not as dire as I think it its then I don't see a near term collapse.
With my scenario its really simply the aggregate that results in a faster systematic collapse. I think the path is one many people will take. If the preassure is low i.e oil prices remain relatively low then at any point in time the total number of people at any one of the stages will be below breakdown levels. If its high and primarily I see oil as the driver then the aggregate will initiate a feedback collapse. Eventually even if the population moving through these levels remains below collapse the weight at the bottom will grow to sink the system basically as you outlined.
So I contend that another oil price shock is sufficient to achieve critical mass and accelerate this rejection of debt in favor of retaining the car as a status symbol. Basically our oil addiction wins over our other addictions. The paradox is I'll be betting on SUV's selling well as Gas prices approach five bucks a gallon. I think the people falling down these steps will be betting on another price collapse for oil i.e someone else will give up before they will they sacrificed their home etc. So a mental illusion is a big part of the problem. And this is where the last price collapse comes back to haunt us big time.
Everyone but me will be betting on another one soon once prices rise above 100. Indeed this expectation of collapse is itself one reason why prices right now are probably readily held at and artificially low level using some fairly crude bluffs. No one seems to be seriously wondering about oil prices at the moment.
Everyone is happy to believe the US is well supplied and its only OPEC supporting prices and if per chance prices did rise they would collapse soon anyway.
Very much a sort of boy who cried wolf type situation but its important as people will retain extreme confidence in Cars as a status symbol on their way towards poverty. When they finally realize their mistake it will be to late.
What will be really funny in my opinion is the former middle class guy that bought and EV that he could plug into his garage living in a hotel after he lost his house wondering where he was going to plug it in :)
I will admit I'll get a good laugh as EV buyers get blown out and realize that their EV is worthless if they hit problems. Regardless of the price of gasoline your better off buying a decent sized truck that you can put a camper on and live out of and a motorcycle for daily transport.
I've actually been looking at this myself. I'll wait until the next price spike in gasoline and return to economic stress but I want to buy a truck/camper combo as a bug out fallback and a motorcycle.
Right now I have a Honda minivan that will work for the time being its got a hitch. So minivan/and pull camper trailer will work also.
Just to be honest I'm not all that different from what I described I'd much rather sink into poverty with a decent Ford truck then a friggn Honda minivan.
Just waiting for my last kid to get out of a car seat.
Until recently I rode motorcycles--got my first MC in 1959, a 200 c.c. Zundapp. Since then I've owned many motorbikes; I always buy used in October or November and sell bikes in May. You won't go wrong with a Honda--lots of dealers and new parts are available even for most models of old Hondas. I'm used to motorcycles that start by kicking, and I consider battery powered starting somewhat effete and wimpish. There are some really good bikes that have been well-cared for during the past twenty or thirty years.
If I buy a motorcycle this October, it will be a 250 c.c. Honda Rebel; there are tons of those out there, and they are good starter bikes.
:)
I worked my way through college restoring antique bikes at a Harley shop and spent my student loans buying Harley's.
Had my priorities strait :)
Today I'd probably go with a Honda but since I'd like to have a side car rig not sure what the best choices would be.
I don't know much about Japanese bikes and sidecars attaching one is not and issue really having the length of the bike and
rake actually work well is and issue.
Back in the bad old days when people bought bikes for transportation sidecars where very common.
They make a heck of a lot of sense.
These have caught my interest big time.
http://www.ural.com/
http://www.cycletrader.com/find/listing/1995-Ural-TOURIST-96880250/?ZMC=...
Take a look at the Royal Enfield sidecar rig--now back in production. I wouldn't buy a Ural; I've heard too many horror stories about them. There is another Russian manufacturer that still makes a Russian copy of the World War II German BMW, sidecar as well, but the name slips my memory.
Or, with your skills you could by a basket of BMW parts from a disassembled bike and put them together. I know a guy who bought a 1937 BMW for $25 back in 1962 or '63; he put the parts together and regularly rode from Berkeley to see his girlfriend on the East coast. Those old BMWs last forever.
You could always custom attach a sidecar to a big Honda bike.
And in the future, keeping old motorcycles running indefinitely might be a good occupation to have; maybe it would be much better than subsistence farming. And more fun, too.
As far as BMW goes too pricy for me these days to be honest. They and a Harely are now a dream. My experience with bikes if if the basic parts are reasonably well made and the aluminum and steels are good then pretty much any bike can be made to run well going over it and blueprinting and balancing the motor.
You might want to change carbs. So if the frames good and the motor casings are well made its really and assembly issue. All the other junk from front forks on can be replaced if needed. Way to many of the Ural's where beaten hard in the Soviet Union for me to believe that they are not good bikes esp if you take time to strip one down and rebuild it. With surprisingly little machine work you would be surprised what motors you can stuff into any bike frame.
I spent a lot of time rebuilding and refurbishing 1970's shovel heads which got a lot of bad rap my experience with them was that in general someone simply did shoddy work at some point in building the bike once you ran through everything they where nice bikes. I did not care much for them because I did not like dealing with a factory bike that was poorly put together but also like I said I did not see any real issues just shitty workmanship esp assembly.
At the end of the day once you think about it if your serious about going down this road you will need to be able to take your bike apart and fully refurbish it. Does not really matter what they did at the factory if the design was right. Its going to be what you can do that determines if its a good bike or not.
Certainly starting with a BMW gives you a leg up but not as much as you might think. I'd rather buy a 3000 dollar Ural and 7k worth of machine tools than a 10k BMW and a few wrenches.
EDIT:
I think this is what your thinking of.
http://www.bikez.com/motorcycles/dnepr_mt_11_with_sidecar_1991.php
Its Ukrainian not Russian.
That is the company I was trying to remember. As of a few years ago they had much better dealer support than did the Urals, and quality control on Urals is apparently zilch, plus they offer little or no dealer support. The Dnepr apparently has much better quality control than the Ural.
You can get a nice twenty-five year old BMW with maybe only fifteen thousand miles on it for $3,000 or less. I bought one several years ago and was delighted with it--never gave me any trouble. Just remember to buy in someplace like Minnesota or Canada in Oct. or Nov., and you can get a great deal.
Unfortunately, few motorcycles get better than 90 mpg (and larger ones are typically <55 mpg). Fun, yes, but not the most economical transportation post-Peak Oil.
For most trips (local), an eTrike (high capacity battery between the rear tires) may be the way to go.
Alan
I used to have an electrical-assist bicycle, but after a few years the motor quit and was too expensive to replace or fix, so I got rid of the bike. My next electrical-assist will be an adult trike when I'm finally put away in some elder care facility, maybe ten or twenty years from now. Currently I ride a Brompton folder and am delighted with it.
Don - they won't be called slaves - they will be indentured servants of some sort, as well as landless serfs and peasants with rental obligations. If it does not reach this level, they will be called minimum wage workers and the wage will be ridiculously low and they will need to keep working in order to remain on government food aid. And the lower class remains dependent on government to eat, the upper class remains dependent on government to keep the lower class in line. Mobility between classes will be slight, wealth will be largely inherited. A good option for a person of lower class would be to become a policeman in such a scenario, for the police would be funded relatively well. Lets hope this doesn't happen.
Well put and very interesting. I did not see your post before I made the one further below about uncertainty.
So yes, I very much agree that there may be an unlikely trigger that will make some mostly discounted factor a key determinate as to how a phase of our future plays out.
Also I am also resigned to the fact that the present financial-energy network is unworkable in the long run and will not survive as we move down the 'shark fin' phase of the post peak world. However we are not at the shark fin phase just yet, although I very much think talk about the peak oil plateau obscures the fact the EROEI is already relentlessly declining, and the US economy in particular seems to have come of this recession less efficient than it went in.
In these circumstances, $75 to $80 oil is a bargain, as price of oil has been forced down as money goes in to the dollar. This money is malinvested in the US dollar - because the US dollar is being bought like a proxy stock in ownership of the US, with the expectation that the US is safe haven in the storm. That is a almost completely false conclusion (for which I previously explained my view as far back as 2005 here) because they are fleeing from the wrong storm. The real storm is about oil supplies, and as oil becomes more expensive, the US may suffer disproportionally more than other countries.
The only good news I perceive is that oil production is somewhat higher now than a year ago, and may have offset falling EROEI, indicating temporarily favorable economic conditions.
I'm not sure if oil production is higher now.
I've been following this keenly.
http://www.bloomberg.com/apps/cbuilder?ticker1=BIDY%3AIND
My take on whats happening is that oil exports have been pulsed for some time and with my tinfoil hat on the pulsing is by design.
Its fairly trivial to overwhelm the oil supply system which is pretty much a JIT. 10-20 million barrels in the right spot at the right time
can seriously affect prices on top of any financial maneuvering.
Assuming pulsing like that and financial games I'd argue prices could remain fairly controlled until they can't.
I think as littel as a four million barrel surge into the US periodically would go a long way to keeping a lid on prices.
Given storage levels with a bit of management of global supply I think it takes a lot less oil than people think to keep prices in line.
Esp as I said if there is concerted effort to do so that include financial moves.
OPEC even claims a price target they are not lying about that perhaps lying about how its done :)
As long as you don't have outright shortages and people play the game then prices can be managed. Heck the US did ok with prices controls for a while.
Eventually of course attempts at price controls fail. Assuming I'm right and OPEC is not doing it from a position of excess but via careful management of supply to prevent shortages then at some point the system will break down.
If you throw in some management if import/export of finished products on top then things work well.
Of course there is a loser in such a game in this case it would be the third world that would have continued to see sporadic oil supplies through the entire price swing. Indeed if you google and follow links you will see they never received any benefit from "cheap" oil.
http://www.energyshortage.org/
Someone would be getting the shaft but done correctly all the shortage conditions could be concentrated in 2nd/3rd world countries where they don't impact global prices that much. As long as they where sporadic and popped up in all kinds of different places they don't create a systematic demand problem.
So I don't think its that hard to effectively have price controls for a while if you want to do it and I don't see that it takes any real change in supplies just good management. However if or in my view when it unravels it does so in a hurry. The moment a significant shortage develops in any of the major countries the game unravels rapidly. Sure at first perhaps you could play the same game of trying to meet the most significant need however at some point fairly quickly you simply don't have enough oil to defend your price point.
And of course the moment this becomes clear someone is probably going to cheat and try and stock up.
My opinion is that the US just did exactly that so I think if a mechanism similar to what I'm describing was in place then its probably just gotten blown out over the last several weeks.
The content of your writing has way too many of these kinds of statements.
These are all empty statements because they really don't tell us anything. I could easily write stuff like, "the thing continued working until it didn't, then it wouldn't work anymore", but I don't because it doesn't tell me anything.
Another example:
Translation: Shortages=price increase.
The problem is that it takes way to much effort to wade through all these elliptical and sollipsistic (i.e. "Assuming I'm right") constructions.
Translation: No one can prove or disprove anything I said because everything is now changed.
That is why I stopped reading memmel a long time ago. His posts are too long, rambling, and full of assertions, assumptions, speculations and elaborate conspiracy theories to manipulate the price of oil and hide "real" production figures. If you read his posts over the last 2 years, he is all over the place with his analysis and conclusions which are based entirely on his fertile imagination!
I more than completely agree that perceived small changes in supply can be used to affect prices, although I would not exactly say they are manipulated but rather the market is over-reacting to small changes - mostly from the weekly EIA report. I frequently post about just how inaccurate that EIA report is on the supply side, but it is rather accurate on the demand side.
Anyway total supplies are not the real story, what we really need to know is how much supply there is above minimum operating levels, and also where that supply is located. Recently US oil inventories have increased, but after further investigation as to why, it is Canadian tar sand oil adding up because of unexpected refinery shutdowns in the Midwest. If the Gulf Coast goes below MOLs, those surplus inventories in the Midwest won't be of any help.
But back to your point are oil supplies really increasing, maybe about a year I summarized my opinion here that OPEC intentionally reduced output about 1 million barrels below capacity (capacity being the level of output hit when oil was about $146 in 2008). There was somewhat of a rebound in shipments in March, and since then, shipments have been flat. Also Mexico has temporarily stabilzed and Canada has increased (both with lower quality oil), so we are barely making some progress in oil output. In addition, since economies can draw down some existing inventories, the US economy may make some tentative improvement.
But those inventories are going to be drawn down faster than expected, as shipping reports indicates that a combination of new fuel rules and longer routes have increased the amount of oil in transit - which results in less oil showing up for land inventories.
WT talked about the longer route issue. The weakness in Dirty Tanker rates is even more alarming once you consider that US imports are coming from farther and farther away as Mexican supplies dropped.
My own calculations have us running a steady linear 1mbd decline annually in production for the last ten years.
So far at lest the supply side drop is smooth as rails. Total energy is being maintained by expanded coal/ng usage.
So whats interesting is there is no real changes over the entire time period on the supply side its fairly smooth. The problems must be on the demand side.
1.) Net exports aka export land.
2.) Hitting inelastic structural limits.
3.) Longer supply chains.
The longer supply chain issue as I said is interesting given tanker rates are tanked :)
I'd argue they bolstered rates at first in 2008 but afterward exports steadily dropping has lead to a surplus of tankers.
Overall globally demand is flat to rising from all secondary indicators rail traffic, vmt etc at least in the first/second world.
This suggest that at least until now third world has face the brunt of any current shortfall.
In general it seems a 500kbd+ deficit in supply is needed to tighten oil storage levels. Makes one wonder what the real situation is.
At best I can only tell that reported numbers are probably wrong however its really hard to figure out how wrong which is the more interesting question. I'm pretty sure we have returned to a period where supply cannot meet current demand thus price pressure is needed. Basically once you hit this level your in deep doodoo within 3-4 months. Looking at price and were it seems to have gotten volatile to the high side was back in Nov 09 so way over 3-4 months. Any smaller deficit would in my opinion tend to get lost in seasonal swings and or just more shortages in the third world. Perhaps OPEC really did bleed in 1mbd of spare capacity.
Its by no means impossible. You would have absolutely needed at least some large surge capacity 500kbd-1mbd every few months to tame things. That fits very well with everything else however eventually of course this fails and the underlying draw down is relentless.
If prices are being suppressed then it will have to be financials playing and ever increasing role as the fundamental issues grow larger. Financial games almost always induce extreme volatility so we should see some pretty crazy price swings in oil over the coming months with big moves up and down.
How much excess oil production do you think exists in the world today? Darwinian estimates 1 mb/d, mainstream claim is 6mb/d. I split the difference and guess it is about 3mb/day.
In my opinion, most or all of the Saudi decline of production is voluntary. There is no way to verify nor to disprove this surmise, just as nobody knows what true Saudi reserves are, though Matt Simmons made a good try in TWILIGHT IN THE DESERT, and various oil geologists and others on TOD have come up with their own estimates. I agree with most that the Saudi official numbers for oil reserves are significantly overstated, but nobody (at least nobody outside a tight circle in KSA) know what the correct numbers are. Similarly, nobody really knows what Iraq's oil reserves are; there is a range of estimates made by various people who know about oil and know about probabilities.
Well I think Saudi production is dropping rapidly. Even with the famous Arab zeal for overstating things big lies cover big problems.
The biggest single piece of evidence that convinces me that are in decline had have been for a while is their claim of non-linear growth in consumption.
I've done a lot of research in that area and consumption levels are based on infrastructure and population getting non-linear increases is nigh impossible.
That believe it or not says nothing about their spare capacity just that if they hold some capacity offline the spare capacity is rapidly eroded by declines.
In general I think they do their best to maintain some spare capacity even if it means cutting exports steadily. However I don't think its sustainable capacity but surge capacity. My best guess is that fields or parts of fields that are in steep decline they go ahead and produce vigorously. Others regions that are still good they baby and do long well rotations. This gives them at least 500kbd of surge for 90 days I think or perhaps 1mbd sustainable perhaps 500kbd or less.
Surge capacity is politically very important for KSA it has little to do with oil production ability.
I think that one big mistake people make with KSA is assuming that they will produce at capacity as they decline. I doubt it they will hold back and surge periodically for political reasons.
Thus the internal consumption claims also coupled with aggressive attempts to switch over to NG have me convinced they have been in decline for a while.
Now all this does is change the absolute numbers so its not as shocking as it sounds just means the world is producing less oil than claimed.
People get all hung up on the political totals and they are not so important. Supply and demand will balance at some price point.
It does matter of course as far as what the Saudi's can really do over time. Obviously they where unable to prevent the last price run up because they can't even though they probably surged production a couple of times it failed. This again points towards them having a fairly low surge capacity.
If they even had 1mbd I assure out throwing 1mbd onto the world oil supply system would flood it. Thats a crapload of oil and would represent a large producer suddenly popping up. 500kbd flux is fairly normal and also not all that effective as far as shock and awe goes. That extra 500kbd make a huge difference.
As far as declines go I figure probably 5-7 years at say 5% a year or so so they are probably down a 1-2mbd from their peak with at least 500kbd of surge capacity the whole time and I think 3-4 major surges over the past few years.
The Saudi's fully intend to be one of the last major oil exporters in the world and should be exporting long after other areas have lost their export capacity. I don't know what else they have I suspect not a huge amount but I'd imagine if they got very aggressive they could probably almost stop their declines today if not moderate them a lot. But I think thats for later when oils a lot more expensive. I'm guessing that they have and additional 1-2 mbd in future capacity they could bring on if they really wanted but they won't right now. Maybe say 2-3 years from now they will get serious and it will be coming online 5 years or so later so about 10 years from now they might be able to boost production by at least 1mbpd. The decline rate of their other fields would have steadily slowed as they entered the fat tail phase.
5-6mbd of production ten years from now will be worth its weight in gold.
I think the US has similar plans for Iraq and basically the same game 2mbd or so of production that can be put online after TSHTF. For the US military this creates a massive strategic advantage.
I'm guessing the timing of this bigger game is setup so it would be after Russia had declined for a while. Assuming Russian declines are fairly steady ten years from now Russia simply won't be able to supply the oil to counter this. Iran is toast also.
For now the only other major source of oil are Venezuela and Canada well Canada is not a problem for the US. Venezuela simply needs a spanking when the time comes. But you can see if the world is really well past peak oil that Iraq, Saudi Arabia , Venezuela and Canada controlled pretty much means you rule the world.
This is how China would eventually be checkmated for conventional warfare they simply don't have the oil to fight us.
So the super big picture beyond what happens over the short term is how the US military positions itself to deal with peak oil.
If I'm right outside of Venezuela looks like we have it locked up if we can hold what we have. And I think with Venezuela given we may enter a shooting war with Iran at any time the decision is to wait and hope Hugo blows up on his own accord. Also consider we probably will have to send large number of troops to Mexico, North Korea could go etc. My point is Chavez is in our backyard we can spank him any time we want its not a problem and for a host of reasons at the moment it does not make sense for us to grab Venezuela proactively might as well do it as part of the Mexican, Central American campaign. And as a bonus we would take back the Panama canal in the process prob Cuba is on the list also. The fact the US does nothing about Venezuela at the moment is really important in and of itself so its something I watch.
Of course thats all tinfoil hat craziness right :)
But seriously at the end of the day blunt brutish issues like these define how we will evolve post peak and its well beyond politics. Indeed I'd have to imagine any politician that tried to throw a monkey wrench in the "big plan" would find himself six feet under fairly quickly no matter who he is.
And I can't see anyone doing that in the first place as its fairly easy to figure out what the US needs to do to ensure it remains dominate as oil supplies dwindle. Heck the US would be effectively in control of 10-12mbd of production with and easy 6-8mbd of exports if not more. Assume 4mbd goes towards internal US consumption and you have plenty left to fight with. Given we could readily disrupt oil exports around the world we would be sitting pretty.
Sorry to take off in that direction but you have to work your way back from the strategic positioning to today. Go back from there to the top where I've stated that KSA will maintain surge capacity even as they decline and you can see why.
Not all the world oil is for happy motoring Suburbia a fairly significant amount of whats really left goes to the US Military thats something I'm pretty sure of.
I take Skrebowski seriously: What do you think of his prediction of 2014 for Peak Oil?
Also I take even more seriously Stuart Staniford: What do you think of his statement that there is no good evidence that we have peaked or that Peak Oil is imminent?
An I'll reiterate my own opinion: Based on what I've seen from reading TOD for more than four years, my unscientific WAG is that current excess capacity in global oil production is in the neighborhood of 3mb/d. I think this excess capacity will evaporate over the next four years.
Ain Dar (basically a northward extension of Ghawar, cut off for a few km) is their most depleted field (acknowledged by Aramco as such). A surge capacity (from memory) of 400,000 b/day.
In 2008, there was still sand piled up in the parking lots of the mothballed production (satellite photos). Rest required to build up pressure for a surge (one estimate was 1 month production for 4 months rest).
Apparently resting since first Gulf War.
Alan
I am pretty much convinced that somewhere in the US or in the world very soon supply shortages may develop. I should clarify that these would be in new places, not just Pakistan or some central African country.
The main reason for that being is the increased transit time that I have discussed before, but also it appears global oil supplies grew in the first quarter 2010 and have now stopped growing.
Basically as we approach minimum operating levels regional differences in available supply have to be smoothed out, or local shortages develop.
The brief article below proves my point as to just how rapidly seaborn supplies can be built up by longer/slower tanker routes.
http://www.automatedtrader.net/real-time-news/44557/oil-opec-sailings-ed...
Yep this fits well with what the Baltic numbers are telling me. We had a big surge and its now over.
Now who knows what the absolute numbers are but I'm in full agreement with the "shape".
Whats interesting is once shortage develop these long transit times will make it hard to deal with.
Thanks for bringing up the transit time issue its one that sort of slipped away from my thinking.
Also on that note those VLCC's on long haul voyages have several chances to reroute along the way and change
destinations. I don't know if thats done but they could readily hit Europe instead of the US for example.
This helps to some extent at first to manage supply problems however when the bidding ware heats up it will amplify them.
I don't like to disagree with some here who are providing some very sharp analysis, but essentially I think it is pretty much impossible that the price of oil will downtrend over the long term as the economy grows smaller.
Granted in the short term, especially during recurrent (non-dollar) financial panics, the price of oil can and will drop steeply. But that is only temporary, usually a few months, although possibly more than a year.
The utility of something is not just dependent upon whether capacity is available or the economy is in a recession/depression. In a depression or severe resource shortage, any 'excess capacity' may be an illusion. For example, could financial conditions become so unstable that oil shipments aren't made from the Mideast to far off locations made because of uncertainty of the costs of shipment and final demand in the consumer country.
Perhaps more importantly, as potential demand exceeds available supply by greater and greater amounts, the price will just go up regardless.
The theory put forth here basically makes an unstated assumption that supply and demand will change gradually. It does not have to happen that way. What would happen with a sudden and unexpected drop in the dollar? The price would rise and demand would fall at the same time.
In sum, I think there are more potential scenarios than being discussed here, and although it is possible we will make a smooth and gradual transition to lower levels of economic activity, I believe unexpected events likely will throw a monkey wrench in to both the financial system and energy supplies. The way down will be missing some steps and at times then we will fall on our collective face, only to get up again for a short time.
I think within a few years (perhaps sooner) the price of oil will rise to the point of triggering a severe recession or a few years of depression. Then the price of oil will crash down due to falling global demand. Eventually the economies of the world recover somewhat (but never to their peak levels), the demand for oil increases to the point where again the U.S. and other countries have their economies pushed down again . . . . These fluctuations with a long-term downward trend can continue for perhaps forty years or more.
What happens when necessary resources deplete? The system adapts up to a point, mostly through attempts at conservation or a pruning back to improve efficiency, and then afterward abruptly collapses.
I think that there is a backbone to our system that needs to stay together, or things are in very great danger of falling apart. These include:
--International financial system that people trust
--Electric system working almost everywhere
--Roads in reasonable repair
--Industrial agriculture produces a reasonable amount of food, and gets it to market.
Once we start losing any of these, it seems like we are in for major trouble. The assumption is very often that "the basics" will always be there; the only difference will be price of oil or whatever is in short supply. But if, for example, cities and states stop repairing roads, because they don't have enough funds, lack of good roads could affect many other parts of society, quickly, and bring about collapse.
The wrong list.
1. Just shift to a gold based system (trade chits for gold stored in the Central Bank of Switzerland in many cases), but revert to physical gold if need be. Increase nominal value to, say, $20.000/ounce and there will be plenty of it. Not that I advocate a gold based standard, but that is the default AND VERY WORKABLE alternative.
4. A limited # of roads need to be passable, at low speed (NOT the overbuilt monstrous network we have in the USA, half of which can be abandoned) leading to the nearest rail stop.
Think 1920 for much of the USA when it comes to roads. We got by just fine with very few paved roads.
2. Electricity is very useful for a large number of tasks, and it is quite convenient BUT NOT NECESSARY to have electricity 24/7. An increase in efficiency dramatically increases redundancy for the grid (despite claims to the contrary).
Example: Replacing a 5 ton SEER 12 air conditioner with a 3 ton SEER 18 a/c (more insulation, better windows & doors etc. and proper calculations can allow such downsizing) does wonders for the grid. 60% less demand at peak for that particular house feeds all the way up the system.
All the way from less coal to be mined and transported thousand(s) of miles, a surplus of capacity on the grid if such is replicated, less stress on transformers and wires during a record heat wave (soon to be common). And if a rolling blackout hits at 2 PM on a hot Saturday, the better insulation will keep the house cool until power comes back on.
So conservation and efficiency are the best things we can do for the grid.
4) A shift in diet can reduce the need for food transportation and the intensity required of agriculture (and obesity means we just eat too much). No feedlot meat and much less meat overall will free up massive amounts of farmland. Eating local food will reduce transportation.
Pre-BP I would have volunteered for a local diet in New Orleans. Seafood, rice, seasonal fruit and vegetables (some frozen or canned), local dairy, a little chicken & catfish from North Louisiana and Mississippi with some imported spices (a few pounds/year).
Now ?? :-((
Alan
.
I am reminded of bridges on rural roads in Kentucky in my youth.
One lane (for both directions), signs said one vehicle at a time, 10 tons maximum (a few had 5 tons maximum).
Existing bridges could be derated to this standard and last a LONG time, while we could still have basic mobility. Just not so much of it.
But modern Americans would think that the Apocalypse has arrived in bridges were derated to what was normal 50 years ago !
Best Hopes for NOT wasting too much money, effort and resources on maintaining roads & highways in Suburbs and for long distance commuters,
Alan
State and local politics rule when it comes to maintaining roads. Because it is labor intensive (especially if we use the techniques of a hundred years ago) road mending creates a lot of jobs. Thus I think it will be enormously popular in times when unemployment is between 20% and 30%, which I expect within a dozen years.
To a large extent, the first roads paved late in the nineteenth century were paved because of the demand from bicyclists for pavement. The future rhymes with the past. As a bicyclist, I want my pavement! Of course an eight or ten foot wide trail will do.
So very true. The basic networks need to keep humming or else the overall system will break down. Right now I'd say roads are the weak link, as repairs and repaving at least here in California seems to be ignored. The thought probably is they will last until the economy rebounds and repairs can be made. The problem with that type of thinking is once they crack and water permeates the road base they can quickly reach a point where they need to be torn up, have the asphalt taken away and be completely repaved, which is an order of magnitude more expensive than regular maintenance. Squirting liquid tar into cracks will only buy so much time.
But isn't this what would be expected in a post peak oil, higher priced crude market? That crude prices rise, discretionary spending drops, fuel tax goes down, less consumer goods are purchased, property values and their property tax revenue descend, and as a result the roads suffer, which may turn out to be the leading edge of collpase.
Except that the last part JUST ISN'T TRUE.
http://seia.org/galleries/default-file/2009%20Solar%20Industry%20Year%20...
(see page 2 for year to year figures)
The US kept subsidies at a high level--it may even have increased them. I expect that is a big part of the increases in solar use.
Now some of the European countries are cutting back on subsidies. We will have to see what that does to sales.
Thanks for the topic Gail, and though I may sound like a nutball here, but clip and save this one.
1. The GDP numbers are bogus of late. We are at 0 growth or in the negative zone.
a-as the economy needs a 2-3% increase in GDP per year to allow borrowers to pay back loan interest, defaults will continue.
b-as many should-have-defaulteds have been put off by various bailouts/stimulus chicanery, the clock is ticking on them, and they will be coming due again, this time without a bailout in sight
c- The FDIC went insolvent a month or so ago. There are 700+banks on the endangered list. The FDIC opened a new branch in the Midwest earlier in the year because they expect more bank closures than last year
d-Commercial Real Estate is coming due this year as well, and there will me a host of CR defaults which will in turn bring about more belly up banks.
2. Congress has decided that extending unemployment benefits is something they don't want to do...
a-aside from the 5-6 million who are unemployed that will lose benefits, there are the others that are not counted as unemployed because of the slimy government counting system.
b-if the counting was done the same way as back in the day, the current unemployment is about 21%
c-of those who do get a paycheck, 41% get it from some part of government...
d-32 States are technically insolvent--they cannot pay their current unemployment bills
3 Peak oil may be the cause, in fact, it is, but all it did was push the system over a cliff.
a-corporatism is so ingrained in U.S. government that it will never be able to take effective action--corporation and congressmen continue to steal from the system even as the Titanic is clearly sinking.
b-the price of a gallon of gas hasn't jumped a lot in the last year or so--your ability to afford it has been hacked off at the knees. That will continue.
4 Alternative energy is irrelevant. Almost every one of us can walk out our front door and prove it to ourselves. Look at all of the infrastructure that oil and coal have built in the last 100 years.
Now say, I think that alternative energy can:
a-repair, maintain, or replace all of this
b-provide transportation energy for a growing population
c-provide agricultural energy to grow food for that growing population
d-provide energy to repair impending troubles with:
I-the draining of the midwest aquifer
II-water shortages in the west
III-cleaning up polluted land and rivers needed to provide food and water
IV-digging deeper for the ores which have passed their peak so that we can get that .02% copper ore from a 2-mile deep pit...
V-solving the problems from global warming
5 The Pension Bubble still needs to burst...
6 The newly unemployed courtesy of BP will be a massive drain on the system. (The BP disaster makes an ironic pun on the phrase "Black Swan" doesn't it?)
Systems with a lot of surplus can take a hit and keep on ticking. When the surplus goes, and the system runs lean, any kind of glancing blow can topple it.
I'll write this again.
By the mid 1970s, TPTB knew about Peak Oil. The CIA started operating on the concept. In 1980, Ronald Regan's VP was oilman George Bush. Bush and Louis Giocatta or something like that changed FEMA. Look up Operation Garden Plot. Part of Rex 84. A plan to inter large numbers of American citizens.
Why? They knew. No oil, no food--Anarchy, really quick. I live near I-78. I see the hordes of semi's taking food into New York City every night.
This isn't going to be like the Great Depression. Back then over half the people lived in rural areas. Most people had gardens and canned regularly with root cellars and cisterns. A lot made do without electricity as well. Now, I think 57% live in cities.
Comparing the Roman Empire or even the 1930s to today is poor reasoning. Oil increased the population 9-fold. The 'green revolution' of mechanized farming and high intensity irrigation doubled or tripled the population.
As OldFarmerMac said, the standard of living is going down.
I would recall the quote, "Eternal optimism is a sign that you are not paying attention."
jw
at Crash Crop Farm and Garden
JW excellent points. I would venture to say that the more complex a society is the more spectacular its fall. We are the world's first global society. We are the world's first industrial society based on fossil fuels and the most complex society the world has seen. I suspect the fall will surprise most everyone with its speed and end point.
I do think that we should distinguish countries like the US from Japan, China and Eurozone. One big difference is the double deficits of the US, especially the trade deficit.
Having a trade deficit means that you end up sending money abroad which you later need to borrow in order to maintain the flow of money. Right now the US is sending money to the Middle East and China/EU (to buy oil or finished products) and the sellers invest the $ on US government bonds keeping the $ value stable.
I am fearful of the fact that the US government will not have the ability to implement another round of debt increase like the one we saw in 2008-2009. If we see a real drop in oil production during 2011 (while global economy manages to get back on it's feet), the most likely scenario is that oil prices will rise and create another recession. Governments will try and fight that recession with another debt driven stimulus program.
The main problem is that by 2011 all the major players (US, UK, Japan, large part of Europe) will have debt over the 100% limit. Increasing it will be very difficult and it will cost a lot (as was shown in the South Europe debt crisis). My assumption is that we will end up with a Japan logic. Interest rates close to zero and the central banks themselves buying new government bonds.
That might work for the EU and Japan but for the US it will mean that the $ will lose it's value rapidly. Imagine a situation where the US holds government debt of 110-120% of the GDP, is in recession, the $ is close to 2:1 against the € and the rest of the world (Middle East, EU, Japan, China) is starting to be reluctant to be paid in dollars. What's the next step?
It seems like we end up with a race to the bottom for everyone.
I don't know if we will be able over the long term to look at the relative value of the dollar, euro, and yen. It may be that some countries just refuse to trade with some others, unless there is some guarantee of a usable product in return.
It is not clear whether the Euro will stay together. And we really don't know for certain about the dollar either--the USSR bloke up when it ran into difficulties, so it would seem that same situation could happen elsewhere, including the US.
I saved your presentation to the Acturial Society.
That about sums it up.
All that I shall add is that the boundary between one stable state and another is chaotic.
Survivors will need to do some fancy footwork.
Several of the posts have started to drill down on subsidies to various energy sectors. Here's a graphic of energy subsidies by the US federal government for 2002-08. Subsidy to fossil fuels was about 71%, renewables about 29%. Or if you consider the two categories on the diagonal (corn ethanol and carbon capture) as temporary bridges to renewables, then true renewables received 12%. Not depicted is the enormous federal subsidy to nuclear energy.
Source: Environmental Law Institute. 2009. Estimating U.S. Government Subsidies to Energy Sources: 2002-2008. 38 pages.
http://www.elistore.org/reports_detail.asp?ID=11358
Does anyone have other data? Agreeing on what we know would narrow the conversation constructively. Thanks for the stimulating dialog.
I would be interested in the property taxes paid/MWh for wind, coal and natural gas. I strongly suspect wind pays far MORE taxes than coal or NG.
One should also look at net taxes (taxes paid - subsidies). Just because one goes to school boards and the other to the national gov't, does not negate the overall impact.
Alan
With apologies for redundancy, here's detail from aangel's valuable post about a projected oil price spike.
http://www.chathamhouse.org.uk/publications/papers/view/-/id/891/
Since we saw a cumulative shortfall in global crude oil production and in Saudi cumulative net oil exports in the 2006-2008 time frame, in response to annual oil prices going from $57 in 2005 to $100 in 2008, versus the large increases in global crude oil production and Saudi net oil exports from 2002 to 2005, in my opinion the data, so far at least, support an effective final global crude oil production peak (especially a conventional peak) in 2005 and also a final Saudi production peak in 2005.
Regarding the bidding war for declining net oil exports, the really interesting anomaly is the large increase in consumption in developing countries, as oil prices rose at 20%/year from 1998 to 2008. "Chindia's" net oil imports, expressed as a percentage of (2005) top five net oil exports, increased from 19% in 2005 to 27% in 2008. If we extrapolate this trend, then by 2020, China and India would be consuming all of the combined net oil exports from Saudi Arabia, Russia, Norway, Iran and the UAE (which comprise about half of current global net oil exports).
Global Cumulative Crude Oil Production Versus US Oil Prices
2002-2005 & 2005-2008 (EIA, crude + condensate)
Here are the average total global crude oil production numbers per day by year, versus average annual US spot crude oil prices:
2002: 67.16 mbpd & $26
2003: 69.43 mbpd & $31
2004: 72.48 mbpd & $42
2005: 73.72 mbpd & $57
2006: 73.46 mbpd & $66
2007: 73.00 mbpd & $72
2008: 73.71 mbpd & $100
Relative to the 2002 production level of 67.16 mbpd, in the following three period, 2003-2005 inclusive, the cumulative three year increase in production was 5,164 mb, versus a three year increase in oil prices of $31.
But then we have the 2006-2008 data.
Relative to the 2005 production rate of 73.72 mbpd, in the following three year period, 2006-2008 inclusive, the cumulative three year decline in production was 632 mb, versus a three increase in oil prices of $43.
Saudi Cumulative Net Oil Exports Versus US Oil Prices
2002-2005 & 2005-2008 (EIA, Total Liquids)
One of the primary contributors to the 2002-2005 increase in production, followed by the 2006-2008 decline was Saudi Arabia, but let’s look at Saudi net oil exports, which are defined in terms of total liquids, inclusive of natural gas liquids and refined products.
Here are the average Saudi net oil export numbers per day by year, versus average annual US spot crude oil prices:
2002: 7.1 mbpd & $26
2003: 8.3 mbpd & $31
2004: 8.6 mbpd & $42
2005: 9.1 mbpd & $57
2006: 8.4 mbpd & $66
2007: 8.0 mbpd & $72
2008: 8.4 mbpd & $100
Relative to the 2002 net export rate of 7.1 mbpd, in the following three period, 2003-2005 inclusive, the cumulative three year increase in net exports was 1,716 mb, versus a three year increase in oil prices of $31.
But then we have the 2006-2008 data.
Relative to the 2005 net export rate of 9.1 mbpd, in the following three year period, 2006-2008 inclusive, the cumulative three year decline in net oil exports was 841 mb, versus a three increase in oil prices of $43.
Note that in early 2004, the Saudis reiterated their support for the stated OPEC policy of maintaining an oil price band of $22 to $28, and they made good on their promises to support lower prices as they significantly increased net oil exports in the 2003-2005 time frame, but then in early 2006, they started complaining about problems finding buyers for all of their oil, “Even their light/sweet oil,” even as oil prices continued to increase. Apparently no one thought to ask them in early 2006, as oil prices traded over $60 per barrel, why they didn’t offer to sell another two mbpd of oil.
Jeff,
What do you think of Skrebowski's estimate that Peak Oil year will be 2014. I take him seriously.
The annual price of oil has exceeded the $57 that we saw in 2005 for four straight years and for 2010 to date, and the average price to date for 2010 exceeds all prior annual prices except for 2008, when we averaged $100. In response to this price signal, global crude oil production, on an annual basis, has not exceeded the 2005 rate for four straight years and for 2010 to date.
This is in marked contrast to the large increase in production from 2002 to 2005, in response to the 2002 to 2005 price signal.
Gail, remember how supply and demand really work in depth and detail: it isn't about some collective "how much people are willing to pay for X", it's that the portion that can afford to pay P for X will be charged that as the supply of X gets smaller. So lots of people would pay $3/gal for gas, but gas can go to $10/gal and so on as it can be sold to the ever smaller percentile who have the money to pay for the smaller supply at that price. It will IMHO go up, and most of us just can't afford it like so many other things we do without. But of course the operative parameter is how much is physically possible to have around, since money is "just an exchange medium" to allocate supply.
This is a common misconception: "Stock market prices [rising] (hopefully)" Really, that can't help us on average. The SM is a con. How can something having a high price help "on average" since someone has to pay more so the seller can get more from selling? It can't, that would be like thinking a bunch of card players could end up richer on average. The market is just an allocation game that breaks down when the Ponzi scheme readjusts as it has recently.
And really, "If nothing else, people need food to eat, and oil is used very extensively for food production. It is questionable whether these variables [like population] can continue their exponential growth if oil and other energy supplies are declining in quantity." No, it is not merely "questionable" it is impossible. I know you mean well but that sort of mush gives credibility to the idea that population might be able to increase without disaster, etc.
When the stock market goes up my pension fund becomes more fully funded (currently at 80%) and they tend to increase pension payouts. Due to the poor performance of the stock market over the past ten years my annual increases are a measly two and a half percent. They used to be much higher back in the nineties and always paid at least the rate of inflation--sometimes 9% or 10% above the rate of inflation.
I daresay many pension funds are in a similar position to mine (Teachers Retirement Assn., MN).
Hence we pensioners cheer when the stock market has a rise that is sustained over five or ten years. Indeed, only ten years ago the fund was 100% funded.
The New Jersey state fund, which includes teachers, is severely underfunded yet no politician in either party wants to increase taxes so that the funds obligations will be bailed out.
This is a good example of what is happening accross the US - no one wants to raise taxes and everyone wants to 'kick the can' down the road.
After reviewing the history of the 1930s depression after our recent financial crisis, I have become convinced that the operative aim of the dollar devaluation of the early 1930s was to raise home and stock prices. That crisis occurred with rising and cheap oil supplies. The current crisis is occurring with expensive and falling oil supplies.
I remain completely convinced that the US government and the Fed will issue new money and run large deficits to create more inflation. In 2007 and early 2008 I said here the Fed would be printing $trillions in new money to resolve the next financial crisis. At that time, it seemed like a wild idea but the Fed has now already gone past printing up $1 trillion in new money.
So yes I am saying the political solution to the housing crisis and retirement funding crisis will be an attempt to create inflation, albeit those dollars people will be using in our future will be worth a lot less.
I think you are correct. What worries me is that after years of low inflation The MN Teachers Retirement Association stopped giving automatic benefits increases to match upward movement in the Consumer Price Index. When inflation resumes, I think I'll still have only a fixed 2.5% increase in my pension payouts each year.
Most likely, like the example you gave, almost all states will think of ways of gradually reducing their benefits. At first, it will just be that benefits won't keep up with inflation. Then they will just freeze benefits, before moving to some way to reduce benefits - although they won't take the last step if they can at least get some inflationary gians on their investments.
Gail
This post is very good summary of the likely future as peak oil translates into an economic crisis rather than a purely resource shortage issue.
I would however caution with respect to your comments that the oil price cannot reach $100s per bbl. You are correct in that there is a limited amount any economy can afford to pay for oil, however there are two factors that need to be considered.
- economies over time will morph so that they can accomodate higher prices in one particular sector. This process of accomodation for higher oil prices has only just begun. It will be many years before we are at a point where western economies are streched to their limit with respect to the amount they will be prepared to pay for energy supply.
- as you rightly point out the consumption of oil will decrease as the recession rolls on into a unending depression. This decrease in consumption will provide scope for the economy to pay more on a per barrel basis.
I think the above two factors will provide scope for the oil price to rise above $200 on an inflation corrected basis. We will certainly get peaks above this level.
Right now, ethanol is competitive with gasoline at $80 per barrel oil. Many folks at TOD are blinded by a bias against ethanol. NREL estimates that 1 billion tons of biomass could replace ~1.9 Gboe of oil/gasoline. Combine this with Alberta tar sands production of 1.6 Gboe by 2030 and the potential of a domestic US oil shale industry we would be closing on the 3.28 Gboe of current gasoline consumption.
The key to all of this is doubling car fuel efficiency(hybrids) and making flexfuel technology(at the cost of $250 a vehicle) standard on all new cars. Cars have an average lifespan of 15 years so if these two goals were mandatory we would be well on our way to meeting Peak Oil.
I'm interested in feedback from anyone out there that has thought of the following idea before, or read about it.
It seems to me that part of the problem of both predicting and explaining the impact of energy constraints is that we must resolve two different systems of book-keeping, economics and thermodynamics. Perhaps this has been discussed in the past (I've only been reading this site about a year), but a logical way to do business is to have energy backed currency. For example, my wallet (sitting on the desk in front of me) had a cost in dollars, but it is very hard for me to compute the energy cost of this wallet using our current system. If we had an energy backed currency, I would just look at the receipt for my wallet and say, "Oh, I paid X Joules for this wallet". If the markets used a proper measure, I feel as if they would be very efficient in determining what technologies are sustainable. Every decision would have to break even in energy terms---a market clearing energy, so to speak. Continuing my example, I would be able to make a decision in my head if a wallet was worth X Joules, as compared to say, heating my apartment X Joules or adding X Joules to the battery of my electric car (if I had one).
The upside of this system is that it should, theoretically, make EROEI calculations as simple as looking at receipts or company ledgers---this seems to be the crux of the debate. It would also ground debt in thermodynamics---probably a good idea over the long term, and it also could make purchasing and borrowing decisions by individuals more tractable.
We need to give people the tool to make good decisions. Thoughts?
I think we all have a general idea of what happen when energy resources deplete. If they are fossil fuel reserves then they are not coming back.
What happen to a society when net energy production (total energy production minus energy consumed in producing the energy) start declining permanently? Same that happen to a fat man when starving. At better times he got surplus energy to gain weight, which was good at start, he was able to make some muscles that were helpful in doing more productive work (including extracting more energy). Later on, he start getting an extra layer of fats on his body, still good because it help him surviving not-so-good days. After that, another extra layer of fats and so on and so on, with every consecutive layer reducing his ability to do productive work, reducing his flexibility to move and very importantly making him require even more food (energy needed to run a body is directly proportional to mass of body). Finally, the surplus of food start getting thinner and thinner till gone and then he have to actually eat less than full stomach, then half stomach and sometimes after that his body's resistive power against diseases get so weak that an ordinary disease kill him. Note that he DO NOT die due to hunger, medically the cause of death is disease.
If he had learned to not go beyond making an extra layer of fats on his body, he would be needing less food to survive than with a fat body, he would have better chances to survive. Growth is not bad, growth is good BUT only to a certain point, after that its better to store the surplus than consuming it.
World's current financial system depends on growth because its an interest-based financial system. Make it interest free to solve the problems. Imagine how many problems can be solved just by doing that. Once there is no interest available on debts the amount of finance available would cut down to less than 1%. People would only be giving loans to friends to help them and giving loan to somebody would not be a "business". Not having available finance to take loans from, the working class would not have to work 12+ hours a day to "service" those debts, this would result in increase in quality of life. Not having available finance to take loans from, governments would have to make themselves efficient, avoid going on wars (imagine how many lives and capital could be saved just by this one thing alone), avoid paying huge benefits to politicians and slow (infact toooooo slow) govt employees. Having little chances to make money in politics profession almost all of gold diggers would have to go leaving behind a few good men.
Another important question is, what should a country do with whatever fossil fuels its left with? First of all, it should be understand that on all minerals majority of rights is of govt and through govt people of the country and only a minority of rights is on the person or company extracting that resource. Islamic law says that govt should take 80% and the extractor should take 20%. 20% usually is too little for an individual or private company to mine a mineral for profit, unless the mineral-to-dirt ratio is quiet high. Therefore, in most cases it would be govt that would mine the minerals and with all its inefficiences its better to have a wealthy govt and poor companies than to have a poor govt and wealthy companies. Govt must always have an upper hand on all local powers in a country. If you have a powerful company employing a hundred thousand people and a weak govt practically having no power on that company then effectively you are living in dark ages where local leaders rule and the kings were puppets in the hands of those local leaders. History tells that countries prosper under strong kings, never under weak kings. Remember that anything that do not follow the general wisdom of eons of history is bound to collapse very soon.
Continuing my upper post here:
Note that you as people can control a govt in many ways, through protests, through mutinees, through electing/selecting a new leader, through not paying taxes, through a more general social dis-obedience etc but there are very few ways to control a private company. The owner of company can shut down the company longer than its employees can through a strike because employees have lesser savings to compensate for non paid days than the owner of company.
Once govt get control of minerals, especially fossil fuels, the govt should use it in building sustainable cities. Give each family a small house, nothing fancy, a 100 sq m (1000 sq ft) is enough with no extra space, a 200 sq m (2000 sq ft) is the average a family need plus have some extra for example to make a garage or a dog kennel or a lawn and a 400 sq m (4000 sq ft) is the ultimate that a small family should realistically dream about. Make blocks, each of 4 houses, in 2x2 fashion, so that at better times a whole block of 4 houses can be given to one family. Make 10 m wide roads around blocks. Keeping this extra space help in making trenches for people to take shelter in during air raids and earth quakes instead of collapsing under multi story buildings in a crowded city. The trenches can also be used for defensive purposes if the city get attacked sometime in future. Some blocks should be used to make govt buildings like schools, clinics, hospitals etc, small units that can operate independently cutting govt hierarchies and costs. Make the city near a clean water source such as a river, lake or canal that is likely to stand global warming in next couple of centuries.
The point is, past civilizations were very interested in making public buildings and sustainable cities when they had surplus but not current civilizations. Most of the public buildings around are to support an industrial society and are made keeping businesses in sight, not people. A lot of modern roads are walkable hardly (take lot more energy to walk on as compare to levelled sand paths or stone roads) and without cars and trucks they are of little use. A lot of under-passes in cities are wrongly built and without electric pumps to take out water from them in rains they are likely to become permanent "dams" preventing all passes through them.