Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever

Below the fold is an essay by Jeremy Grantham, the Chief Investment Officer of GMO Capital (with over $106 billion in assets under management). Normally, we wouldn't highlight an investment firm's quarterly newsletter, but when one of the world's largest asset managers articulates the same themes that have been debated on The Oil Drum for the past 6 years, such a watershed for biophysical awareness deserves to be highlighted. Grantham's essay catalogues many of the issues related to resource depletion in a no-nonsense and urgent tone, yet with an odd juxtaposition - he is saying these things about limits, resource constraints, and human behavior as the head of a firm whose objective it is to increase financial capital. I expect his message will fall on deaf ears within the industry, but as has oft been pointed out here, in order to create change, we all have to start speaking a common language. This piece is a positive step in that direction.

Mr. Grantham began his investment career as an economist with Royal Dutch Shell and earned his undergraduate degree from the University of Sheffield (U.K.) and an M.B.A. from Harvard Business School. His essay, reformatted for TOD, is below the fold. (Original, on GMO Website, here)


The purpose of this, my second (and much longer) piece on resource limitations, is to persuade investors with an interest in the long term to change their whole frame of reference: to recognize that we now live in a different, more constrained, world in which prices of raw materials will rise and shortages will be common. (Previously, I had promised to update you when we had new data. Well, after a lot of grinding, this is our first comprehensive look at some of this data.)

Accelerated demand from developing countries, especially China, has caused an unprecedented shift in the price structure of resources: after 100 hundred years or more of price declines, they are now rising, and in the last 8 years have undone, remarkably, the effects of the last 100-year decline! Statistically, also, the level of price rises makes it extremely unlikely that the old trend is still in place. If I am right, we are now entering a period in which, like it or not, we must finally follow President Carter’s advice to develop a thoughtful energy policy and give up our carefree and careless ways with resources. The quicker we do this, the lower the cost will be. Any improvement at all in lifestyle for our grandchildren will take much more thoughtful behavior from political leaders and more restraint from everyone. Rapid growth is not ours by divine right; it is not even mathematically possible over a sustained period. Our goal should be to get everyone out of abject poverty, even if it necessitates some income redistribution. Because we have way overstepped sustainable levels, the greatest challenge will be in redesigning lifestyles to emphasize quality of life while quantitatively reducing our demand levels. A lower population would help. Just to start you off, I offer Exhibit 1: the world’s population growth. X marks the spot where Malthus wrote his defining work. Y marks my entry into the world. What a surge in population has occurred since then! Such compound growth cannot continue with finite resources. Along the way, you are certain to have a paradigm shift. And, increasingly, it looks like this is it!

Malthus and Hydrocarbons

Malthus’ writing in 1798 was accurate in describing the past – the whole multi-million year development of our species. For the past 150,000 years or so, our species has lived, pushed up to the very limits of the available food supply. A good rainy season, and food is plentiful and births are plentiful. A few tough years, and the population shrinks way back. It seems likely, in fact, that our species came close to extinction at least once and perhaps several times. This complete link between population and food supply was noted by Malthus, who also noticed that we have been blessed, or cursed, like most other mammals, with a hugely redundant ability to breed. When bamboo blooms in parts of India every 30 years or so, it produces a huge increase in protein, and the rat population – even more blessed than we in this respect – apparently explodes to many times its normal population; then as the bamboo’s protein bounty is exhausted, the rat population implodes again, but not before exhibiting a great determination to stay alive, reflected in the pillaging of the neighboring villages of everything edible. What hydrocarbons are doing to us is very similar. For a small window of time, about 250 years (starting, ironically, just in time to make Malthus’ predictions based on the past look ridiculously pessimistic), from 1800 to, say, 2050, hydrocarbons partially removed the barriers to rapid population growth, wealth, and scientific progress. World population will have shot up from 1 to at least 8, and possibly 11, billion in this window, and the average per capita income in developed countries has already increased perhaps a hundred-fold (from $400 a year to $40,000). Give or take.

As I wrote three years ago, this growth process accelerated as time passed. Britain, leading the charge, doubled her wealth in a then unheard of 100 years. Germany, starting later, did it in 80 years, and so on until Japan in the 20th century doubled in 20 years, followed by South Korea in 15. But Japan had only 80 million people and South Korea 20 million back then. Starting quite recently, say, as the Japanese surge ended 21 years ago, China, with nearly 1.3 billion people today, started to double every 10 years, or even less. India was soon to join the charge and now, officially, 2.5 billion people in just these two countries – 2.5 times the planet’s entire population in Malthus’ time – have been growing their GDP at a level last year of over 8%. This, together with a broad-based acceleration of growth in smaller, developing countries has changed the world. In no way is this effect more profound than on the demand for resources. If I am right in this assumption, then when our finite resources are on their downward slope, the hydrocarbon-fed population will be left far above its sustainable level; that is, far beyond the Earth’s carrying capacity. How we deal with this unsustainable surge in demand and not just “peak oil,” but “peak everything,” is going to be the greatest challenge facing our species. But whether we rise to the occasion or not, there will be some great fortunes made along the way in finite resources and resource efficiency, and it would be sensible to participate.

Finite Resources

Take a minute to reflect on how remarkable these finite resources are! In a sense, hydrocarbons did not have to exist. On a trivially different planet, this incredible, dense store of the sun’s energy and millions of years’ worth of compressed, decayed vegetable and animal matter would not exist. And as for metals, many are scarce throughout the universe and became our inheritance only through the death throes of other large stars. Intergalactic mining does not appear in so many science fiction novels for nothing. These are truly rare elements, ultimately precious, which, with a few exceptions like gold, are used up by us and their remnants scattered more or less uselessly around. Scavenging refuse pits will no doubt be a feature of the next century if we are lucky enough to still be in one piece. And what an irony if we turned this inheritance into a curse by having our use of it alter the way the environment fits together. After millions of years of trial and error, it had found a stable and admirable balance, which we are dramatically disturbing.

To realize how threatening it would be to start to run out of cheap hydrocarbons before we have a renewable replacement technology, we have only to imagine a world without them. In 17th and 18th century Holland and Britain, there were small pockets of considerable wealth, commercial success, and technological progress. Western Europe was just beginning to build canals, a huge step forward in transportation productivity that would last 200 years and leave some canals that are still in use today. With Newton, Leibniz, and many others, science, by past standards, was leaping forward. Before the world came to owe much to hydrocarbons, Florence Nightingale – a great statistician, by the way – convinced the establishment that cleanliness would save lives. Clipper ships were soon models of presteam technology. A great power like Britain could muster the amazing resources to engage in multiple foreign wars around the globe (not quite winning all of them!), and all without hydrocarbons or even steam power. Population worldwide, though, was one-seventh of today’s population, and life expectancy was in the thirties.

But there was a near fatal flaw in that world: a looming lack of wood. It was necessary for producing the charcoal used in making steel, which in turn was critical to improving machinery – a key to progress. (It is now estimated that all of China’s wood production could not even produce 5% of its current steel output!) The wealth of Holland and Britain in particular depended on wooden sailing ships with tall, straight masts to the extent that access to suitable wood was a major item in foreign policy and foreign wars. Even more important, wood was also pretty much the sole producer of energy in Western Europe. Not surprisingly, a growing population and growing wealth put intolerable strains on the natural forests, which were quickly disappearing in Western Europe, especially in England, and had already been decimated in North Africa and the Near East. Wood availability was probably the most limiting factor on economic growth in the world and, in a hydrocarbonless world, the planet would have hurtled to a nearly treeless state. Science, which depended on the wealth and the surpluses that hydrocarbons permitted, would have proceeded at a much slower speed, perhaps as little as a third of its actual progress. Thus, from 1800 until today science might have advanced to only 1870 levels, and, even then, advances in medicine might have exceeded our ability to feed the growing population. And one thing is nearly certain: in such a world, we would either have developed the discipline to stay within our ability to grow and protect our tree supply, or we would eventually have pulled an Easter Island, cutting down the last trees and then watching, first, our quality of life decline and then, eventually, our population implode. Given our current inability to show discipline in the use of scarce resources, I would not have held my breath waiting for a good outcome in that alternative universe.

But in the real world, we do have hydrocarbons and other finite resources, and most of our current welfare, technology, and population size depends on that fact. Slowly running out of these resources will be painful enough. Running out abruptly and being ill-prepared would be disastrous.

The Great Paradigm Shift: from Declining Prices…

The history of pricing for commodities has been an incredibly helpful one for the economic progress of our species: in general, prices have declined steadily for all of the last century. We have created an equal-weighted index of the most important 33 commodities. This is not designed to show their importance to the economy, but simply to show the average price trend of important commodities as a class. The index shown in Exhibit 2 starts 110 years ago and trends steadily downward, in apparent defiance of the ultimately limited nature of these resources. The average price falls by 1.2% a year after inflation adjustment to its low point in 2002. Just imagine what this 102-year decline of 1.2% compounded has done to our increased wealth and well-being. Despite digging deeper holes to mine lower grade ores, and despite using the best land first, and the best of everything else for that matter, the prices fell by an average of over 70% in real terms. The undeniable law of diminishing returns was overcome by technological progress – a real testimonial to human inventiveness and ingenuity.

But the decline in price was not a natural law. It simply reflected that in this particular period, with our particular balance of supply and demand, the increasing marginal cost of, say, 2.0% a year was overcome by even larger increases in annual productivity of 3.2%. But this was just a historical accident. Marginal rates could have risen faster; productivity could have risen more slowly. In those relationships we have been lucky. Above all, demand could have risen faster, and it is here, recently, that our luck has begun to run out.

… to Rising Prices

Just as we began to see at least the potential for peak oil and a rapid decline in the quality of some of our resources, we had the explosion of demand from China and India and the rest of the developing world. Here, the key differences from the past were, as mentioned, the sheer scale of China and India and the unprecedented growth rates of developing countries in total. This acceleration of growth affected global demand quite suddenly. Prior to 1995, there was (remarkably, seen through today’s eyes) no difference in aggregate growth between the developing world and the developed world. And, for the last several years now, growth has been 3 to 1 in their favor!

The 102 years to 2002 saw almost each individual commodity – both metals and agricultural – hit all-time lows. Only oil had clearly peeled off in 1974, a precursor of things to come. But since 2002, we have the most remarkable price rise, in real terms, ever recorded, and this, I believe, will go down in the history books. Exhibit 2 shows this watershed event. Until 20 years ago, there were no surprises at all in the sense that great unexpected events like World War I, World War II, and the double inflationary oil crises of 1974 and 1979 would cause prices to generally surge; and setbacks like the post-World War I depression and the Great Depression would cause prices to generally collapse.

Much as you might expect, except that it all took place around a downward trend. But in the 1990s, things started to act oddly. First, there was a remarkable decline for the 15 or so years to 2002. What description should be added to our exhibit? “The 1990’s Surge in Resource Productivity” might be one. Perhaps it was encouraged by the fall of the Soviet bloc. It was a very important but rather stealthy move, and certainly not one that was much remarked on in investment circles. It was as if lower prices were our divine right. And more to the point, what description do we put on the surge from 2002 until now? It is far bigger than the one caused by World War II, happily without World War III. My own suggestion would be “The Great Paradigm Shift.”

The primary cause of this change is not just the accelerated size and growth of China, but also its astonishingly high percentage of capital spending, which is over 50% of GDP, a level never before reached by any economy in history, and by a wide margin. Yes, it was aided and abetted by India and most other emerging countries, but still it is remarkable how large a percentage of some commodities China was taking by 2009. Exhibit 3 shows that among important non-agricultural commodities, China takes a relatively small fraction of the world’s oil, using a little over 10%, which is about in line with its share of GDP (adjusted for purchasing parity). The next lowest is nickel at 36%. The other eight, including cement, coal, and iron ore, rise to around an astonishing 50%! In agricultural commodities, the numbers are more varied and generally lower: 17% of the world’s wheat, 25% of the soybeans (thank Heaven for Brazil!) 28% of the rice, and 46% of the pigs. That’s a lot of pigs!

Optimists will answer that the situation that Exhibit 3 describes is at worst temporary, perhaps caused by too many institutions moving into commodities. The Monetary Maniacs may ascribe the entire move to low interest rates. Now, even I know that low rates can have a large effect, at least when combined with moral hazard, on the movement of stocks, but in the short term, there is no real world check on stock prices and they can be, and often are, psychologically flakey. But commodities are made and bought by serious professionals for whom today’s price is life and death. Realistic supply and demand really is the main influence.

Exhibit 4 shows how out of line with their previous declining trends most commodities are. We have stated this in terms of standard deviations, but for most of us, certainly including me, a probabilistic – 1-in-44-year event, etc. – is more comprehensible. GMO’s extended work on asset bubbles now covers 330 completed bubbles, including even quite minor ones. These bubbles have occurred only 30% or so more than would be expected in a perfectly random world. In a world where black swans are becoming very popular, this is quite a surprise.

Exhibit 4 is headed by iron ore. It has a 1 in 2.2 million chance that it is still on its original declining price trend. Now, with odds of over a million to one, I don’t believe the data. Except if it’s our own triple-checked data. Then I don’t believe the trend! The list continues: coal, copper, corn, and silver … a real cross section and all in hyper bubble territory if the old trends were still in force. And look at the whole list: twelve over 3-sigma, eleven others in 2-sigma territory (which we have always used as the definition of a bubble), four more on the cusp at 1.9, two more over 1.0, and three more up. Only four are down, three of which are insignificantly below long-term trend, and the single outlier is not even an economic good – it’s what could be called an economic “bad” – tobacco. This is an amazing picture and it is absolutely not a reflection of general investment euphoria. Global stocks are pricey but well within normal ranges, and housing is mixed. But commodities are collectively worse than equities (S&P 500) were in the U.S. in the tech bubble of 2000! If you believe that commodities are indeed on their old 100-year downward trend, then their current pricing is collectively vastly improbable. It is far more likely that for most commodities the trend has changed, just as it did for oil back in 1974, as we’ll see later.

Aware of the finite nature of our resources, a handful of economists had propounded several times in the past (but back in the 1970s in particular) the theory that our resources would soon run out and prices would rise steadily. Their work, however, was never supported by any early warning indicators (read: steadily rising prices) that, in fact, this running out was imminent. Quite the reverse. Prices continued to fall. The bears’ estimates of supply and demand were also quite wrong in that they continuously underestimated cheap supplies. But now, after more than another doubling in annual demand for the average commodity and with a 50% increase in population, it is the price signals that are noisy and the economists who are strangely quiet. Perhaps they have, like premature bears in a major bull market, lost their nerve.

Why So Little Fuss?

I believe that we are in the midst of one of the giant inflection points in economic history. This is likely the beginning of the end for the heroic growth spurt in population and wealth caused by what I think of as the Hydrocarbon Revolution rather than the Industrial Revolution. The unprecedented broad price rise would seem to confirm this. Three years ago I warned of “chain-linked” crises in commodities, which have come to pass, and all without a fully fledged oil crisis. Yet there is so little panicking, so little analysis even. I think this paradox exists because of some unusual human traits.

The Problem with Humans

As a product of hundreds of thousands, if not millions, of years of trial and error, it is perhaps not surprising that our species is excellent at many things. Bred to survive on the open savannah, we can run quite fast, throw quite accurately, and climb well enough. Above all, we have excellent spatial awareness and hand/eye coordination. We are often flexible and occasionally inventive.

For dealing with the modern world, we are not, however, particularly well-equipped. We don’t seem to deal well with long horizon issues and deferring gratification. Because we could not store food for over 99% of our species’ career and were totally concerned with staying alive this year and this week, this is not surprising. We are also innumerate. Our typical math skills seem quite undeveloped relative to our nuanced language skills. Again, communication was life and death, math was not. Have you not admired, as I have, the incredible average skill and, perhaps more importantly, the high minimum skill shown by our species in driving through heavy traffic? At what other activity does almost everyone perform so well? Just imagine what driving would be like if those driving skills, which reflect the requirements of our distant past, were replaced by our average math skills!

We also became an optimistic and overconfident species, which early on were characteristics that may have helped us to survive and today are reaffirmed consistently by the new breed of research behaviorists. And some branches of our culture today are more optimistic and overconfident than others. At the top of my list would be the U.S. and Australia. In a well-known recent international test,1 U.S. students came a rather sad 28/40 in math and a very mediocre eighteenth in language skills, but when asked at the end of the test how well they had done in math, they were right at the top of the confidence list. Conversely, the Hong Kongers, in the #1 spot for actual math skills, were averagely humble in their expectations.

Fortunately, optimism appears to be a real indicator of future success. A famous Harvard study in the 1930s found that optimistic students had more success in all aspects of their early life and, eventually, they even lived longer. Optimism likely has a lot to do with America’s commercial success. For example, we attempt far more ventures in new technologies like the internet than the more conservative Europeans and, not surprisingly, end up with more of the winners. But optimism has a downside. No one likes to hear bad news, but in my experience, no one hates it as passionately as the U.S. and Australia. Less optimistic Europeans and others are more open to gloomy talk. Tell a Brit you think they’re in a housing bubble, and you’ll have a discussion. Tell an Australian, and you’ll have World War III. Tell an American in 1999 that a terrible bust in growth stocks was coming, and he was likely to have told you that you had missed the point, that 65 times earnings was justified by the Internet and other dazzling technology, and, by the way, please stay out of my building in the future. This excessive optimism has also been stuck up my nose several times on climate change, where so many otherwise sensible people would much prefer an optimistic sound bite from Fox News than to listen to bad news, even when clearly realistic. I have heard several brilliant contrarian financial analysts, siding with climate skeptics, all for want of, say, 10 or 12 hours of their own serious analysis. My complete lack of success in stirring up interest in our resource problems has similarly impressed me: it was like dropping reports into a black hole. Finally, in desperation, we have ground a lot of data and, the more we grind, the worse, unfortunately, it looks.

Failure to Appreciate the Impossibility of Sustained Compound Growth

I briefly referred to our lack of numeracy as a species, and I would like to look at one aspect of this in greater detail: our inability to understand and internalize the effects of compound growth. This incapacity has played a large role in our willingness to ignore the effects of our compounding growth in demand on limited resources. Four years ago I was talking to a group of super quants, mostly PhDs in mathematics, about finance and the environment. I used the growth rate of the global economy back then – 4.5% for two years, back to back – and I argued that it was the growth rate to which we now aspired. To point to the ludicrous unsustainability of this compound growth I suggested that we imagine the Ancient Egyptians (an example I had offered in my July 2008 Letter) whose gods, pharaohs, language, and general culture lasted for well over 3,000 years. Starting with only a cubic meter of physical possessions (to make calculations easy), I asked how much physical wealth they would have had 3,000 years later at 4.5% compounded growth. Now, these were trained mathematicians, so I teased them: “Come on, make a guess. Internalize the general idea. You know it’s a very big number.” And the answers came back: “Miles deep around the planet,” “No, it’s much bigger than that, from here to the moon.” Big quantities to be sure, but no one came close. In fact, not one of these potential experts came within one billionth of 1% of the actual number, which is approximately 1057, a number so vast that it could not be squeezed into a billion of our Solar Systems. Go on, check it. If trained mathematicians get it so wrong, how can an ordinary specimen of Homo Sapiens have a clue? Well, he doesn’t. So, I then went on. “Let’s try 1% compound growth in either their wealth or their population,” (for comparison, 1% since Malthus’ time is less than the population growth in England). In 3,000 years the original population of Egypt – let’s say 3 million – would have been multiplied 9 trillion times! There would be nowhere to park the people, let alone the wealth. Even at a lowly 0.1% compound growth, their population or wealth would have multiplied by 20 times, or about 10 times more than actually happened. And this 0.1% rate is probably the highest compound growth that could be maintained for a few thousand years, and even that rate would sometimes break the system. The bottom line really, though, is that no compound growth can be sustainable. Yet, how far this reality is from the way we live today, with our unrealistic levels of expectations and, above all, the optimistic outcomes that are simply assumed by our leaders. Now no one, in round numbers, wants to buy into the implication that we must rescale our collective growth ambitions.

I was once invited to a monthly discussion held by a very diverse, very smart group, at which it slowly dawned on my jet-lagged brain that I was expected to contribute. So finally, in desperation, I gave my first-ever “running out of everything” harangue (off topic as usual). Not one solitary soul agreed. What they did agree on was that the human mind is – unlike resources – infinite and, consequently, the intellectual cavalry would always ride to the rescue. I was too tired to argue that the infinite brains present in Mayan civilization after Mayan civilization could not stop them from imploding as weather (mainly) moved against them. Many other civilizations, despite being armed with the same brains as we have, bit the dust or just faded away after the misuse of their resources. This faith in the human brain is just human exceptionalism and is not justified either by our past disasters, the accumulated damage we have done to the planet, or the frozen-in-the-headlights response we are showing right now in the face of the distant locomotive quite rapidly approaching and, thoughtfully enough, whistling loudly.

Hubbert’s Peak

Let’s start a more detailed discussion of commodities on by far the most important: oil. And let’s start with by far the largest user: the U.S. In 1956, King Hubbert, a Shell oil geologist, went through the production profile of every major U.S. oil field and concluded that, given the trend of new discoveries and the rate of run-off, U.S. oil production was likely to peak in around 1970. Of course, vested interests and vested optimism being what they are, his life was made a total misery by personal attacks – it was said that he wasn’t a patriot, that he was doing it all to enhance his own importance, and, above all, that he was an idiot. But he was right: U.S. production peaked in 1971! This, typically enough, did not stop the personal attacks. There is nothing more hateful in an opponent than his being right. In 1956, Hubbert also suggested that a global peak would be reached in “about 50 years,” but after OPEC formed in 1974 and prices jumped, he said it would probably smooth out production and extend the peak by about 10 years, or to 2016, give or take. Once again, this could be a remarkably accurate estimate!

The U.S. peak oil event of 1971 is important in rebutting today the same arguments that he faced in the 1960s. This time, these arguments are used against the idea that global oil is nearing its peak. The arguments back then were that technological genius, capitalist drive, and infinite engineering resourcefulness would always drive back the day of reckoning. But wasn’t the U.S. in the 1960s full of the most capitalist of spirits, Yankee know-how, and resourcefulness? Didn’t the U.S. have the great oil service companies, and weren’t there far more wells drilled here than anywhere? All true. But, still, production declined in 1971 and has slowly and pretty steadily declined ever since. Even if we miss the inherent impossibility of compound growth running into finite resources, how can we possibly think that our wonderful human attributes and industriousness will prevent the arrival of global peak oil when we have the U.S. example in front of us?

Exhibit 5 shows that global traditional onshore oil, in fact, peaked long ago in 1982, and that only much more expensive offshore drilling and tertiary recovery techniques allowed for even a modest increase in output, and that at much higher prices. Exhibit 6 shows that since 1983, every year (except one draw) less new conventional oil was found than was actually pumped!

Global Oil Prices, the First Paradigm Shift

We have seen how broad-based commodity prices declined to a trough from 2000-03. Oil however, was an exception and, given its approximate 50% weight by value, a very important exception. In 1974, it split off from other commodities, which continued to decline steeply. It was in 1974 that an oil cartel, OPEC, was formed. What better time could there be for a fast paradigm shift than during a cartel forming around a finite resource?

Exhibit 7, which may be familiar to you, was developed when the penny first dropped for me five years ago, and was soon after reproduced in the Sunday New York Times. It shows that for 100 years oil had a remarkably flat real price of around $16/barrel in today’s currency, even as all other commodities declined. It was always an exception in that sense. Oil has a volatile price series, which is not surprising given supply shocks, the difficulty of storage, and, above all, the very low price elasticity of demand in the short term. Normal volatility is, relative to trend, more than a double and less than a half, so that around the $16 trend we would normally expect to see price spikes above $32 and troughs below $8. Drawing in the dotted lines of 1 and 2 standard deviations, it can be seen that the series is well behaved: it should breach the 2-sigma line about 2.5 times up and 2.5 times down in a 100-year period (because 2-sigma events should occur every 44 years), and it does pretty much just that. It is also clear that this well-behaved $16 trend line was shifted quite abruptly to around $35/barrel in 1974, the year OPEC began. And OPEC began in a very hostile and aggressive mood, resulting in unusual solidarity among its members. Oil prices remained very volatile around this new higher trend, peaking in 1980 at almost $100 in today’s currency (confirming, to some degree, the new higher trend) and falling back to $16 in 1999.

Today, looking at the oil price series from about 2003, it seems likely that a second paradigm jump has occurred, to about $75 a barrel, another doubling. Around this new trend, a typical volatile oil range would be from over $150 to under $37. The validity of this guess will be revealed in, say, another 15 to 20 years. Stay tuned. There is, though, a different support to this price analysis, and that is cost analysis. We are not (yet, anyway) experts in oil costs, but as far as we are able to determine, the full cost of finding and delivering a major chunk of new oil today is about $70 to $80 a barrel. If true, this would make the idea of a second paradigm jump nearly certain.

The Great Paradigm Shift

So, oil caused my formerly impregnable faith in mean reversion to be broken. I had always admitted that paradigm shifts were theoretically possible, but I had finally met one nose to nose. It did two things. First, it set me to thinking about why this one felt so different to those false ones claimed in the past. Second, it opened my eyes to the probability that others would come along sooner or later.

The differences in this paradigm shift are obvious. All of the typical phantom paradigm shifts are optimistic. They often look more like justifications for high asset prices than serious arguments. They are also usually compromised by the source. It is simply much more profitable for the financial services business to have long bull markets that overrun and then crash quite quickly than it is to have stability. Imagine how little money would be made by us if the U.S. stock market rose by its dreary 1.8% a year adjusted for inflation, its trend since 1925. Volume would dry up, as would deals, and we’d die of boredom or get a different job. In short, beware a broker or a sell side “strategist” offering arguments as to why overpriced markets like today’s are actually cheap. Finally, the public in general appears to like things the way they are and always seems eager to embrace the idea of a new paradigm. The oil paradigm shift and the “running out of everything” argument is the exact opposite: it is very bad news and, like all very bad news, ordinary mortals and the bullishly-biased financial industry seriously want to disbelieve it or completely ignore it. (Just as is the case with climate warming and weather instability.) It is in this sense a classic contrarian argument despite being a paradigm shift.


On the second point – looking for other resources showing signs of a paradigm shift – the metals seemed the next most obvious place to start: they are finite, subject to demand that has been compounding (that is, more tonnage is needed each year), and, after use, are mostly worthless or severely reduced in value and expensive to recycle. Copper, near the top of the standard deviation list, has an oil-like tendency for the quality of the resource to decline and the cost of production to rise. Exhibit 8 shows that since 1994 one has to dig up an extra 50% of ore to get the same ton of copper.

And all of this 150% effort has to be done using energy at two to four times the former price. These phenomena of declining ore quality and rising extraction costs are repeated across most important metals. The price of all of these metals in response to rising costs and rising demand has risen far above the old declining trend, at least past the 1-in-44-year chance. (There is a possibility, I suppose, that some of the price moves are caused by a cartel-like effect between the few large “miners.” There just might have been some deliberate delays in expansion plans, which would have resulted in extra profits, but it seems unlikely that this possible influence would have caused much of the total price rises. These very high prices are compatible with such possibilities, but I am in no position to know the truth of it.) There also might be some hoarding by users or others, but given the extent of the price moves, it is statistically certain that hoarding could not come close to being the only effect here. Once again, the obvious primary influence is increased demand from developing countries, overwhelmingly led by China; and that we are dealing with a genuine and broad-based paradigm shift.

The highest percentage of any metal resource that China consumes is iron ore, at a barely comprehensible 47% of world consumption. Exhibit 9 shows the spectacular 100-year-long decline in iron ore prices, which, like so many other commodities, reach their 100-year low in or around 2002. Yet, iron ore hits its 110-year high a mere 8 years later! Now that’s what I call a paradigm shift! Mining is clearly moving out of its easy phase, and no one is trying to hide it. A new power in the mining world is Glencore (soon to be listed at a value of approximately $60 billion). Its CEO, Ivan Glasenberg, was quoted in the Financial Times on April 11, describing why his firm operates in the Congo and Zambia. “We took the nice, simple, easy stuff first from Australia, we took it from the U.S., we went to South America… Now we have to go to the more remote places.” That’s a pretty good description of an industry exiting the easy phase and entering the downward slope of permanently higher prices and higher risk.

Agricultural Commodities

Moving on to agriculture, the limitations are more hidden. We think of ourselves as having almost unlimited land up our sleeve, but this is misleading because the gap between first-rate and third-rate land can be multiples of output, and only Brazil, and perhaps the Ukraine, have really large potential increments of output. Elsewhere, available land is shrinking. For centuries, cities and towns have tended to be built not on hills or rocky land, but on prime agricultural land in river valleys. This has not helped. We have, though, had impressive productivity gains per acre in the past, and this has indeed helped a lot. But, sadly, these gains are decreasing. Exhibit 10 shows that at the end of the 1960s, average gains in global productivity stood at 3.5% per year. What an achievement it was to have maintained that kind of increase year after year. It is hardly surprising that the growth in productivity has declined.

It runs now at about one-third of the rate of increase of the 1960s. It is, at 1.25% a year, still an impressive rate, but the trend is clearly slowing while demand has not slowed and, if anything, has been accelerating. And how was this quite massive increase in productivity over the last 50 years maintained? By the even more rapid increase in the use of fertilizer. Exhibit 11 shows that fertilizer application per acre increased five-fold in the same period that the growth rate of productivity declined. This is a painful relationship, for there is a limit to the usefulness of yet more fertilizer, and as the productivity gains slow to 1%, it bumps into a similar-sized population growth. The increasing use of grain-intensive meat consumption puts further pressure on grain prices as does the regrettable use of corn in ethanol production. (A process that not only deprives us of food, but may not even be energy-positive!) These trends do not suggest much safety margin.

The fertilizer that we used is also part of our extremely finite resources. Potash and potassium are mined and, like all such reserves, the best have gone first. But the most important fertilizer has been nitrogen, and here, unusually, the outlook for the U.S. really is quite good for a few decades because nitrogen is derived mainly from natural gas. This resource is, of course, finite like all of the others, but with recent discoveries, the U.S. in particular is well-placed, especially if in future decades its use for fertilizer is given precedence.

More disturbing by far is the heavy use of oil in all other aspects of agricultural production and distribution. Of all the ways hydrocarbons have allowed us to travel fast in development and to travel beyond our sustainable limits, this is the most disturbing. Rather than our brains, we have used brute energy to boost production.

Water resources both above and below ground are also increasingly scarce and are beginning to bite. Even the subsoil continues to erode. Sooner or later, limitations must be realized and improved techniques such as no-till farming must be dramatically encouraged. We must protect what we have. It really is a crisis that begs for longer-term planning – longer than the typical horizons of corporate earnings or politicians. The bottom line is, as always, price, and the recent signals are clear. Exhibit 12 shows the real price movements of four critical agricultural commodities – wheat, rice, corn, and soybeans – in the last few years. Unlike many other commodities, these four are still way below their distant highs, but from their recent lows they have all doubled or tripled.

Bulls will argue that these agricultural commodities are traditional bubbles, based on euphoria and speculation, and are destined to move back to the pre-2002 prices. But ask yourselves what happens when the wheat harvest, for example, comes in. Only the millers and bakers (actually the grain traders who have them as clients) show up to buy. Harvard’s endowment doesn’t offer to take a million tons and store it in Harvard Yard (although my hero, Lord Keynes, is famously said to have once seriously considered stacking two months’ of Britain’s supply in Kings College Chapel!). The price is set by supply and demand, and storage is limited and expensive. All of the agricultural commodities also interact, so, if one were propped up in price, farmers on the margin would cut back on, say, soybeans and grow more wheat. For all of these commodities to move up together and by so much is way beyond the capabilities of speculators. The bottom line proof is that agricultural reserves are low – dangerously low. There is little room in that fact for there to be any substantial hoarding to exist.

Weather Instability and Price Rises

But there is one factor big enough, on rare occasions, to move all of the agricultural commodities together, and that is weather, particularly droughts and floods. I don’t think the weather instability has ever been as hostile in the last 100 years as it was in the last 12 months. If you were to read a one-paragraph summary of almost any agricultural commodity, you would see weather listed as one of the causes of the price rising. My sick joke is that Eastern Australia had average rainfall for the last seven years. The first six were the driest six years in the record books, and the seventh was feet deep in unprecedented floods. Such “average” rainfall makes farming difficult. It also makes investing in commodities difficult currently, for the weather this next 12 months is almost certain to be less bad than the last, and perhaps much less bad.

The Unusual Entry Risk Today in Commodity Investing: Weather …

For agricultural commodities, it is generally expected that prices will fall next year if the weather improves. Because global weather last year was, at least for farming, the worst in many decades, this seems like a good bet. The scientific evidence for climate change is, of course, overwhelming. A point of complete agreement among climate scientists is that the most dependable feature of the planet’s warming, other than the relentless increase in the parts per million of CO2 in the atmosphere, is climate instability. Well, folks, the last 12 months were a monster of instability, and almost all of it bad for farming. Skeptics who have little trouble rationalizing facts will have no trouble at all with weather, which, however dreadful, can never in one single year offer more than a very strong suggestion of long-term change.

Unfortunately, I am confident that we should be resigned to a high probability that extreme weather will be a feature of our collective future. But, if last year was typical, then we really are in for far more serious trouble than anyone expected. More likely, next year will be more accommodating and, quite possibly, just plain friendly. If it is, we will drown, not in rain, but in grain, for everyone is planting every single acre they can till. And why not? The current prices are either at a record, spent just a few weeks higher in 2008, or were last higher decades ago. The institutional and speculative money does not, in my opinion, drive the spot prices higher for reasons given earlier, but they do persistently move the more distant futures contracts up.

Traditionally, farmers had to bribe speculators to take some of the future price risk off of their hands. Now, Goldman Sachs and others have done such a good job of making the case for commodities as an attractive investment (on the old idea that investors were going to be paid for risk-taking), that the weight of money has pushed up the slope of the curve. This not only destroys the whole reason for investing in futures contracts in the first place, but, critically for this current argument, it lowers the cost to the farmers of laying off their price risk and thus enables, or at least encourages, them to plant more, as they have in spades. Ironically, institutional investing facilitates larger production and hence lower prices! Should both the sun shine and the rain rain at the right time and place, then we will have an absolutely record crop. This would be wonderful for the sadly reduced reserves, but potentially terrible for the spot price. (Although wheat might be an exception because the largest grower by far – China – is looking to be in very bad shape for its upcoming harvest.)

… and China

Quite separately, several of my smart colleagues agree with Jim Chanos that China’s structural imbalances will cause at least one wheel to come off of their economy within the next 12 months. This is painful when traveling at warp speed – 10% a year in GDP growth. The litany of problems is as follows:

a) An unprecedented rise in wages has reduced China’s competitive strength.

b) The remarkable 50% of GDP going into capital spending was partly the result of a heroic and desperate effort to keep the ship afloat as the Western banking system collapsed. It cannot be sustained, and much of the spending is likely to have been wasted: unnecessary airports, roads, and railroads and unoccupied high-rise apartments.

c) Debt levels have grown much too fast.

d) House prices are deep into bubble territory and there is an unknown, though likely large, quantity of bad loans.

You have heard it all better and in more detail from both Edward Chancellor and Jim Chanos. The significance here is that given China’s overwhelming influence on so many commodities, especially in terms of the percentage China represents of new growth in global demand, any general economic stutter in China can mean very big declines in some of their prices.

You can assess on your own the probabilities of a stumble in the next year or so. At the least, I would put it at 1 in 4, while some of my colleagues think the odds are much higher. If China stumbles or if the weather is better than expected, a probability I would put at, say, 80%, then commodity prices will decline a lot. But if both events occur together, it will very probably break the commodity markets en masse. Not unlike the financial collapse. That was a once in a lifetime opportunity as most markets crashed by over 50%, some much more, and then roared back. Modesty should prevent me from quoting from my own July 2008 Quarterly Letter, which covered the first crash. “The prices of commodities are likely to crack short term (see first section of this letter) but this will be just a tease. [Editor’s Note: the section referred to is titled “Meltdown! The Global Competence Crisis,” which discusses the aftermath of the global financial crisis.] In the next decade, the prices of all raw materials will be priced as just what they are, irreplaceable.” If the weather and China syndromes strike together, it will surely produce the second “once in a lifetime” event in three years. Institutional investors were too preoccupied staying afloat in early 2009 to have obsessed much about the first opportunity in commodities and, in any case, everything else was also down in price. A second commodity collapse in the next few years may also be psychologically hard to invest in for it will surely bring out the usual bullish argument: “There you are, its business as usual. There are plenty of raw materials, so don’t listen to the doomsayers.” Because it will have broad backing, this argument will be hard to resist, but should be.

Residual Speculation

Finally, there is some good, old-fashioned speculation, particularly in the few commodities that can be stored, like gold and others, which are costly per pound. I believe this is a small part of the total pressure on prices, and the same goes for low interest rates, but together they have also helped push up prices a little. Putting this speculation into context, we could say that: a) we have increasing, but still routine, speculation in commodities; b) this comes on top of the much more important effects of terrible weather; and c) most important of all, we have gone through a profound paradigm shift in almost all commodities, caused by a permanent shift in the underlying fundamentals.

The Creative Tension in Investing in Resources Today

As resource prices rise, the entire system loses in overall well-being, but the world is not without winners. Good land, in short supply, will rise in price, to the benefit of land owners. Technological progress in agriculture will add to the value of land holdings. Fertilizer resources – potash and potassium – will become particularly precious. Hydrocarbon reserves will, of course, also increase in value. In general, owners or controllers of all limited resources, certainly including water, will benefit. But everyone else will be worse off, and a constrained-resource world will increase in affluence per capita more slowly than it would have otherwise, and more slowly than in the past. Remember, this is not simply a recycling of income and wealth as it was when Saudi Arabia stopped some of its pumping for political reasons. Then, we paid a few extra billion and they put money in the bank for recycling. There was no net loss. But now when they pump the last of the cheapest $5/barrel of oil and we replace it with a $120/barrel from tortured Canadian Tar Sands, the cost differential is a deadweight loss. GDP accounting can make it look fine, and it certainly creates more jobs but, like a few thousand men digging a hole with teaspoons, it adds jobs but no incremental value compared to the original cheap oil.

How does an investor today handle the creative tension between brilliant long-term prospects and very high short-term risks? The frustrating but very accurate answer is: with great difficulty. For me personally it will be a great time to practice my new specialty of regret minimization. My foundation, for example, is taking a small position (say, one-quarter of my eventual target) in “stuff in the ground” and resource efficiency. Given my growing confidence in the idea of resource limitation over the last four years, if commodities were to keep going up, never to fall back, and I owned none of them, then I would have to throw myself under a bus. If prices continue to run away, then my small position will be a solace and I would then try to focus on the more reasonably priced – “left behind” – commodities. If on the other hand, more likely, they come down a lot, perhaps a lot lot, then I will grit my teeth and triple or quadruple my stake and look to own them forever. So, that’s the story.

The Position of the U.S….

The U.S. is, of course, very well-positioned to deal with the constraints. First, it starts rich, both in wealth and income per capita, and also in resources, particularly the two that in the long run will turn out to be the most precious: great agricultural land and a pretty good water supply. The U.S. is also well-endowed with hydrocarbons. Its substantial oil and gas reserves look likely to prove unexpectedly resilient, buoyed by improving skills at fracking and lateral drilling. And, by any standard, U.S. coal reserves are very large. All other countries should be so lucky. Second, we are the most profligate or wasteful developed country and this fact, paradoxically, becomes a great advantage. We in the U.S. can save resources by the billions of dollars and actually end up feeling better for it in the end, like someone suffering from obesity who succeeds with a new diet.

The slowing growth in working age population has reduced the GDP growth for all developed countries. Adding resource limitations is further reducing it. If our GDP in the U.S. grew 2% for the next 20 years, I think we would be doing very well. Dropping to 1.5% would not surprise me, nor would it be a disaster. In the past 28 years, we have increased our GDP by 3.0% per year with only a 0.9% increase in energy required. That is, we increased our energy efficiency by 2.1% without a decent energy policy and despite some very inefficient pockets like autos and residential housing. This would suggest that at a reduced 2% GDP growth rate, we might expect little or no incremental demand for energy, even without an improved effort. If in addition we halved our deficit in energy efficiency compared with Europe and Japan in the next 20 years, then our energy requirements might drop at 1.5% a year. Given the plentiful availability of low-hanging fruit in the U.S., this is achievable.

… as for the Rest

Other countries will not be so lucky. Almost all will suffer lower growth, but resource-rich countries will have a relative benefit as the terms of trade continue to move in their favor. Less obviously, those countries that are particularly energy efficient will also benefit. If the Japanese, for example, can produce over twice the GDP per unit of energy than the Chinese, then, other things being equal, the terms of trade will move in their favor as oil prices rise. At the bottom of the list, poor countries with few resources and little efficiency, which already use up to 50% of their income on the commodity “necessities,” will suffer. The irony that they suffered the most having used up the least will probably not make their misery less. Limited resources create a win-lose proposition quite unlike the win-win we are accustomed to in global trade. Theoretically, we all gain through global trade as China grows. But with limited resources, the faster they grow and the richer they get (and, particularly, the more meat rather than grain that they eat), the more commodity prices rise and the greater the squeeze on the poorer countries and the relatively poor in every country. It’s a gloomy topic. Suffice it to say that if we mean to avoid increased starvation and international instability, we will need global ingenuity and generosity on a scale hitherto unheard of.


The U.S. and every other country need a longer-term resource plan, especially for energy, and we need it now!(Shorter-term views on the market and investment recommendations will be posted shortly.)


(1) P.I.S.A. Test 2003, OECD.

(2) Edward Chancellor, “China's Red Flags,” GMO White Paper, March 23, 2010.

Disclaimer: The views expressed are the views of Jeremy Grantham through the period ending April 25, 2011, and are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.

For those looking to follow the evolution of Grantham's thinking (and his despair that his colleagues in the asset management industry care little for the subject) I have written both a 2009 post on the topic:
Peak Oil and Professional Money Management, and also a post this week: Jeremy Has Spoken.

I too remain fascinated that the asset management industry continues to get away with managing capital in Nominal, not Real, terms at a time of quickly accelerating losses in the purchasing power of paper currencies. Moreover, Grantham's lone voice is all the more interesting given that the pro money management industry appears to have learned nothing from the crisis of 2008, and is on its merry way again--hoping to get back to Normal. This, despite endowment's such as Harvard's having lost over 33% in the crisis, while gaining a paltry 11% in 2010. And again, that's nominal.


Going forward how should Harvard manage it's endowment.? What are some reasonable options - hoping of course to minimize further regret. What percentage should be left in cash equivalents? I doubt that emulating the University of Texas position on gold will be a politically viable option.

Perhaps they should give back to the Soviet people what was stolen during the shock therapy fire sale of state assets.

Silver. It's a very small market ($30-40 billion mined per year), with huge industrial use (since at least 2001 industrial use has surpassed mining production).

Check the World Silver Supply and Demand section:

Note that scrap silver inputs are also lower than "future scrap" production (silverware, jewelry, and medals/coins).

Government sales make up the difference.

If 100 endowments invested $500 million ($50 billion total, over a years mining production) into silver the market would... I'm not sure. But the price of silver would certainly go up, as would the values of the endowments in terms of their silver investments.

And of course I'm talking about taking physical delivery and using secure storage.

Chief Investment Officer and Economist for royal Ducth Shell...?

I'f floored. I never though I'd ever see the day when I'd read something like this from an economist. It's like reading something from Albert Bartlett.

I'm not floored. In fact I'm totally unimpressed. He is making assumptions that growth in the US will continue (albeit at a slower pace) for the next 20 years. A typical response from those whose livelihoods depend on the continuation of BAU. 7000 odd words and I didn't see any reference to the total cluster*** that the US is sinking into with its national debts and deficits.

He is making assumptions that growth in the US will continue (albeit at a slower pace) for the next 20 years.

Not to worry, just come to sunny Florida where growth is guaranteed to continue ad infinitum and BAU will never cease!

Legislative leaders use the must-pass budget bill to get approval of a bill that would ease growth management restrictions.
By Mary Ellen Klas
Herald/Times Tallahassee Bureau

TALLAHASSEE -- A major overhaul of the state’s growth management laws was tacked onto a budget bill by House and Senate leaders Friday, giving legislators a take-it-or-leave-it option of either rejecting the $67-plus billion budget or accepting the controversial growth management legislation.

Read more: http://www.miamiherald.com/2011/04/29/2193300/controversial-growth-manag...

"I didn't see any reference to the total cluster*** that the US is sinking into with its national debts and deficits."

Perhaps he wants to break the news slowly :-/

Having seen the article initially on TOD I highlighted it on New Zealand's most popular finance blog where it has attracted a great deal of attention, even from the perennial headinthesand merchants.I suspect it is not only the quality of the analysis (which to be fair is nothing we havent heard here on TOD for years now) but the status of the messenger which is carrying so much weight.

Re; the reaction of other fund manangers - well they are in an enormous bind - Grantham's musings really destroy all the underpinnings to their conventional investment stategies going forward (other than alternative long/short commodity trades). It may make some of them think - but if it does only in terms of getting out of the industry before it implodes around them with a large wadge of ill earned cash.

Hey andyh, could you please link to that? Thanks!

About half way down the comments thread:
Bernard Hickey then made it the lead article on the following day's top 10

Interesting article, thanks.

I enjoy hearing Grantham's take on American optimism, and his personal experiences with it, and how it colored the perceptions of even very intelligent people.

Grantham is also correct on his assessment on the resource prospects for North America - they are actually quite good, at least better than 95% of the planet.

However, IMO the U.S. is well beyond the point where complexity reaps advantages. This should be clear. So in that sense, America's downward trajectory is all but guaranteed, despite it's wealth. It will literally take collapse for us to be responsible stewards of our resources.

Imagine NASCAR or the military and wars being run on coal or gas and you get my point. We don't have the good sense to use our endowment in any other way but the most wasteful.

Denmark or Taiwan, for example, may not have resources, but they don't need them! They are much smaller and less complex, and the people live completely differently to how we do.

The U.S. is by far the most complex nation on Earth. It's no contest, it's not even close. China and India are much larger, but a substantial portion of their population are simple farmers. And no developed country comes close to the U.S. in population.

I happen to agree with you -the more I look at the problems we face the more I think the largest hurdle we face is peoples expectations, entitlements and neural habituation to more. (To wit: my next post here is titled "Shortage of Energy? Or Longage of Expectations?")

We don't have enough high quality energy (and some other limiting resources) to keep up this system of claims, which means this society is insolvent....but far from bankrupt - as Grantham points out US is still well endowed with resources - we produce over 80% of our own energy - few large countries can say that. But its our paper claims that have extended beyond what can be serviced and paid back which will have to be adjusted - on top of that we have a general sense that 'more every year' is our birthright. Two things need to be effectively dealt with: a)on the supply side, we need to really urgently look at local/regionally sourced basic goods - so as to mitigate dangerous supply breakdowns if there is an overnight currency/claims snafu and b)people need to reduce expectations, substitute self-worth for net worth (on average) and prepare for lower living standards across the board (on average).

Telling people to do these things is a waste of time IMO, and telling people the problem without giving them some actionable plan is equally futiel- there needs to be some sort of cool scout team on the demand side and a top down scientific effort on the supply side. Unlikely but possible. At least Grantham is speaking his mind (though he leaves aside trade/supply chain shortfalls and much of human nature and environmental externalities, he got alot of it right)

there needs to be some sort of cool scout team on the demand side and a top down scientific effort on the supply side. Unlikely but possible.

How about using nature as a model for dealing with limited energy resources? Nature has been dealing with limited resources for billions of years.

Mickey McManus thinks information liquidity based on the nature model can lower energy requirements 40-60%.


I needed to watch it a couple of times to grasp his thesis.

Thanks for this, x. As you say, at first the guy sounds like he's been smoking too much weed. But it's worth persevering to the end, where the good stuff is.

Anything presented by Maya is likely to be slick as they do high-end graphics for Hollywood. These TED things are hit and miss and some are highly manipulative, like that one woman remembering her out-of-body experiences. I don't know where this fits on the scale. No demo at the end and the slide presentation looks like it was filmed but intended as spontaneous. The last slide showing the UUID-based containers looks fairly conventional.

Right, I have not seen that video but that fact that people think we need all the oil we use is a strange faith in a provably failing system. Capitalism is a big waste and misallocation machine. Oh the humanity! We won't be able to ship fish from Canada to China to be cleaned then back to the US for consumption. The tyranny of limited resources and being materially efficient.

"Capitalism is a big waste and misallocation machine."

Compared to what? Central planning is a proven failure. Complete anarchy doesn't work. Since the end of Feudalism is called the Enlightenment I get the impression that wasn't doing so well either. And certainly the Fascism-lite we in the US are trying is failing as well. And the Japanese model of directed capitalism ( whatever they call it) has failed.

Our list of successful economic models seems to be very short.

"Capitalism is a big waste and misallocation machine."

"Compared to what?"

Why would the truth or falsity of the statement be dependent upon comparison with other systems?

Central planning is a proven failure. Complete anarchy doesn't work. Since the end of Feudalism is called the Enlightenment I get the impression that wasn't doing so well either. And certainly the Fascism-lite we in the US are trying is failing as well. And the Japanese model of directed capitalism ( whatever they call it) has failed.

Even if a comparison were, for some reason, an appropriate way to test the assertion, surely we'd want to be more thorough and careful than picking a few (some clearly deliberately odious) possibilities from a nearly-infinite list.

Capitalism works very well. In an enviornment where there are abundant resources. We had a century or two of that, and it was nice. Now, resources wont be so abundant any more.

Capitalism works very well. In an enviornment where there are abundant resources.

For the winners.

kind of how natural selection works as well, both inter and intra species often enough.

Social Darwinism. Very attractive philosophy.

As long as you think you're a winner.

you may have missed my point, anything here is a winner...for the moment

Perhaps I did miss your point. Sorry.

There's enough social Darwinism "going around" here, that I may be getting trigger-happy.

Let's see now. After decades of pursuing profit at the expense of the environment, Mr. Gantham has had an epiphany.

Give people a break.

This is Mr. Gantham covering his tracks as much as possible. Kind of like Germans at the end of WW2 saying they were only following orders.

You are way too harsh on Grantham. I have followed his writings for many years and, in fact , it was partly due to his long range analysis that I got into the tree farming business. He has always considered timber an inflation proof commodity. In a field full of hucksters, Jeremy has proven to be a clear thinker and a purveyor of rational advice..

Everyone has to earn a living so I don't expect everyone to be environmentally perfect. But here is someone who manages billions of dollars for strangers with the sole objective of maximizing profits. Like I said, revisionism.

I don't know Grantham (at all) but it is a very real and I would say even likely possibility that he is waking up to our predicament just now (or however long it took him to learn what he wrote in his piece).

I didn't wake up until 2005 to the environmental situation in general and on the topic of depleting oil not until 2007. Am I a revisionist? Or did I simply go through the learning process that each of us must?

Until someone gives me a reason to do otherwise, I'm willing to give him the benefit of the doubt, assume he took several years of study to come to the conclusions he did (just as I did) and welcome him to the conversation — a conversation that can use and many, many more voices.


You can welcome whoever you want to the conversation. Whether he shares the same agenda as environmentalists is another issue.

True. Although I tend to think it's unlikely that he is going to change his focus on profit above all else, that too is a real possibility and he has to go through the awareness stage first — just like each one of us.

Next he will be confronted by the questions that all of us also had to confront: "Do I keep fueling the train as it goes over the cliff? Or do I do something to stop it or at least mitigate the crash?"

Let me know when he quits his day job.

Will do :-)

Grantham linked to Chris Martenson's Crash Course video in a 2009 Quarterly Letter and provided a blurb for the book version which was published in March this year so I assume that his epiphany on resource constraints resulted from his somehow having been exposed to Martenson's work at some point a couple of years ago.

It seems to me to do little good to pillory what he's done in the past - what's done is done. Nor even to pick the nit that he is still intending this for the wealthy to get wealthier by investing wisely based on his advice. None of that changes the value of such a message now coming from such a voice as his, deeply embedded and highly placed as he is within the world (economics) that, unfortunately, 'the world' (industrial civilization) listens to. Heck, not just listens to, hangs on every word of. Let his message carry far and wide I say.

Even if he had only pointed out the absurdity of endless growth, this would have been an amazing article coming from someone esteemed in the financial community. Nice counter to the endless ignorance and b.s. we get fed daily by the likes of CNBC. The economists and financial people have to come around before any of this will get the attention of the powers that be.

Yes, one can profit from understanding reality as it has ever been so. But this does not detract from the importance and quality of his well documented message.

It would have been an amazing article 10 years ago, not today.

Like I said, when he quits the financial industry, he'll be credible.

I disagree: the fact that Grantham wrote what he did while still within the financial sector (and that GMO allowed the 19 pages to appear under its letterhead) is quite extraordinary and should be commended.
It reminds me of Jeff Rubin's efforts while still at CIBC. I thought it was daring of Jeff to step out on these issues, and to CIBC's credit that it was done under their logo.

Grantham is almost certainly taking some career risks in doing this... hats off to him for having the courage to speak the truth (even if he got the occasional detail wrong).
His paper has as much to do with human nature as it does with supply and prices, and he was right-on in that respect (our preference for optimism, our denial of profoundly bad news, etc)

Mr. Rubin quit working at CIBC to speak freely about Peak Oil. Until Mr. Gantham does the same, he has no credibility with me.

Everyone has to earn a living

That seems to be part of the problem.

The problem is Americans' profligate use of natural resources far beyond what is necessary for a high standard of living.

Sustained exponential population and economic growth will eventually overwhelm all efforts to increase efficiency and reduce consumption. The first two diverge to infinity, the third asymptotically approaches 100% and the fourth approaches zero. Zero consumption of a vital resource is death. The problem is too many people.

Bob Shaw's question from Phoenix, AZ: Are humans smarter than yeast?

Maybe the agricultural and material prosperity of the US which is built on oil has allowed the world to sustain a larger and larger population, at least for the short to medium-term.

The Green Revolution (U.S. plan to modernize agriculture to increase food production) was lauded by humanitarians as a way to end world poverty, but when we made more food, we got more people instead of ending poverty. The U.S. does not feed the world. It mostly feeds itself. I think you are placing too much blame on one country because agricultural productivity increased all around the world.

Since the population growth rate in the U.S. is positive only due to immigration, the large material consumption of the U.S. is probably restraining world population growth by denying resources to others who reproduce faster. However, that may not be true for the same reason more food did not end poverty. Poor people may not be able to utilize resources even if they are available or remain untouched by others. They may lack the desire, skill, stability or financial resources. Overpopulation is ugly, and the humane response to save all the suffering people perversely makes the situation worse. Attempts by an outsider to restrain high birth rates are usually met with religious condemnation, accusations of racism or ridicule like, "You go first." I doubt humans will solve the problem of excess population. Nature will force the solution upon us.

haven't seen a post from totoneila in quite some time--miss his perspective

Yes, indeed, his perspective was well worth reading.

people need to reduce expectations, substitute self-worth for net worth (on average) and prepare for lower living standards across the board (on average).

This assumption really angers me. Not at you personally, but the assumption generally - which it seems that even intelligent analysts repeat without thinking critically about corporate power and who is grabbing all the wealth.

I've been reading the oil drum for years, and it's been a great education. I do understand the problems of oil depletion and how this will affect our standard of living and the way we live our lives. It's caused me to change many of my ways - like getting serious about food production (I had long been a hobby gardener), deliberately moving to a walkable neighborhood close to where we work, going down to one car, hanging laundry instead of putting it in the dryer, and on and on.

HOWEVER, really get frustrated with persons like yourself, who have a platform, overlooking the fact that living standards have been going down for decades for the working and middle classes. Offshoring good jobs has been going on for decades. And the housing bubble was engineered to make lots of money for those at the top. We now have the greatest economic inequality since the Great Depression.

And now we are told, by politicians seeking solutions to the budget deficit, and by energy depletion experts like yourself, that we have to give up more - that "entitlements" cannot be honored.

As an aside, I am in Wisconsin and have been involved in the protests. I can tell you that many, many people understand budget problems and are willing to do their share. But when we are asked to take benefit cuts while corporations (in WI 2/3 pay no taxes) are given over a million dollars in tax cuts, when we have already accepted the lower standard of living you mention, in the form of furlough days, and were set, according to the Wisconsin Fiscal Bureau, to end the year in the black - before the corp tax breaks - people get angry. And i think this injustice should be recognized.

At the federal level, tax breaks were given to the top earners, while two wars were waged, our SS $$$ were lent to the general fund, in the form of treasury bonds (about to go out - I can link later to a great piece by Paul Craig Roberts on this if anybody's interested) - and now we're told times are tough. The nation can't afford "entitlements" (DAMN RIGHT THEY'RE ENTITLEMENTS - WE PAID IN ALL OUR WORKING LIVES!!!) like Medicare and Medicaid - that everyone "across the board" has to accept a lower standard of living????

Words cannot express how angry this makes me feel. We need some serious income redistribution before the middle and working classes take more hits...


The energy simply won't be there in the future to pay entitlements. Those entitlements were uninformed promises derived from the minds of magical thinkers. The corporations, politicians, bankers, and military will repossess the American dream and entitlements to keep themselves fat and happy, or at least functioning. It is definitely time to take care of yourself and it sounds like you're doing a great job of it.

Eventually it will only make sense to invest in essential commodities as their inflating values will outperform just about every other investment opportunity when world GDP begins to contract. However, commodities can be nationalized, so keep it close to home if possible. You're in a jungle and the predators want to turn your entitlements into a tasty meal, and they'll probably get away with it because citizens are not organized into powerful vector(s) that can bring pressure to bear on those responsible, although the Wisconsin spectacle was impressive.

Right. "The energy simply won't be there in the future to pay entitlements." TRUE. However, and I think this is what Lilith was saying: if things are so constrained, how come there is PLENTY -- as in unlimited $ trillions -- for entitlements for the banksters, corporations and plutocrats?

We're headed into a zero sum situation in which there will be winners and losers. Not everyone can win and whether you get to take a trip to Disney World or get to kick back on a beach for 25 years upon retirement is unimportant. The vital organs of our nation, as they're perceived by those making decisions will be saved first. The fat and muscle (middle class) will have the extra wealth squeezed from them until we are lean and mean like the typical Chinese factory slave. Our potentates have done pretty well by us by arranging to denominate oil in dollars and allowing us to consume 25% of the stuff. We've grown fat and happy and delusional. This once in 200 million year party is coming to a close and lean and mean will count for a lot in the future.

lilith & Dopamine,

I'm also from Wisconsin and I agree with lilith. For my wife and me, this is hardly an academic debate - if SS and Medicare go away, I suspect our lives will indeed be "short and brutish". It seems that many folks like Dopamine are exclusively focused on "survival of the fittest" as the only viable strategy for a constrained energy future.

The transfer of wealth from the majority to a small percent of the US population is a significant factor in the potential inability to honor contractual payments to retirees. This transfer attempts to be justified because the most wealthy folks claim some sort of entrepreneurial superority or some other exceptional set of skills and abilities that entitle them to nation's wealth. Of course, this is nonsense. I'd be impressed if these folks moved to the Somalia Republic and achieved the same success. Here, in the good old USA we have highly developed systems for infrastructure, banking, legal, education, medical, etc that were build up over a long period of time my millions of ordinary people. We have a class systems that greatly favors people born into the right circumstances. For a person privileged from birth to take maximum advantage of a civilization structure and then claim "exceptionalism" is a real stretch. Sure, we value reward for hard work and good ideas - but the current transfer of wealth is a grotesque distortion of that value.

As others have pointed out, there is also the issue of budget priorities - military entitlements, corporate subsidizes, prison vs schools, goofy earmarks, etc. I suspect that most retirees would have trouble relating to the "kick back on a beach for 25 years" model for post employment years and as the primary use of their retirement income. Honoring budgetary commitments to retirees is hardly a frivolous use of national money.

I don't know about the future value of "mean and lean", but it is certainly mean spirited to characterize as "delusional" the millions of US citizens who worked nearly every day of thier adult lives to build the country that an elite few now find so lucrative. We made a contract, we paid our taxes, we planned our financial future accordingly and we expect the contract to be honored. If this type of contract is no longer worth anything, then indeed we can expect a massive breakdown of trust and many serious consequences for the nation - and this might not be so swell for the rich either.

I'm well aware of the energy and environmental issues that will most certainly change the course of history in the USA - and probably for the worse. I also think there is a lot of delusional thinking going on in a number of areas. But, I don't think that the concept of honoring a contract is delusional. I think that the attack on the poor, the middle class, and retirees is just another tactic to divert attention from our real problems and allow an elite few to continue to enjoy BAU. Even some TOD commentors use terms like "Pity Party" to marginalize any attempt to restore equity back into the fabric of our culture.

Even having said the above, I have serious doubts that we in the US can overcome hardened ideological positions long enough to understand the real problems, set realistic goals, and focus on effective solutions. TOD comments often seem to reflect much of the divide in the country at large. There is general recognition here of the impending energy shortage, but little consensus beyond that. Perhaps the world as Dopamine predicts is the one we will get.

Humans are masters of deception and are opportunistic predators. If a lump of meat (entitlements) is available for the strongest to feed upon, they will. If a five percent growth rate can no longer be carved out of a growing pie of energy and material, then they will look at your piece of pie to get their 5% growth rate.

Our fairy tale comes to an end when the pie stops expanding and then begins to contract. Credit will dry up because the interest on the bills and bonds can not be forthcoming from a shrinking pie. The only reason to lend is to magnify your wealth by using tools to uncover and convert new natural resources to some human utility, at a profit. Existing financial entities already have to leverage themselves, with the consequent risk, just to generate a single digit return. I think I would take the University of Texas' path and take delivery on a billion dollars worth of gold, because when the contraction begins the collapse of paper wealth will be stupefying.

However, I do think the U.S. will keep its retirees in beans and bacon with a little medical care, for a long time and we have all of those nice new houses that will only become more affordable for those who can save a little cash in the face of food and energy price increases.

Our fairy tale comes to an end when the pie stops expanding

Well said.

entitlements [are] available for the strongest to feed upon

Well, not exactly "the strongest" in a physical sense although that does ultimately weave itself into the equation, but those who are able to use the dark arts of persuasion to convince the masses that some animals (pigs) are more equal than others and they happen to be those pigs who "deserve" more; well in that sense it is true that those persons will be the ones feeding on the last of the entitlements before anyone else is let near the feeding trough once our shared fairy tale ends.

[ i.mage.+]

174 responses to this article so far, and I don't see one reference in the article or comments to the role of the largest single consumer of energy in the US--- the Pentagon. The US military budget is nearly as large as the entire rest of the world combined, 48.5% of world expenditures, according to the figures I have seen. I recently asked a retired aircraft carrier captain how he would restructure the US military if its role were limited to defending the territory and citizens of the US. He said that was not realistic, as the necessary mission was to project power worldwide in a hostile world by any means available including torture. Indeed. We are following exactly the same path as every imperial power that has preceded us, with the same end result as Spain, Portugal, Great Britain and the Soviet Union.

If we are such a resource rich continental nation why must we have a thousand military bases worldwide? World military dominance is the underpinning of the dollar as the world reserve currency, which allows us to continue to import 70% of our oil consumption denominated in dollars printed at will by the Fed.

The fundamental role of the military is to fight permanent wars in order to support the only viable export industry left in the country-- that of weapons of death. Much more profitable than winning a war like we last did in WWI, resulting in the growth of competitors like Japan and Germany.

This New World Order is starting to unravel, and the end result will not please a nation of citizens born and "educated" to the idea that waste and endless consumption are their birthright. Meanwhile we debate "hard choices" like whether it is better to cut teachers jobs or eliminate social security cost of living increases so inflation will force the retired poor who have had their home repossessed to shift from a diet of hamburger to dog food and dumpster scraps. The military budget remains untouchable, and the current Liar in Chief plays his fiddle while the city burns.

"Grantham is also correct on his assessment on the resource prospects for North America - they are actually quite good, at least better than 95% of the planet."

This is something I used to remind myself of; "America's Great Endowment". After further review, considering the US's total investment in this package of finite resources and realization that our consumption is on par with our endowment, I always come up with a big So What?. What it means is that we are going to experience the mother of all behavior modification programs. The bigger we are, the harder we fall. Wise management of this endowment could buy us time, but the ultimate availability of these non-renewables to society works out to be the same. They don't draw interest, they only become more scarce.

We are not as densly populated as Chindia.

We must keep it that way.


I find it rather telling that people who use the most of everything, target high populations in other countries as the problem.

The 300 million people in the United States consume 19 Million barrels per day, this is more than China, India, Russia, United Kingdom and Germany combined.


Nigeria population 152 million use 280,000bld
Bangladesh population 164 million use 96,000bld

Total population of 316 million consume 376,000 Barrel per day.

U.S. grain consumption is not much better.


Not to mention the consumption of goods America does not pay for.

Being concerned about resource constraint, I know which 300 million I would target for family planning, resource constraint would not be talked about for another 100 years.

Fact population is not the problem, the problem is what the US openly encourages at the expense of everyone else.


Fact population is not the problem, the problem is what the US openly encourages at the expense of everyone else.

Population and excess resource consumption are both the root issues. I know everyone hates when you express it mathematically but
ResourceUseRate = AverageYearlyConsumptionPerCapita * Population

Can't get around the fact that both play a role.

ResourceUseRate = AverageYearlyConsumptionPerCapita * Population

Well, I'd say:
ResourceUseRate = AverageYearlyConsumptionPerCapita * NonRenewableQuota * Population

It's different whether someone gets most of his/her household power from a roof or a coal fired plant. (Silicon is available in abundance and doesn't need to be burnt to produce electricity and one gram of silicon of a thinfilm PV-module can produce even more electricity than one gram Uranium).

Carbon is at 0.03% and Uranium235 at 0.0000013%

By the way, thinfilm PV-modules can be obtained for less than $1 per Watt:

My household is currently at 300 kWh electricity consumption per year and person (and no, we are not missing out on any comfort. Most people are simply unaware what efficient appliances/lights/TV/computer can do).
In other words: If I had my own roof, I would need about $300 worth of PV-panels to cover the electricity consumption for each person for decades to come (yes, inverters and mounting frames are also needed).

In any case: These costs are far less than what Americans pay too much for cars they don't need (not even counting the gasoline costs!):

And since this is the best selling US-car it doesn't look like Americans are currently facing a resource problem.

Oh well, at least Superman is fed up with the American way:

That is indeed a better equation. I was really responding to jaz, who seems to go off on these weird directions.

Sure, but the vast majority of the material demands, subsequent environmental degradation and just general resource mismanagement is in the top 20% - who are also pushing this high material demand system, based on faulty logic and blind to the planetary limitations around the world. The problem arises with the confusion between material demands of the system for the sake of economic growth and human need. Two completely different things. In fact a lot of studies have shown how the commodity fetishism and consumerism is anxiety based and causes unhappiness. Along with profit based industrial practices to make poor quality manufactured goods for the sake of cyclical consumption. Ain't nothing efficient about economic efficiency.

Can we make a distinction between the role that population & resource use play now, and their role in the future?

There is a lot of conjecture on TOD about 'the future', mostly related to how it might be in the USA. Just now the per capita use of fossil fuel in the USA is about 50 times that in, for example, Bangladesh, and the use of non-renewable resources generally in Bangladesh is also insignificant compared with USA. Bangladesh certainly has a significant issue with population, but however that works out, it is scarcely likely to pull down the USA. On the other hand, the extra 10M every 5 years in the USA is very significant for the rest of the world and even seems to be knocking on the American ceiling.

The USA might be in competition for resource use with China (population growth slowing) or with Saudi Arabia (population growing rapidly from a comparatively tiny base, but with significant growth in net resource demand), but elsewhere even the aggregate demands of the vast populations of the poor can hardly affect the outcome for the American way of life?

I agree we consume more than our fair share...

Les(s) is more....

But the world are overpopulated

The world is not overpopulated, it misuses it's resources and spends money on stupid things.
If you take a look at all the semi arid and arid areas of the world, the land areas of the Gobi, Arizona, Sahara, sahel and deserts in Australia are about 10 times the area of Europe.



Both the links above show how desertification in these areas can be reversed, it just takes money.
Irrigation with desalinated water powered by solar and wind and small reservoirs would increase effectiveness of tree planting.

U.S. military spending is about $700 billion, just think what $100 billion per year could do. At the moment charities do the best they can with a few hundreds of thousand of dollars.


Australia has 31 times the land of the UK and only 20 million people, it has vast areas of land waiting for the money to reclaim it.

Guess politicians do not find tree planting as sexy as fighter planes.


So you consider reclaiming desert as the preferred direction to take?

I certainly think that if forest destruction and soil erosion are not reversed than the staving masses from those effected countries will overwhelm the richer ones.


You were talking about places like the deserts of Australia. Not many people live there in the first place and there is no forest to speak of that could be destroyed.

Now it sounds like you are talking about desertification, which is a different topic.


It is not a different topic.

If you had bothered to read the articles you would see that desertification is often caused by deforestation, it is also caused by bad land management, over grazing and poor cultivation techniques.


It does not take many people to cut down trees or to cause over grazing.

As per my point previously, a small number of people can use up most of the worlds resources.

Regarding Australia as all other areas I was talking about the causes


There is considerable evidence that the worst pressure on much of the pastoral rangelands in recent decades occurred in the 1970s, when stock numbers were about twice the numbers in the 1990s, and before the Landcare movement was established in 1989. In many areas these pressures and earlier periods of overgrazing led to massive vegetation loss and accelerated erosion that have left landscapes permanently degraded.

You pointed to a Wikipedia page on the deserts of Australia. They have existed for thousands of years and will be there for thousands more; mankind has little to do with the vast majority of those areas.

I did not say ALL the deserts were man made.

Humans have been destroying their environment for thousands of years, never heard of Rome's need for grain and North Africa. Guess you are too clever to properly inform yourself.


By the way, Rome was an empire which covered Europe, North Africa and Asia Minor and was at it's height around 200AD.


I put it to you, you have little idea of the effects of farming and over grazing by the Chinese over the centuries.

Ever heard of Easter Island?

jaz: If you take a look at all the semi arid and arid areas of the world, the land areas of the Gobi, Arizona, Sahara, sahel and deserts in Australia are about 10 times the area of Europe.

Then why mention Arizona if you were talking about desertification by humans?


I have thought for quite some time that the W stands for something else other than Web, you are proving me right.

Where did I say they were all caused by humans?

I said desertification can be reversed and people given resources have done so in many countries.

As usual you are changing the original terms of your claim.

If you take a look at all the semi arid and arid areas of the world, the land areas of the Gobi, Arizona, Sahara, sahel and deserts in Australia are about 10 times the area of Europe.

Both the links above show how desertification in these areas can be reversed, it just takes money

So you claim that money can turn the Sahara Desert into what? A non-desert?
The Sahel is a transition area and perhaps that is getting worse, but my god man, can't you show some logic and not lump actual deserts with very little water into your rhetoric?

If you think what you do is logical then I would rather not, thanks.

I would rather take all evidence into account, before I come to any conclusion and not assume I know everything as you arrogantly do.

I have included several studies which have clearly shown how deforestation and overgrazing have caused massive amounts of desertification over the last 2 thousand years.

Including how once fertile land which produced wheat for the Roman Empire is now desert.

Studies in Australia which have shown overgrazing has turned once good grassland into semi arid regions which can no longer support livestock.

Again nowhere do any of these studies claim all deserts are caused by man.

However projects like this can reverse these trends.


The real issue is little men make little points and these issues are far too important for pettiness.

The Sahara Desert is called a desert for a reason. That sounds pretty logical to me.

Yes and large parts of it are desert which were previously productive farmland and grasslands which supported cattle.

Those areas are now part of the desert because they are desert. What stupid point are you trying to make?

I wonder where the camels came from with all the cattle roaming around the sand dunes.

Of course certain areas are getting worse but your statements consistently show a lack a scale. All you have to do is give a number demonstrating a fraction of encroachment in terms of the original size of the Sahara Desert. You pointed to this image. Do you really think that we can do anything about the large white areas that already exist as huge desert regions? You mentioned Sahara, Gobi, and Australia.

You still do not get it do you, some of those white bits have been caused by man's activity over the last couple of thousand years.
To say they already exist is to fail to understand that SOME of these areas would not be desert were it not for deforestation and over production of land.

Not one of the studies says ALL deserts are man made, so stop putting words into people's mouths, is that the only way you can win an argument? To argue against something that has not been said?


2 billion people are threatened by encroaching deserts how about that for a fraction.

What is possible?


The farm, which occupies 10,000 acres of reclaimed desert, also produces fruit and vegetables for domestic consumption and for export.

Unfortunately too many poorly informed people like you exist who do not know what can and cannot be done, thankfully not everyone is so limited.

.. some of those white bits ..


.. that SOME of these areas would not be desert

Thank you for finally using the phrase "some of". That is all I was trying to get out of you -- a sense of proportionality and scale.


You said.
Do you really think that we can do anything about the large white areas that already exist as huge desert regions?

From the first I mentioned projects which were reversing desertification, also these studies mention the number or hectors lost every year.

The phase not all, for most people means just that.

How many ropes do you have to drop down to someone who has dung themselves a big hole?

How many ropes do you have to drop down to someone who has dung themselves a big hole?

Would that hole be as big as the Sahara Desert that you found yourself stranded in?

Show me where I said the Sahara was caused totally by humans?

As I said you can only win arguments by accusing people of saying things they did not.

You said this (which you can't take back):

If you take a look at all the semi arid and arid areas of the world, the land areas of the Gobi, Arizona, Sahara, sahel and deserts in Australia are about 10 times the area of Europe.

Both the links above show how desertification in these areas can be reversed, it just takes money

So you essentially said that the Sahara can be reversed. You mentioned that these areas are 10 time the size of Europe.

If you wanted to say this correctly, you would say that "The natural deserts of the world occupy a land area around 10 times the area of Europe. The perimeters of these areas, such as the Sahel, are prone to desertification and we can potentially take steps to reverse this."

I correct you on this because I don't like the way you flippantly state things. This goes for many of your comments on oil depletion. Other people can make up their own minds, and they can judge me based on what I write. I don't put words in your mouth; you do it all on your own.

I wonder where the camels came from with all the cattle roaming around the sand dunes.


mid-13c., from Anglo-Fr. catel "property" (O.N.Fr. catel, O.Fr. chatel), from M.L. capitale "property, stock," neuter of Latin adj. capitalis "principal, chief," from caput "head" (gen. capitis; see head). Cf. sense development of fee, pecuniary. Original sense was of moveable property, especially livestock; not limited to "cows" until 1550s.


Note the very close link between "capital" and "cattle." Fascinating. I am a word guy.

I lived in AZ for 36 years and it is my understanding that man has contributed to significant desertification there due to overgrazing and overuse of groundwater, not to mention whatever role the burning of fossil fuels has had on climate change.


In fact, as much as 90% of the riparian forests have been lost in AZ since the Spaniards arrived in the 1600s. There have been significant changes in the landscape just in the past 100 years. Many of AZ rivers have been reduced to "transient running rivers", meaning they run only with sufficient rainfall, yet these were once lush, riparian ecosystems. Many of the environments surrounding these river systems were recently far more lush with vegetation and animal life as recently as a century ago.

Continuing depletion of groundwater by the rapidly growing population of the late 20th and early 21st centuries is a serious problem that continues to threaten the remaining running rivers in AZ.



Sure, and all the flora and fauna specifically adapted to desert life like your cactus and your horned lizard happened to evolve based on human disturbance? I don't think so.

Show me that the Sonoran Desert of Arizona didn't exist pretty much as it stands now thousands of years ago. You are likely talking about problems around the periphery.

Geez, jaz mentioned the Sahara Desert in the same sentence as the "Arizona" desert. He wasn't talking about the region around Flagstaff. Give me a break!

AZ has a large number of environments at a wide variety of elevations. It's my understanding that accompanying overgrazing and dropping water tables is this recent change: some plant life that has evolved over time is in the process of dying out (one example is the unique saguaro cactus of the Sonora Desert) as well as decreases in some wildlife, though others such as the javelina, which thrives in urban locations as well as the Sonora wilds are gaining numbers and spreading northward to higher elevations as temps and seasons have changed. Of course, natural cycles play a role as well, but that doesn't discount the human role of the past 100 years. AZ probably supports more (avaricious)humans than it should.

I lived in AZ for 36 years and it is my understanding that man has contributed to significant desertification there due to overgrazing and overuse of groundwater, not to mention whatever role the burning of fossil fuels has had on climate change.

That does seem to be the prevailing theory, however it may not be completely true at least with regards overgrazing.

Allan Savory - Keeping Cattle: cause or cure for climate crisis?



Thanks for the link to Allan Savory lecture, very interesting, he does say over grazing is a problem.
It is the definition of over grazing which is often interpreted as too many animals, where in fact it is, the grazing of grass lands for too long a period of time, this gradually destroys the grass and the land.

Some farmers in the west have started to mimic the natural grazing pattern of wild herds. I.E. concentrated grazing and moving to new pasture, repeated several times, when herd gets back to first field all the dung and urine has been converted into lush grass.

Hey, jaz, I agree with your definition of over grazing. Good to hear that some farmers in the west are mimicking natural grazing patterns. Knock down the fences and bring back the bison!

There is also some fascinating evidence that some now extinct fauna such as giant land sloths were essential for the dissemination of plant species such as the Saguro cactus. So the question remains whether or not we can maintain such ecosystems artificially, barring the actual reintroduction of giant sloths...

Actually there is a Russian scientist who is trying to do almost exactly that:


Pleistocene Park: Return of the Mammoth's Ecosystem

1. Sergey A. Zimov
Sergey A. Zimov, director of the Northeast Science Station in Cherskii in the Republic of Sakha (Yakutia), received his academic training in geophysics at the Far East State University in Vladivostok, Russia. He subsequently did fieldwork in northern Siberia for the Pacific Institute for Geography, part of the Far East Branch of the Russian Academy of Sciences. In 1980, he organized the science station that he now directs. Research at the center includes studies of global carbon and methane budgets and animal extinctions that occurred in Siberia when the Pleistocene epoch gave way to the ongoing Holocene about 10,000 years ago. In 1989, Zimov initiated a long-term project known as “Pleistocene Park,” which he now is pursuing with a number of partners. The goal of the project is to reconstitute the long-gone ecosystem of the Pleistocene epoch that supported vast populations of large animals including mammoths, horses, reindeer, bison, wolves, and other large predators. If the effort succeeds in the park, Zimov and his co-workers would like to see the ecosystem restored over much larger areas in an effort to stave off what otherwise could be a massive release of carbon that now is sequestered in the permafrost but that could be released into the atmosphere as global temperatures rise. His hunting of mammoth remains in the tundra and his bold vision of controlling and restoring ecosystems have earned him coverage in books, documentaries, and other media.

This guy actually gives me hope for the future of humanity, he started out in the geosciences, look what he's doing now, are you listening, ROCKMAN? >;^)

I've also corresponded with a Brazilian biologist who is studying ecosystem reconstruction in the North East of Brazil. I think he will be publishing something soon.

And now back to our regularly scheduled discussions on Obama's birth certificate and how soon before there will be an Osama sighting...

I would consider desertification, due to deforestation, over grazing and poor land management more important than peak oil. As long as there is enough food we can always go to work by public transport. If the land destruction continues we are finished no matter how we move around.

These man made deserts are increasing all over the world.


You must link that video again in the future, you may even educate WHT, although I doubt it.

Deforestation, yes.

But you said the Sahara Desert was getting desertified. It was already a desert!

There are likely places throughout the West and SW that illustrate both sides of the equation. Thanks for the link.


There is a theory (because "we" do not have verified, contemporaneous records of that time - it is a theory) that the Australian Desert was caused by the actions of man.

Permacultualists like to pitch all deserts used to be green and it's mankind who made 'em deserts. But I'll let people with time machines who can alter the past and run things different prove it.

It would seem so simple to counter the claims. Australia is an island and so any flora and fauna adapted to desert life had to evolve there over very long periods of time. The Thorny Devil anyone? This was a much longer time than humans have evolved obviously. QED, deserts existed long before man arrived on the scene.

"American Consumerous Pathologus" is headed for a dieoff, that's for sure

Despite my usual proclivity for the Doomer's viewpoint,
it is worthwhile to note that there is an operating nuclear fusion reactor
located not far from our orbiting pebble in space.

It is worthwhile to note that this reactor is tossing off from its surface, unimaginable amounts of energy.

The human race could, if it pooled its resources together, build a giant concentrator mirror in space (even on the moon) that makes useful deployment of all this excess energy.

Alas we are a weak minded and warring species, always at each others throat and ready to kill even as our row boat of a civilization is going over the edge of the waterfall.

Oops, there goes my doomer viewpoint knocking down the possibility of a cornucopian future even before it has a chance to take its first breath.

The human race could, if it pooled its resources together, build a giant concentrator mirror in space (even on the moon) that makes useful deployment of all this excess energy.

Thankfully, this idea is not practical. If it were practical, it would have already been deployed as a weapon by the United States against those who hate freedom. For decades, the human race has been pooling its resources into boats and sending them off to America.

And even if it were impossible to use this mirror as a weapon, it would increase the earth's effective cross-sectional area, so it would be catching more heat from the sun. There's this little fly in the ointment called global warming.

Yes, thankfully, the idea is not practical.

fly in the ointment: global warming

Right you are that Global Warming is an impediment to the idea.

In order for the giant space mirror to work efficiently, waste heat from whatever process it drives must be dissipated into space as efficiently as possible and the GHG's building up in our atmosphere would indeed impede such dissipation.

On the other hand, if Fossil Fuels are used to produce energy for the heat driven process that the Space Mirror could instead power (i.e. desalinization) those FF's would pump yet more GHG's into the atmosphere and choke the efficiency of every other Carnot engine on the planet even faster.

Recall that some nuke plants recently had to be shut down when the rivers next to them got too warm due to GW.

So as between the lesser of two evils, the giant space mirror would be the lesser evil.

I used to have a link in my profile to the thread where space-based solar capture and beaming the result back to Earth was analysed.

The end result was it was cheaper to use land based PV.

it was cheaper to use land based PV

I'm not proposing PV conversion in space and then a beam down of microwaves.

I'm thinking more in the line of a geostationary orbiting mirror that is used at night to beam concentrated solar power for carrying out a heat dependent operation on earth such as desalinating sea water. The alternative would be to burn fossil fuels to perform the desalination.

I think a hypothetical wise sentient species, given the resources and opportunities we were given, probably could have spread life and industry far beyond earth, while pointedly avoiding mucking up the earth's life systems. Unfortunately, no such species arose, and if it arises in the future it will not have the resources. So earth life will almost certainly end on the earth.

The difference between the list of things which are "not physically impossible" and the list of those which are "not socially and politically possible for humans as they now exist" is huge. Chaotic path-dependency notwithstanding, hardwired core aspects of human behavior mean that widespread individual change is unlikely. It is not impossible that the human race will, one person at a time, enlighten itself and drastically change its behaviors in the nick of time... just as it is not impossible that all the oxygen molecules in my room will spontaneously find themselves above my head, and I'll pass out before finishing this note.


Nope, I'm done & still well-oxygenated.

The implications of aggregate probability are not confined to thermodynamics; but we have a particular blindness for it in our own actions, and our evolved systems have learned to correct for the noise of minority opinion.

(good article... thanks)

And yet, every rare once in a while, a great leader does arise from among the unwashed masses.

To be a leader who stands out from the crowd he will have to play on those genetic algorithms that evolution has bestowed on humanity for dealing with resource constrained events. He'll go down in history most likely as the greatest butcher of them all then.

Even Gandhi's goal was 'downhill' in terms of core short-term human wants & imperatives of the many. His task was pretty easy by comparison with what we have now.

We'll have "leaders" with huge followings, and that does not cheer me. For they will also be rolling things downhill in mindspace, and human self-sacrifice and altruism are uphill from here.

Could be that I am suffering from a bad case of "want to believe" but I would like to submit that the odds against humanity becoming a wise sentient species while really bad is not totally beyond all hope.

Mindset issues differ from physical ones in that there is a tendency for group cohesion. If a mindset meme change can be facilitated for a substantial enough number of people the rest will tend to fall in line.

Unlike the oxygen where the more you move the harder to move the next, with mindset issues the first tend to move more difficult like while the last move more easy. This would tend to make the task look harder that it really is.

I share the hope for humans to become such a species. It's no longer probabilistically possible for it to happen for the population in general prior to the great bottleneck, and afterwards it will be less relevant since there will be many fewer of us with greatly-degraded resources. Perhaps we'll become philosophically-sophisticated aboriginals and develop a culture based on irony and anscestor-loathing, though I think delusion - as ever - is a better bet.

Certainly humans don't move in the same way as gas molecules, but they are physical electrochemical systems just as subject to probability gradients. A bounded, path-dependent iterative progression. No supercomputer can predict whether a hurricane will hit my house this summer, but anyone can correctly predict that no hurricane will cross the equator in the next thousand years. In a similar way, there is unlikely to be a catalyzed cascade of humans prematurely acknowledging difficult truths, because we are evolved not to.

Any overt, motivating mass changes in the zeitgeist will be rationalized to be in the service of perceived short-term gain, the thwarting of perceived adversaries, the attainment of perceived status. Set against the landscape of a century or more of worsening resource scarcity, this will probably not be a particularly enlightened time, although we should leave behind some impressive legends. Probably not a bad time to get a headstart on the philosophy of irony.

Disclaimer: I'm an activist/optimist.

The human race could, if it pooled its resources together, build a giant concentrator mirror in space (even on the moon) that makes useful deployment of all this excess energy.

Let me see if I understand your position:

You want to ADD energy into the heat envelope of the Earth. A place where people are concerned about Global Warming.

You may wish to Step Back and look at that idea.

yes you have it almost right

I am proposing to SUBSTITUTE beamed down concentrated solar power from an above-the clouds orbiting mirror to perform heat dependent processes that otherwise would be powered by the burning of fossil fuels

Interesting Malthusian thoughts but science progresses faster. :)Take for instance the hydrogen storage problem. It has been solved: http://www.ench2go.com All we need to do is produce hydrogen and invest accordingly. Human ingenuity knows no bounds.

Yair...does anyone have any comment about this outfit...they are making a lot of noise about their syncrude production.



Synthetic oil from coal gasification plus Fischer-Tropsch has been the heir to crude oil for a long time.

Back in 1973 an economist called Nordhaus (Krugman's supervisor) wrote a paper* about the future of energy supplies, and in it, he predicted that "liquified coal" would start to come into use about 2020.

My guess is coal-to-liquids is probably commercial with oil over about $120. It's far more likely to work than all this algae and ethanol nonsense, let alone hydrogen.

* Brookings Papers on Economic Activity, 3, 1973, p 529. Overall the paper has stood the test of time very well. I think the Brookings Institute now has its stuff freely available on the inter-tubes.

You still won't get past the point that hydrogen is not an energy source.

Some people want to solve the oil crises with electricity, but it's not a primary source of energy either.

At leat they may have a better shot if they start to realize, first they must generate more electricity either through burning more hydrocarbons, nuclear reactors (seems unlikely now), and or diffuse renewables.

We need to use the resources we have. Such as thorium,uranium and natural gas andothers.

We do not have to forsake the environment to do this. Take thorium for example. It is a waste product of"rare earths" mining. so no new mines need be opened. "Rare earths"are used in wind turbines. So, in a sense one could say that wind turbines produce radioactive waste.

Fukashima is what it is and will pay out in time. That does not mean we have to do things the same old way.

Oil is not an energy source either.

Most people seem to forget about the other half of the equation:

CnHm + O2 --> Heat + H2O + CO2

Where did that O2 come from?

Answer: Sunlight, photosynthesis

Oil alone is not an energy source.

All we need to do is produce hydrogen...

...aye, there's the rub...

Server not found

Firefox can't find the server at www.ench2go.com.

That about sums up the hydrogen economy, really...

Producing hydrogen is great but it does not solve our problem. Oil is a PRIMARY source of energy.

It's dwindling supplies will need to be replaced with another PRIMARY source of energy.

Hydrogen is NOT a primary source of energy.

It may be useful like electricity, but electricty is also not a primary source of energy.

First solve the oil crises, then play with hydrogen.......

Too late.
There is no solution to cheap oil depletion.
We will simply run out of it in 40 years at the current consumption rate.

Unconventional oil will be more expensive than conventional oil. That could last another 40 years if new refineries suddenly appeared.

Hydrogen is more expensive than cheap oil( 1 kg of hydrogen, the energy equivalent to a gallon of gasoline, would cost about $7) but like electricity can be made from pretty much any fossil fuel or from electricity, and when hydrogen is put into an engine or fuel cell it emits water vapor not CO2.

If you favor a blinders approach to GW, you will look for the next cheapest
liquid fuel after petroleum to put in your car. Unfortunately all fossil fuels are becoming expensive.

Why keep cars?

Why even try to keep cars?

Use trains, light rail, high speed rail, make cities denser.

How much energy is wasted as heat to the environment? 85% or more....

People are running around using SUVs that weigh several tons, their engines are wasting more energy moving the car than the person inside...

Could we possibly come up with a worse form of transportation than SUVs and Hummers?

Flying SUVs and flying Hummers?

Get real.
Give up your car and see how much you like it, unless you simply want
to make a point.
People do most of their traveling by cars.
In the USA cities are far less dense than in Europe or Asia, so we naturally have a car centered culture( or visaversa). European cities are used to living closer together and their cities are 3 times as dense as US cities, Japan is 6 times as dense. These cities are not more dense by choice but because they've physically run out of space to build on.


Rather rebuilding every US city, the easiest route would be to require more fuel efficient cars. If the efficiency of average US vehicle went from 22 mpg to 44 mpg hybrid then consumption in car dominated US cities would drop from ~55 GJ/per-yr to 27.5 GJ/per-yr only twice as high as European cities at around
14 GJ/per-yr. If car technology could achieve 66 mpg with fuel cells per
Honda Clarity FCX, there would be little difference in transportation energy consumption between today's US 'car' cities(18 GJ/per-yr) and European cities.


FWIW, speaking of efficiency--mass transit is ~33% less efficient than hybrid cars and only 50% more efficient than personal trucks(gas guzzlers).


~33% less efficient than hybrid cars and only 50% more efficient than personal trucks(gas guzzlers).

Possibly, but that's not the only factor to consider. In a rich and growing economy many people can accumulate the capital or be given the credit to purchase their own vehicle at the level we do. Today's cars are amazing.

In a much poorer society, we need collective action that takes a bit from everyone and provides common services.

That's where we are heading. Might was well start getting ready for it.

This doesn't, btw, preclude electric bicycles, which I think are going to sell very well soon. And there will be a transition period in which one can purchase a plug-in hybrid or other reduced fuel (or no fuel) vehicle to help reduce waiting in gas lines when they start.

I'm #4 in the San Francisco waiting list for the Toyota plug-in Prius. I could have taken an earlier generation Prius and modified it but I wanted the manufacturer to do the heavy lifting — and provide a warranty.

Now we just need to keep the car companies alive long enough after the next crash for my warranty to be worth anything!

Car sales should start slowing soon as oil continues its upward trajectory. When auto company gross revenues fall below their fixed costs, watch them (and airline companies) scramble and fail (again).

Are we going to bail them out one more time?

In a much poorer society, we need collective action that takes a bit from everyone and provides common services.

In a much poorer society, we wouldn't be able to afford $3million or $4million each for subway cars, either. In a much poorer society, a lot of things would have to give, including the massive overregulation that makes subway cars cost that much.

FWIW, speaking of efficiency--mass transit is ~33% less efficient than hybrid cars and only 50% more efficient than personal trucks(gas guzzlers).

I'm aware that most Americans are infatuated with inefficient systems and wasting resources but do they really build buses with holes in their tanks?

This recuperating trolley bus seats 200 people and consumes 3 kWh/km. That's 0.015 kWh/km and person:


If half the US population would travel 10,000 km per year in these trolley buses and the average occupancy was 50% 45 TWh of wind power would be needed. 45 TWh require 17 GW of wind power at 30% capacity factor.

17 GW of additional wind power in 20 years costs about 0.06% of the US-Defense budget.

The best selling car in the US seats 3 people and consumes 14 kWh per km in the city. That's 4.7 kWh/km and person AND requires imported oil and doesn't run on homegrown wind power.

FWIW, speaking of efficiency--mass transit is ~33% less efficient than hybrid cars and only 50% more efficient than personal trucks(gas guzzlers).

You could, of course, create a set of conditions under which that claim is true, but it wouldn't be a meaningful set, in the context of the choices we are considering.

To make the bald claim, with no other evidence than an unusually sloppy hodge-podge of a Wikipedia entry, seems reckless, if not deliberately misleading.

But, if you want to get down to brass tacks, we could start by hearing from you which form(s) of mass transit are a third less fuel efficient than which hybrid vehicles, and give us an idea of the assumptions you are working from.

Oh, BTW, what do you think makes US cities far less dense than European counterparts?

Yes. Start from the premise that cars were and continue to be a hugely large mistake. Think of structuring everything around that central concept and one has begun down the road to a society that might have a chance at survival for a few more years. Start from the premise that we must maintain and increase our autos and things very quickly begin to look impossible and destructive.

Quite. Seconded.

If we do not end the dominance of the personal automobile (no matter how it may be fueled) in our urban and suburban communities, if we do not remake the built environments of those communities to serve walking, cycling, mass transit, compact patterns of daily life... we are almost certainly toast.

If we do all those things, we improve our (still slim) chances enormously, and we gain enormously in quality of life while doing so.

N.B. I don't think there's a realistic alternative to the auto in truly rural areas, but I also think it's difficult to imagine a more negatively-impactful lifestyle than Rural Ranchette City for those not engaged in food/fiber/fuel, etc. production.

Then we are toast. One of he biggest and (up until 3 years ago) most successful townships in Pennsylvania is yet to see despite two years of 10% declines in tax revenues (townships are dominated by Earned income tax revenues,
not real estate taxes in PA), fuel spikes for their fleet of vehicles and projections for the same in the future -- can not get over their zoning concepts. In working meetings or one on ones, when I talk about residential density
on public transportation corridors all they can imagine is single family homes on 1/4 to 1/8 acre lots 8 miles from them. 1-5 blocks from those corriders (which is commercial actually on them) is housing
built in the 40's through the 70's with all the power, water, sewer right there in abundance.

I know. They (we) have been enculturated to see cities and density as bad and dirty, transit riders and pedestrians as losers, SFD's as the height of desirability, lawns and cars as status symbols...

You'd think that facing a world with 7 billion humans and a permanent energy crunch would be sufficient to allow us to see that making cities work is not optional, and that we cannot make them work if they're clogged with cars that, inevitably, must push everything ever-farther apart. But we sure as hell haven't even begun to see it, in N. America, despite thunderous warnings for decades.

The utter failure to get people to pay attention to this obvious truth about our built environment is one of the chief causes of my chronic doomer depression (AKA realism).

We probably are toast.

No, No don't say that. The sooner all the philanthropists get their asses into a hybrid or electric car, the sooner I'll be able to use more of the gas I'm entitled to, without the expense of buying a new car.
That's just me, no one else thinks like that.

1 kg of hydrogen, the energy equivalent to a gallon of gasoline, would cost about $7)

How did you calculate that? What's the cost of the capital equipment required?

How did you calculate that?

I'm guessing he didn't use this site

His number, for energy value, is bang on. The LHV of 1lb of H2 is 52,217btu or 114,900btu/kg, and the LHV of regular gasoline is 116,000btu/gal
(data from here http://www.afdc.energy.gov/afdc/pdfs/fueltable.pdf)

Now, the $7 is a different question. We'll see if he shows us what his source is.

According to a 2008 report from the Texas government; (http://www.window.state.tx.us/specialrpt/energy/exec/h2.html)

The cost of hydrogen for large industrial applications is dependent upon the cost of the feedstock. Hydrogen at refineries may be produced for under $2.00 per gallon equivalent. Transportation and storage add costs to a delivered price of hydrogen (up to $30 per gallon of gasoline equivalent). Consequently, on-site hydrogen generation from either water or natural gas is viewed as a more commercially viable choice for transportation fuel applications.

So, it can be very cheap, until you compress of cryogenically liquefy it, and then it can be very expensive.
The only possible advantage over using the CNG directly, or converting to methanol, is to use it in a H fuel cell - which are very expensive, and, to date have not really resulted in outstanding mileage.

Cost hydrogen $3.1 per kg.
Cost of hydrogen infrastructure $3-4/kg.
The key to low cost is substantial market penetration.

I don't see the detailed cost numbers for H storage in the doc. Have you seen some?

The late Julian Simon put great emphasis on historical price declines - and of course won the famous bet with Paul Ehrlich. Simon still has many followers, including a few posters on TOD.. They will not be pleased with such a Great Paradigm Shift.

"The Great Paradigm Shift: from Declining Prices…"

"The history of pricing for commodities has been an incredibly helpful one for the economic progress of our species: in general, prices have declined steadily for all of the last century. We have created an equal-weighted index of the most important 33 commodities. This is not designed to show their importance to the economy, but simply to show the average price trend of important commodities as a class. The index shown in Exhibit 2 starts 110 years ago and trends steadily downward, in apparent defiance of the ultimately limited nature of these resources. The average price falls by 1.2% a year after inflation adjustment to its low point in 2002. Just imagine what this 102-year decline of 1.2% compounded has done to our increased wealth and well-being. Despite digging deeper holes to mine lower grade ores, and despite using the best land first, and the best of everything else for that matter, the prices fell by an average of over 70% in real terms. The undeniable law of diminishing returns was overcome by technological progress – a real testimonial to human inventiveness and ingenuity."

---See exhibit 2 and especially the last sentence below

"But the decline in price was not a natural law. It simply reflected that in this particular period, with our particular balance of supply and demand, the increasing marginal cost of, say, 2.0% a year was overcome by even larger increases in annual productivity of 3.2%. But this was just a historical accident. Marginal rates could have risen faster; productivity could have risen more slowly. In those relationships we have been lucky. Above all, demand could have risen faster, and it is here, recently, that our luck has begun to run out."

And he certainly would not accept the graphs below:

Greer's Stages of Technic Societies

Possible Future Scenarios

The game I'm playing is to create the green line but I can't exclude the possibility that it will at some point become completely out of our collective hands and we will follow the orange line. We will certainly see the orange line in many areas of the world.

The prime candidates would seem to be the countries already on the Failed State Index:
Failed State Index 2010

Once these states lose the support of an essentially functioning world economy/political system around them, the populations there are likely to revert to the basest of our human instincts, namely, how can I get what I and my children need to survive, no matter the cost?

Rapid growth is not ours by divine right; it is not even mathematically possible over a sustained period. Our goal should be to get everyone out of abject poverty, even if it necessitates some income redistribution.

[emphasis mine]

Wow. "Some income redistribution" has been going on for decades now, though not in the direction I expect Mr. Grantham is suggesting. Now that the super-wealthys' control of the direction of wealth flow is complete, they are suddenly going to have a come to Jesus moment? Time to help the little people before they storm the Castles?

Mr. Grantham's take on human nature differs somewhat from mine.

Time to help the little people before they storm the Castles?

Perhaps. FDR convinced the ruling class, in the 30's, that such was the choice, although not without enormous resistance.

OTOH, in the U.S. at least, the peons seem much more docile these days. For the moment, anyway.

Docile? I'm hearing a lot of grumbling in the ranks, and when inevitable austerity measures begin to hit home, cuts in entitlement and social programs, rising costs for basic necessities, all of the things that affect us peons most, we'll likely see some "income redistribution". Suggesting that it can planned or controlled is a stretch,,, for me anyway. Perhaps we should ask Mubarack or Qadaffi how it works.

Methinks Grantham has a sense of timing about this, as in 'too little, too damn late'. It's what he doesn't say .....

It's called food stamps (Pepsi and Cheetos), internet porn, video games, cable TV, and Prozac.

Oh, and mass imprisonment of those who prefer marijuana to Prozac.

Oh, and a military deployed around the world protecting the flow of oil so we can have all of these wonderful things.


Perhaps. FDR convinced the ruling class, in the 30's, that such was the choice

Did he? There sure is a cult that considers him evil incorporated, and that wishes to undo all of his accomplishments. If some (enough) were convinced once, they have since had buyers remorse and are trying their darndest to return the goods.

...they have since had buyers remorse and are trying their darndest to return the goods.

Oh, yes. It was always a slim and uncertain victory. A big chunk of the ruling class has been on a passionate crusade to reverse it from Day One of the "first hundred days" of the New Deal.

They've been very successful, particularly since 1980. One of their greatest achievements has been to convince large portions of the working and middle classes to vote and act against their own interests, partially by playing to the most divisive social issues and feeding the masses endless propaganda about the evils of "socialism," "welfare," unions, taxes, etc.

With the recent success of the Tea Party movement, the regressives are certain that they are on the verge of total victory. If they can get away with the slash and burn policies they are promoting in Washington and actually implementing in Michigan, Ohio, etc., they may achieve it.

Of course, victories can be expensive.

"...Pyrrhus replied to one that gave him joy of his victory that one more such victory would utterly undo him."

Pyrrhus, by Plutarch

...convince large portions of the working and middle classes to vote and act against their own interests..."

This meme is very popular and taboo-to-question in some circles, but is it too shallow to be useful in the real world (Utopia remaining stubbornly inaccessible)? A fair number of middle-class Americans, and even some in the working class, have traveled overseas. Some of any class may have contact with relatives overseas, or may have received visitors. Some will have had extensive contact with foreigners in college. So on the whole, a sizable number have more than just propaganda (convincing or otherwise) available to go on. And yet (despite the existence of the occasional eccentric) it's tough to find much of anyone anxious to trade places with someone elsewhere in the world.

At a more mundane adapt-in-place level, the political choice seems to be between the Republicans and the Pity Party. What I mean is that so many social benefits and the like in the US are so very aggressively "means-tested". Thus, unless you're utterly destitute, it will likely prove useless to vote for the Dems (i.e. the Pity Party) in the name of sheer self-interest. You simply won't "qualify" for what they promise unless you're flat-out broke and falling off the cliff. They'll almost always find someone they deem to be worse-off than you are, or something in the "environment" they deem more worthy of pity than you are, take resources from you, and redirect them there.

Thus all but the very worst-off voters would stand to pay a deadweight cost, many will find that an unattractive proposition, and some will apparently become Tea Partiers. Plus, in the end, when it comes down to a choice between voting for pity and voting for hope - or even mere "hope" - most will find pity to be the less energizing or appealing option. Solve or seriously mitigate that, and maybe you win some sort of political prize...

What I mean is that so many social benefits and the like in the US are so very aggressively "means-tested". Thus, unless you're utterly destitute, it will likely prove useless to vote for the Dems (i.e. the Pity Party) in the name of sheer self-interest.

It is useless to vote for the Democrats mostly because there are, today, few fundamental policy differences between them and mainstream Republicans. And why would there be? They are funded (and thus,largely controlled) by the same interests.

The United States, effectively, has one political party, with two right wings. The Republicans are the Farther Right wing and the Tea Party goofballs are the useful-idiot shock troops of masters they don't know they serve.

True, capitalist propaganda has been most successful in the US. It is one of the biggest and most successful psychological experiments of all time. There is an ugly alliance in the US. The bootstrapper-maverick, sink-or-swim, angry-white-christian coalition on the font lines and the uber-elitist, trickle-down-economics, scorched-earth-capitalist, radical-self-interest generals that call the shots at a safe distance from the field of battle.

The elites hold that the common good is an undefinable and therefor empty notion. They maintain that it is up to society’s leaders (them) to tell the masses what is in their own interests. They snatch up every corner of add space to foster the myth that consumer choice is synonymous with democracy and freedom (including brand blue and brand red politics). They justify America’s decadent economic inequality as necessary for the “accumulation of capital” (the “rising tide floats all boats” gem). They engage in military campaigns abroad to spread the “good news” of capital , privatized national resources, and consumerism

As the US economic system breaks down, this alliance will become more radical.

A number of large number of asset managers have been completely aware of peak oil / limits to growth for years. Most of them don't write about it but they invest.




Or Mad Max.

I think more like Mad Max.

Or Mad Marx. Groucho, Chico, Harpo, and Zeppo. Was Karl a Marx brother?

Socialism is far preferable to Anarchy.

Socialism is far preferable to Anarchy.

I think you probably need to distinguish between what you think of as "Anarchy" and what anarchists of various kinds call anarchism.

Leaving that aside, for the moment, I'm afraid that at least half of my fellow citizens, here in America, would much prefer a fight to the death to acquire -- or preserve -- as many resources as possible for themselves, their families, their "tribes" over sharing with those whom they believe are less deserving.

They'd concoct all sorts of fanciful stories to mask or justify their positions, but they'd ruthlessly demonize and then crush the "losers" without hesitation.

It is exactly that battle, albeit still in somewhat restrained form, that is going on right now in, e.g., Michigan: a class/resource war.

half of my fellow citizens, here in America, would much prefer a fight to the death

Large, well organized groups will survive the Social Darwinism born of Chaos. The Anarchist of today may think that they want an end to our society. But a new society will evolve.

Anyway, I'm sure you are right; many will prefer to die fighting. Which is not a good thing for America. Many other countries will stay organized and thus gain control of the remaining resources. America will return to First World status eventually, after some terrible, serious adjustments.

This country, like all others, will either rise to the occasion or.........

think WWII

I'm hoping we rise to the ocassion but I'm not holding my breath.

better fed then red.

What do you have against anarchy?

In other words - This could not be true because if it were it would force that evil socialism upon us.

Live simply so others can simply live, amazing how this has been so thoroughly demonized. If socialism is the bad, then anti-socialism, the concentration of wealth and power into the hands of the few, is the good?

Is it not clear that the root problem issue that we are facing is our sociopathic tendencies?

socialism, as practiced in the soviet union concentrated wealth in the hands of the ruling party. Not much different then capitalism. You either have government mangers of capital or owners of capital.

Socialism works well on a local scale. But not from central planing.

If I take a large corporation and compare it to a small business a small business manages capital more efficiently.

socialism, as practiced in the soviet union

So you need a dead strawman because your ideas are so outdated and parochial?

What about socialism as practiced in Canada, Norway, Sweden, Germany, France, Britain, etc., not to mention your own Medicare and Social Security Programs?

socialism, as practiced in the soviet union... Not much different then capitalism.

Socialism never really was practiced in the USSR (although some early leaders had good intentions--they were generally purged). What actually developed was state capitalism.

Use of a label in a marketing brochure may not be evidence of the truth of the matter. Just think how often the U.S. is described as a "democracy."

Socialism never realy IS practiced, for the simple reason that it does not work on a higher levelthan the village. There are examples of succesfull socialistic comunities, but you never get above the village level If you do, you need to implement so much administrative overhead because people in general don't want to share with people they don't know, that the beurocratic weight breaks the country.

Socialism actually have never failed, because it has never been implemented. Because it CAN NOT be implemented. So your excuse that the SU never realy implemented socialism don't work out.

And just to contradict myself (and you) the Soviet Union back in 1969 actually claimed officially to have implemented socialism fully that year.

I'm not a pro-capitalist (any more) but please direct me towards a socialist country where the wealth was not concentrated towards the political elite.

No matter what the form of governance is, there will be a group of "great persuaders" who will figure out how to manipulate it for their own advantage.

[ i.mage.+]

If we were to truly follow Malthus, we'd realize that massive die offs are in the cards - in fact the primary reason for the continuous upward trajectory of these commodities (separating renewables, which are all the foods from non-renewables, which are all the minerals and oil) is that the population keeps growing without a major setback in the form of "famine and pestilence" as Malthus expected. War of course follows next or in line with those other setbacks. Reduce the population by a third and things become quite different for the survivors. Also all you atheists reading this should recall that Malthus was a preacher (he might even have been getting some of his material from Revelations).

Does this post qualify as doom and gloom enough for TOD?

The dieoff has already begun; it is just that most of us are too anthrocentric to notice that.

The dieoff is already here – it's just not evenly distributed...

Income and wealth is not evenly distributed either.
Economists are usually unaware that variation in the actors and agents plays a bigger role than any imagined homogeneous parameter space contained within their model. That is the gist of the field of econophysics.

So inequality works its way up during good times and likely unwinds in similar ways during a downturn.

Must do something to economic momentum of an economy?
Stiglitz in a recent Vanity Fair article calculated nearly a quarter of US income went to the top 1% who also controlled 40% of US wealth. Some of us are more equal than others.

Yup. And many of us, maybe even some here, are way less equal.

Sometimes it's interesting to look at the distribution from the bottom up:

The bottom 80% (that's eighty percent--eight-tenths) of Americans have 15% (fifteen percent) of the total net worth and an astonishing 7% (seven percent) of the total financial wealth.


With power-law statistics none of that is surprising.
The median income can look perfectly acceptable but the tails on the high end completely distort how wealth inequality plays out. The thinking is that this is a natural consequence of entropy and variability and the only way to change the course of entropy is to apply energy or constraints to the system. In this case this energy is applied by the government in the form of constraints such as progressive taxation and on limiting compound growth on income.

I have written about this topic, and econophysicists such as Yakovenko are a good source for statistically explaining income disparity.

That's economic efficiency for you.

Although I agree heartily with Grantham's overall perspective I do question some of his numbers -- especially the focus on iron ore. I notice that Exhibit 9 is titled 'Iron Ore Prices' as opposed to 'Real Iron Ore Prices'.

The US Minerals databrowser is a useful tool for fact checking articles like this. Here's the plot showing US and world production of iron ore along with an adjusted price. The last ten years have seen a big trend reversal in terms of price but this has also happened before in the 50's and again in the 70's.

Data for this plot come from the USGS dataseries 140 -- a pretty reliable resource IMHO. Is Grantham's iron ore prices plot perhaps not adjusted for inflation?!! It completely misses the inflationary period of the 70's. Why does the data from Global Financial Data differ so much from the data from the USGS?

Another view of the data is what I like to call the 'economist view' that plots annual price vs. annual production. This type of plot is useful in that the direction of motion basically tells you what is going on:

In this case, movement toward the upper right means that higher prices resulted in more production -- just what the economists would have predicted. Other motions tell other stories:

  • movement toward the lower right means more production at lower cost through production efficiencies(e.g. silicon)
  • movement straight up and down is seen during a speculative boom and bust (e.g. gold in 1980)
  • movement to the lower left means that we are abandoning use of a resource (e.g. arsenic)
  • movement to the upper left means that higher prices cannot generate increased production and we have, at least temporarily, reached a resource limit (e.g. gold for most of this decade)

Reviewing the data available from the USGS this way paints a picture similar to but not quite as dire as Grantham's.

I do hope his message makes it out to a wide audience as I think resource limits are the defining problem of our age. My goal with our databrowsers for population, minerals and energy resources is to make researching the limits to growth both easy and entertaining for those who are concerned about these issues.

Happy Exploring.


Thanks for this, Jon.

Having read and reflected on Mr. Grantham's epistle, I think he is talking his book.

Although the P/Q chart suggests that iron ore's price elasticity of supply has dropped markedly, it's more or less impossible for there to be a sustained scarcity of iron ore. And pretty much all other bulk uses of metals can be substituted by one or another iron alloy, or by aluminium -- instead of copper pipes and brass fittings, we can use stainless steel, for example.

It's ironic that Mr. Grantham says his mantra has been "reversion to the mean". China will sooner or later, one way or another, revert to the mean, and then infrastructure resources will cease to be scarce.

I say this without in any way relaxing my limits-to-growtherism. Mr. Grantham spends far too little time on energy, water, and environmental resource constraints.

One thing that has kept the price of iron ore low this decade (except for the last year or so) has been the high price for scrap and the high recycle rate for steel. Steel scrap can easily substitute for many application of virgin steel except for some special high strength alloys.

Your supposition that other metals can easily substitute is wrong. If stainless steel were to substitute for copper and brass, then nickel would jump in price just as it did about three years ago to $27/pound. Current price is $12/pound. Furthermore, the ease of forming copper and brass, along with their high thermal conductivity make stainless steel a poor substitute. Some aluminum may be taking the place of copper, but AL price of $1.20 per pound is nearing the past record high. I know this as I design products from all these materials.

The fact is that nearly all metals have risen in price since mid 2000's, except for a fall during the great recession in 2009. As we go forward with some economic growth expect price for metals to continually increase. Only a long term decline of the economy will reduce metal prices, but don't expect them to fall back to 1990's prices as the easy to extract ores are gone and mostly hard to extract ores/low concentration ores remain. Perhaps if the economy really crashes most metal mining will cease and demand will be met by recycling of our infrastructure (scrapping).

I was a bit surprised at the amount of aluminum wire used at a 10 MW solar PV project near me. It's a lot harder to pull through conduit, which is compounded by the fact larger gauges have to be used. I was also surprised by the amount they left lying around. I attribute that to the fact the workers were all making scale, so they'd actually lose money trying to pick up every piece.

If stainless steel were to substitute for copper and brass, then nickel would jump in price just as it did about three years ago to $27/pound. Current price is $12/pound.

Is nickel really needed? I understood that inexpensive managanese could be used instead, if needed.

“Potash and potassium are mined and, like all such reserves, the best have gone first.”

“Fertilizer resources – potash and potassium – will become particularly precious”

Stimulating article but potash and potassium are the SAME THING.

I believe the author is desiring to say "potash and PHOSPHORUS", as concerns are circulating about the geological or at least the geopolitical availability of phosphorus for fertilizer production.

Even better would be to say "potash and rock phosphate", both visible in the Minerals databrowser and both showing worrisome trends:

The situation with potash is worrisome only for the years 2008 and 2009. (That's as far as the USGS data go.) I'm not sure that two years constitutes a trend but potash and phosphate are well worth watching as we go forward.


My thanks added to that from others.
Re potash: my understanding from UK farming press at the time was that world supplies were bought by US traders in advance because of the very sudden (one-off?) take up of US set-aside land to grow ethanol. Can anybody confirm? The story was that world potash mining would then gear up. I presume it has? Certainly made a large hit on UK arable farming costs at the time.

Regarding odd lapses in Grantham's thesis, as well as proof reading mistakes: could be part of the reason why his main thesis does not get the attention it deserves in the industrial / government circles, if not the financial world?

Minor point perhaps, but the nitrogen fertilizer component of NPK is to a degree both renewable and re-cyclable depending on the farming system. A good temperate grass/clover sward, for example, will per year 'fix' atmospheric nitrogen to soil-N to the extent of 200kgN per hectare, or about the usual full application required by the higher-yielding cereal crops. BTW, most of China's synthetic N fertilizer (urea) is still derived from coal, not NG. Not that the world will avoid fertilizer problems in future, of course.

We have hundreds of years of supply of "potash and potassium". The worry is rock phosfates. The global peak seemed to be in 2035 last time I looked, given a BAU scenario.
And since I see near zero phosphate recycling projects going on now, I guess we will start thinking about that in november, 2034.

Exhibit 5 just about sums it up for me. If it wasn't for Tar Sands and Deep Offshore, the world would be producing far less than I'd thought!

Quite so.
There is a line somewhere in Jeff Rubin's book where he talks about how the oil majors are chasing deepwater projects in places like Russia;s Kamchatka peninsula, and that if someone asked them why, they would say "that is all that's left".

Exhibit 5 certainly seems to suggest that the easy stuff has peaked, and its all harder from here.

Russia's Kamchatka peninsula, and that if someone asked them why, they would say "that is all that's left".

Not precisely true. The supermajors are playing there because "that all that's left" that they get to play with, ie, the Russians will let them. Where they do NOT get to play includes both the Eastern and Western coasts of the United States and now much of the gulf of Mexico. Remember, only 6% of global reserves (and production) can be attributed to oil majors. 88% belongs to national oil companies otherwise known as NOCS's.

Given that they are government owned/controlled, we have to ask ourselves just how efficient governments are at ? My personal experience is ... not much. But I haven't personally experienced all 193 governments' efficiency so I'm sure I'll be told that I'm wrong and that some government somewhere is the epitome of efficiency, skill and brilliance.


You are correct, and that was Rubin;s context - I just did not emphasise that fact.
Yes, that is that is available to them - the NOC's have kept the best goodies for themselves, and let the oil cos take on the risky ones! if they work out, they can always nationalise them later.

I'm i agreement that govt's are not the most efficient way to do almost anything, but, the NOC's are the most efficient way for the gov to control what is going on, and I;d say most of those oil exporting countries (except Canada, Norway) place a large importance on control.

Look at how the US people are hyperventilating about fuel prices that have just reached half of Europe - they too are calling for "control" - and could care less about efficiency.

Sadly, that is the world we live in.

The capitalist/corporatist countries were more technologically advanced and more productive so exploited the resources more rapidly. The other less advanced or despotic countries slid down the continuum and did not exploit as aggressively. This created the effect that most of the reserves today belong to the NOCS.

This slide along a continuum is called dispersion and I have studied this quite a bit. The oil geologists got the underlying interpretation of the Hubbert curve completely wrong. It isn't a single rate that applies to depleting a geological volume but a dispersion of rates amongst several operating regions that aggregate to model the curve.

If we segregate the rates into intervals the curves look like the following, with the aggregate in this case following the derivative of the logistic sigmoid:

So this is essentially the way that discoveries accumulate, with the most technologically advanced regions (such as the USA) discovering regions first, and then the slower regions following along a dispersion profile.

This same argument is key to understanding that the NOCS probably don't have lots of hidden reserves either. The dispersion continuum is just that, a continuum, and doesn't have these gaps that will reveal huge new regions not yet undiscovered. They may be slower to discover and exploit but they have eventually gained in technological prowess.

To put this into the context of what Grantham is talking about, realize that this is all a mathematical model and is just the sort of argument that he is begging for TPTB to consider. But Grantham also says that even the smartest quants on Wall Street have mental blocks that prevent them from looking at the problem from an unconventional perspective. That understanding is what makes Grantham's essay so provocative and IMHO so great.

The capitalist/corporatist countries were more technologically advanced and more productive so exploited the resources more rapidly. The other less advanced or despotic countries slid down the continuum and did not exploit as aggressively. This created the effect that most of the reserves today belong to the NOCS.

I think this subtle but important fact is often overlooked. Now, of course, the US is trying hard to exploit other countries resources, like the "joint development" of the Brazilian offshore oil, but is such a big consumer that it cannot conserve its own resources either.

When I look at graphs like that I am firmly of the opinion that the object should be to get out of using oil as fast as possible, yet no country really is. Problem of course, is that there is no better alternative, only worse ones, so BAU is the most politically acceptable option.
I'm sure the NOC's are very grateful that all the Western countries depleted their own oil first, when it was cheap, and now buy theirs, when it is expensive.

I think we have been outplayed in this game.

Not entirely the correct analogy but it may turn out that we are the hare and they are the tortoise, yet the earth is still the earth -- and it will outlast us all.


Do you have a reference to a credible estimate of how much oil is waiting to be discovered/produced under the Eastern U.S. continental shelf, the Western U.S> continental shelf, and the GOM?

Next: Do you have a credible estimate of the cost of production of these resources?

Are these resources in several huge, easy-to-produce fields with light, sweet crude, or is the oil in a much larger number of scattered fields, which are hard to produce, and not always containing light, sweet crude?

How long will it take to produce these resources, at what cost, and what will the flow rate be?

Just a couple of questions...

It is also clear that this well-behaved $16 trend line was shifted quite abruptly to around $35/barrel in 1974, the year OPEC began. And OPEC began in a very hostile and aggressive mood, resulting in unusual solidarity among its members. Oil prices remained very volatile around this new higher trend, peaking in 1980 at almost $100 in today’s currency (confirming, to some degree, the new higher trend) and falling back to $16 in 1999.

Once again, the myth that the first oil shock was a pure "hostile and agressive"(sic) OPEC move, when it was done in perfect cooperation with US diplomacy and the majors (who NEEDED higher prices), besides the plain historical mistake : OPEC started in 1960 and not in 1974, and of course not the slightest mention of US production peak in 1970.
Talk about self imposed blindness ...

and of course not the slightest mention of US production peak in 1970


A little confused. he made a major point of relating the US production peak in1970's to Hubbert's analysis. ???

I don't think that Grantham mentioned OPEC as an intentional misdirect.

I think that by laying all the problems on OPEC and embargoes and such, instead of labeling it a problem of USA peak oil production, the powers that be essentially squelched the general panic that may have set in. Hubbert predicted the peak around that date but it wasn't called "peak oil" and this facet was not well known apart from there being a general "energy crisis". Since that date, the USA came across several successive reprieves that bought us time: in no particular order, these include Alaska North Slope, the Gulf, Mexico, Canada, enhanced or secondary recovery and reserve growth, plus scores of stripper wells. So the focus away from real concerns of US supply worked because we have a collective short-term memory. Carter reminded us a little bit about the problems but that was squelched as soon as Reagan came to power, and convenient sources of crude started to arrive,.

Now we are getting Bakken and natural gas replacements as reprieves.
I happened to read many of the energy crisis articles as a teenager during the mid to late-70's so I can remember the confusion that existed. I honestly never remember seeing any of the gas station lines, but I did read Our Petroleum Predicament, so I knew what was in store for us down the road.

"A little confused. he made a major point of relating the US production peak in1970's to Hubbert's analysis. ???"

Yes true, went a bit too quickly trough the article, but somehow that make it even stranger that he then switches back to the complete myth of "OPEC agressive move" in the seventies. Again the majors needed higher prices to start higher cost ressources (GOM, Alaska, North Sea), and this move was also pushed by US diplomacy. OPEC isn't like a utility company with a monopol that would impose a given price to its customers, in order to increase the price they had to put quotas on themselves and decrease production (or decrease production potential growth in a growing period), therefore in effect losing market share to other players. Sure the oil wasn't under the majors direct control like before WWII, but that is a different matter.
And the presentation to the public "it's OPEC fault" was really very handy to "cover" the fact that the US just went through its production peak. A result being that not only peak oil is a scam for most Americans these days, but even the US peak is one (just open protected ressources and prod will rise back over 70ies levels).

And now what do you get ? This :

Or :

Like "it's OPEC fault", "it's their fault if they don't have as much oil as we need at the price we need !" :( :(

Scary ...

It is very hard to forgive factual errors like those.

Grantham's letter would be sent back for a major rewrite if not rejected outright if this were the academic press.

But of course financial managers can say anything they want as long as they return a profit. (And often even when they don't.)

Sadly, most people prefer confidence and swagger to careful fact-checking.


"Grantham's letter would be sent back for a major rewrite if not rejected outright if this were the academic press."

Among my first thoughts after reading the paper. In Grantham's newsletter, I see ideas from Albert Bartlett, John Perlin, Richard Heinburg, Kenneth Deffeyes and probably some other authors without citation. Failure to cite your sources is sloppy writing at best.

And thanks for providing the Databrowser views (e.g. iron ore, potash). Quite illuminating.


The books written by Heinberg, Deffeyes, and Perlin were not academic works and I don't think Grantham's was intended as one either.

You can easily tell this because he added quite a few opinions to the piece.

There is a fallacy in Malthus, but it's not necessarily a cause to be pollyanna.

The fallacy is the relationship between knowledge and resource availability.

Take the Romans for example. They were powered just about entirely by grains and other crops, with the possible exception of a tiny amount of fossil fuel used as lamp oil.

How much energy did the Romans have at their disposal?

Obviously far less than us.

They were sitting just about directly on top of the same huge oil deposits that we're currently drinking up, but they didn't know they were there.

So how much energy did the Romans have at their disposal? Obviously this is a function of resource availability and knowledge.

There could be a million times more energy than in all the fossil fuels on Earth sitting around. It could be in fissile materials, which (to be objective) we barely know how to use safely or efficiently. Or it could be in seawater in the form of deuterium, which we have absolutely no idea how to use.

As I said, I'm not being pollyanna. I'm just pointing out that carrying capacity is not an absolute, fixed quantity. It's a complex (maybe even chaotic) function of many variables overlapping with each other.

All this got me to thinking then about another issue that I've never seen explored: given that resource availability is partly a function of knowledge, this raises the question as to what the embodied energy of knowledge is.

Take fusion for example. Let's say it's possible, but let's say we have to build twenty ITERs, national ignition facilities, etc. and pay thousands of highly educated Ph.D scientists for a hundred years to finally figure out how to do it. Obviously that's quite a bit of energy. At the end of this process we'd be left with a body of knowledge about how to build a fusion power plant. So that body of knowledge could be said to have a certain embodied energy, and it would be quite large.

Renewables could be the same way... you don't have to think of something as exotic as fusion. It might be possible to support a steady-state economy of eleven billion people on solar, wind, hydro, geothermal, biomass, etc. But that too has a large required body of know-how associated with it, and that know-how has an embodied energy.

Just some food for thought. To me the question of whether we face some kind of ugly permanent depression or die-off vs. whether we face a brighter future might boil down to the question of whether we have enough energy now-- and whether we are using it efficiently enough-- to pay the embodied energy cost of the knowledge required to keep going. It almost looks like activation energy for a chemical reaction... if continued human progress is a catalytic process, then that process could fail if at any stage in the process the energy available is not sufficient to catalyze the next stage.

You raise some very good points.

The fallacy is the relationship between knowledge and resource availability.

I'm not quite sure about there being a fundamental fallacy with regards the simple fact that there are indeed limits to growth.

Perhaps if I could see a path by which humans could reach the level of knowledge that the bonanza of fossil fuels has allowed them to achieve and with that knowledge were able to create a steady state economy based on renewables with a tacit acknowledgment that limits do exist then I'd be a bit more comfortable with your statement.

Though as you say:

It almost looks like activation energy for a chemical reaction... if continued human progress is a catalytic process, then that process could fail if at any stage in the process the energy available is not sufficient to catalyze the next stage.

So at any point our civilization could just fizzle out...

whether we have enough energy now ... to pay [for] the "embodied energy cost" of [acquiring] the [new] knowledge required to keep going [in a better-than-current-BAU way]

Very nice insight.

On the other hand, also very long winded.

The quest for the new "knowledge to keep going" begs the questions as to whether that knowledge exists in the first place, and even if it does, do we humans have the brain capacity to see it even if it shines straight into our lying eyes?

What is the post-peak decline slope of production likely to look like?

I know that's a compound question. There are really three pieces:

  1. Conventional crude production
  2. All-liquids production
  3. Net exports

What are the latest studies, analyses, guesstimates of these? I ask because I was looking at the Uppsala projections:


And they seem to be forecasting about a 1% decline rate (or less!) in all-liquids production for the next 20 years. That's remarkable, but I guess plausible if Iraqi production comes on line.

Any thoughts?

The Global Energy Systems Group at Uppsala University does not include all factors involved in its projections. It holds all other variables constant (like capital availability, for instance, when that is clearly headed for a crash).


We have been living in the illusion of prosperity by a massive, worldwide infusion of credit:


It doesn't include the impact of rapidly declining net exports, either, which on current trends are going to choke off oil sooner than almost anyone outside of TOD expects:

Great Oil Squeeze

Kjell Aleklett thinks their projections are "optimistic." That's an understatement.

Reinforcing (i.e. positive) feedback loops but in a negative direction are more likely, in my view, to produce a shark fin production shape as I show in the slide above "Greer's Stages of Technic Societies."

The chaos starts this decade, in my view. We may get one more major recession and manage to keep things together but I'm personally not going to bank on more than that.

Staircase Model

Hirsch proposes the possibility that this could happen:
Best Case Mitigation

In other words, mitigation strategies halt oil production decline and thus economic contraction within a decade but he too didn't include the factors I cite above (I asked).

Those who are interested can see the whole argument laid out in:
Preparing for a Post Peak Life

I approach the topic in some areas more directly than Chris does but people should really watch both.

Given the number of factors involved, it's not easy to create one projection with rigor. On the other hand, if one assumes a "phase change" the job becomes much simpler — everything generally contracts rapidly before settling into a new, lower state.

Those who haven't watched Collapse Dynamics by Noah Raford should:

Even if we don't experience a sudden drop in oil, the German military think tank probably has it correct when they say:

The abovementioned chain of events shows clearly that the energy supply of the economic cycle must be assured. The energy supply must be sufficient to allow positive economic growth. A shrinking economy over an indeterminate period presents a highly unstable situation which inevitably leads to system collapse. The risks to security posed by such a development cannot even be estimated (p. 50, emphasis added).


Andre - I agree with you for the most part. I guess I'm trying to test my understanding and beliefs by playing a bit of devil's advocate.

Stuart Staniford has suggested that Iraqi production has a fair chance of ramping up (not to the optimistic forecast levels, but still), and that'd allow for the Uppsala projections to hold up. Even if we do have a recession (which seems likely in the next year) some, maybe even most of those projects won't get canceled, so production will continue apace. Also, net exports projections assume that consumption in exporting nations will march along increasing at a steady clip, and I'm not sure that's a reasonable assumption as those countries are increasingly vulnerable to global economic and geopolitical disruptions. (That is, if we assume that production can be affected by economic events, we should also assume that consumption in producing nations can be as well.) I can see the Fed and others doing their best to hold the bubble up, and as long as the recession isn't too deep, they may well be able to prevent another waterfall decline.

Given that, it seems possible that we'd have a 1% decline. But more data would be interesting.

I will tell you what I would do WRT the import/export model.

I would create a Markov chain transition matrix between all suppliers and consumers of oil and label all connections as transfer rates. This is done at the country level because that is where we have the best information. The solution of this Markov chain will give a good idea of a stable equilibrium of imports and exports levels between all the countries.

This is most interesting from a geopolitical standpoint and not geologically, because we know that the gross oil depletion will occur independent of how the pie is sliced up. In other words, the import/export model is exactly right but it is only second-order on the global decline.

I know that it can be done and the math is very straightforward (if we keep it as a Markov chain) but I don't quite have the motivation to do it.

The chaos starts this decade, in my view. We may get one more major recession and manage to keep things together but I'm personally not going to bank on more than that.

You speak of our economic system collapsing as a bad thing. Oh the humanity! We won't be able to waste more resources on stupid shit. Really, it's a crap system anyway. Resource flows, waste and allocations are insane. A systemic collapse is the best chance we got. Hopefully it happens soon, rather that dragging out over decades.

I mean, these are not rational assumptions to govern a complex, high-tech society with - because, well, it's not reality based.


The market system is a closed circular flow between production and consumption, with no inlets or outlets.
Natural resources exist in a domain that is separate and distinct from a closed market system, and the economic value of these resources can be determined only by the dynamics that operate within this system.
The costs of damage to the external natural environment by economic activities must be treated as costs that lie outside the closed market system or as costs that cannot be included in the pricing mechanisms that operate within the system.
The external resources of nature are largely inexhaustible, and those that are not can be replaced by other resources or by technologies that minimize the use of the exhaustible resources or that rely on other resources.
There are no biophysical limits to the growth of market systems.

Yes, a sudden collapse is a bad thing for almost everyone involved (and lots of other species, too). I have no trouble transitioning off this economy but I would much rather it be done in a measured way.


I emphatically agree. A relatively slow stairstep model down (as both you and John Michael Greer see things) is way better than Apocalypse Now. Leanan seems to think a slow catabolic collapse is the worst of all possible futures; this is one of the very few points on which she and I disagree.

I can live with your green line. That is the best we can hope for.

I guess that's how you define "collapse". If it's of an abstract financial system suddenly seizing up and rendering the global economy inoperative than I am not sure how that effects other species. The human species which is commanded by this idiotic set of rules probably would be better off to organize in a different way. That fact that most people think we don't have another choice but to follow this suicidal logical called economics, is simply amazing.

Almost any definition of collapse is going to impact people greatly because almost no one is preparing for it.

As for other species, how will we continue to protect the meagre populations of certain endangered ones when we no longer have the money to hire wildlife rangers?

One of the winners of this year's Goldman Environmental Prize needs lots of oil and and money to do what he is doing for the rhino population of Zimbabwe (2 min video):


What is the nearest ready form of energy once a suddenly poor population can't afford natural gas to heat their homes? (Hint: tall and leafy; lots of species count on healthy stands of them)

I fear that we will indeed "strip the world bare like locusts" (Gandhi) on the way down. Over populating the planet then suddenly taking away the energy source that got it to that level of overpopulation is certainly going to have some beneficial effects eventually but there will be a good long time where environmental regulations don't get enforced, once-protected areas and species can no longer be protected, and so on.

Over populating the planet then suddenly taking away the energy source that got it to that level of overpopulation is certainly going to have some beneficial effects [for other species] eventually ...

Yes, at least for many species, very likely. Depends, in large measure, on how much long-term environmental damage we do as we work through our collapse.

If very many of the nukes are launched during our resource wars, for instance...

Am hesitant to add my 2 cents to many fairly credible comments. Also, do not want to get drawn into intellectual p*ss*ng contest. But am surprsied no one has done this yet ... will take some time to suggest that Mr Grantham's piece is flawed, maybe fatally so, or has sufficient issues inherent in its articulation that some other more credible analyst address it forthrightly.

First, without sounding egotistical ... or distracting too much (but bona fides are useful to establish ...), consider myself credible enough to waste others time to read this. Have multiple professional licenses in one of the largest commercial states in the country (USA) traditionally considered quite competitive. Of course, education is theoretical and have much high level biz experience, decades in finance, business development, international business (multiple countries/cultures), investment banking, venture capital and, the most relevant, actual running of businesses and investment (as Mr Grantham has so successfully done).

Second, there are commentators, who even though I do not agree with broadly or specifically, will take the time to absorb their points as matter of self-interest (gain investment/biz insight) & respect. Have generally been impressed with Mr. Grantham's previous articulations, certainly for their thoughtfulness & thoroughness. But my exposure to Mr Grantham has been derivative, meaning interviews (e.g., Barron's) or excerpts apart from downloading his material directly in full from GMO website. By that I suggest, that 'media' quite properly trained to get to widest set of eyeballs (so that advertisers can best benefit ... nothing wrong with that as sponsors ... as Michael Jordan's agent, Mr Falk told him wisely, even Republicans, those evil, hateful, racist, fearmongerers, etc. .. buy basketball shoes) ... may have 'polished' up some of Mr Grantham's prose for best effect. E.g., once saw WSJ Editor take Dow Jones newswire on small company I was deeply familiar with .... he made maybe 5% or less changes but instantly transformed the newswire into a piece of much broader interest internationlly than originally written by the young journalist .. and that is how that 'news' appeared in Wall Stree Journal Int'l Edition (it was revealing about the art/craft-side of news biz & fascinating).

Third, and certainly not to bring bad luck on myself with hubris, but am hesitant to take on directly a successful large fund manager who has withstood the pressures of decades by demeaning or slighting his analytical work product where he has put his name/firm behind it versus a cowardly anonymouse blog entry. To add to this, there is the clear statement that Mr Grantham 'crunched' a lot of data before he issued his piece. And on that front, I am certainly going to be deferential to his expertise, acumen & investment wisdom.

Fourth, to add to the preceding 'cowardly' theme, I do not have enough time or access to data or staff to go after this piece the way I think it may deserve before Mr Grantham's piece gets transmitted & absorbed 'directly' so wholeheartedly in the extended global cloud of the blogosphere

So with the preceding said, I cannot take issue with Mr Grantham's data or generally analysis. But what troubles me mightily is the tone of the presentation ... which by itself suggests to me where the flaws ultimtely might be in this overall portrayal ... and therefore 'conclusions'.

So I will do a 'Chomsky' on this ... meaning a linguistic analysis and what it belies versus straight on data/analytical challenge because I cannot ... but that it itself may be a 'red herring' issue to the central problem methinks exists with Mr. Grantham's piece.

Last, as final disclosure, am personally/familially heavily invested in the direction of Mr Grantham's conclusions, so it is almost schizophrenic of me to argue substantively with him when I have put my money heavily in the commodities direction. But even here, I think that is for different reasons than what Mr Grantham lays out in his piece. (I read Joseph Schumpeter's "Capitalism, Socialism & Democracy" recently ... very slowly & thoroughly ... and it scared me to death it was/is so prophetic ... and while generated in the aftermath of the New Deal & WW2 ...it is appropos to the present Administration .... so I've gone 'crackpot' with a heavy tilt to 'real' assets, economies & currencies, etc. .... have to fight my instincts to do this but see no other course for protection of hard-earned savings & life's work but to go seriously into commoditites as US$ effectively being used to cover up debt absorption by gov't ... what happened to GM bond & equity holders is happeneing to world at large and good chunk of American citizenry ... especially, unfortunately, the lower classees in the USA, and methinks ironically, inner-city stuck African-Americans).

To be blunt, Mr Grantham is obviously 'doctrinaire'. I was stunned that a guy this respected and professional would out his name & his firm's on such a piece of largely editorialized opinion supposedly based on data analysis. Mr Grantham's conclusion may be on point .. but he cannot help himself letting you know how 'smart' he is, how 'numerate' he is, and how 'stupid' so many of his fellow Americans seem to be in his eyes. I was reluctant to call him out like this, but almost shocked that 'professionals' in this country, no matter their track-record, dip so easily & quickly into the well of 'policy opinion' masquerading as 'analysis'.

The tip offs were in no particular order:

(1.) Climate Change (and he even says 'warming' once I recall) is a scientific fact and anyone who denies this is an idiot or worse. He and so many others may ultiamtely be proven correct, but all he has at present are arguments and theorizations about an especially complex scientific topic that has been hijacked for 'policy' conclusions (and now by big biz/Wall Street ala GE & Goldman Sachs). We do not even yet understand the vastness of our ocean's and their full impact on climate, yet he seems ready to launch into expensive fuzzy policy initiatives that are murky, if even effective, regarding climatic impacts of anthropromorphic activity? This is the mentality of 'surgeons' who beleived bloodletting' regularly helped cure you ... before there was a clearcut data baseline that, in retrospect now, obviously looks stupid & counterprodctive. I lived in then polluted Chicago and worse, Cleveland, and an no environmental protagonist .... but in America & Europe, we are light yerrs ahead of where we were 40 years ago. But much of that was clear-cut dangerous and unarguable .. versus the present day Climate Change/Warming/Cooling manifestations. This is the major tip off that Mr Grantham is probably either out-of-his-economist-by-training/successful-fund-manager League or is blatantly doctrinaire.

What do I mean by 'doctrinaire' here? One has a predisposed belief system that no matter what the 'real' or 'natural' fact pattern may be, one will 'force' it into, and through, the strainer of their belief system to formulate conclusions. For all the protestation about the closed-mindedness of those open to religous inspiration of any kind, certainly anything tied to Western heritage, Mr Grantham is just replacing his core belief system with that of the late middle ages Roman Catholic Church hierarchy that admonished Galileo & Copernicus ('convicted' of 'heresy' I believe for the former and more subtly shipped off to the hinterlands for the latter). If you do not agree with me over a legitimate argument ... you are unscientific or a racist or a dupe or plain stupid. I got that clearly Mr Grantham. I, despite my own successes (and failures, which biz everyday teaches you why to be humble), am an idiot because I am insufficiently 'numerate' in your opinion, to hang all the way with your data analysis conclusion and random editorializing along the way.

(2.) What sealed this conclusion of my own, was his totally unconnected 'shot' at Fox News in this 'data analysis' piece. Mr Grantham was just getting on a soapbox to let the world know that he does not care for Fox News; last I checked, while he is entitled to his opinion for sure, it is a little sophmoric to be sounding off like that, in a totally unconnected way, in a supposedly 'serious' bit of 'paradigm-shifting' analysis. On a personal level, I wish Fox News were better or did some things differently, but to my mind, Roger Ailes et al, may be the saviors' of the West considering every other supposedly 'news' (let's call it what it really is ... infotainment and 'narrative-shaping' for CBS, CNN, NBC, etc.. versus conveyance of 'objective' information). So here again, Mr Grantham implicitly mocks anyone who watches Fox News versus his more preferred 'news' sources (MAD Magazine ?). Come on, that is pathetically juvenile. Talk about closed-minded .... if I adopted Mr Grantham's supposed' methodology' here ...I could paint him as a crackpot if I wanted to ... but I am much to deferential to his cumulative success to try and do so ... even though the pinata is ripe for such an offing.

(3.) Third, to be more broad linguistically, go reread the entire piece, a step removed like a disinterested observer in an anthropological sense. Mr Grantham, constantly talks about 'smart people', 'very smart people, etc. In fact, go check out the level of verbiage surrounding those words and the associated trains of thought in this piece. There is a lot of it proportionally .. and as I recall ... not so much of it is directly tied to the data his is supposedly 'grinding' and the conclusions. I certainly would have liked to have heard more about his 'grinding' and methodologies than his opinion of climate change or Fox News ... especially when this piece is presented by Mr Grantham as a 'paradigm-shifting' analysis. But then again, neither Time, Newsweek or The Economist (warning: personal opinion about to be inserted ...sadly for The Economist-a once great magazine now smitten by the on-the-hand-then-the-other almost always concluding with a EuroLeftie proscription) are really 'news' magazines are they anymore if they ever were? So Mr Grantham evidently lives in the Olympian world of a lot of 'smart' and 'very smart' people unlike, presumably, the rest of us. Who'd a thunk ..... are all these 'smart' people the same group that largely brought the USA and Western World a financial credit crisis we just might never be able to escape. This 'smart' and 'very smart' group were the leaders of the financial world, his world for all Mr Grantham's probably timely and credible warning earlier last decade. And never forget, Main Street America excesses did not cause this financial credit crisis, they participated in it but it was not Main Street economic policy that brought us this mess .. rather it was the 'smart' and 'very smart' people, so numerate as Mr Grantham likes to fondly assert, who brought this on .... certainly not your average Fox News viewer.

(4.) Fourth, and this is pretty clear-cut. Mr Grantham, made this reader back away from his piece instinctively when Mr Grantham fondly recalled former President Carter. Not to get into the political debates of yesteryear, but to even reference former President Carter, who just happened to have 'suprisingly' lost in a landslide to that 'amiable dunce' Reagan (not a very 'smart' man many would say ... especialy in the then no-Fox-News challenged late 1970s), had to be purposeful for such a 'smart' person as Mr Grantham. Mr Grantham can fondly recall President Carter may have been correct about one thing (I guess that was a staglationist, I'm ready to bend over Saudi Arabia & Iran & Russia oil/energy policy), but there are a lot of people who became Republican voters (they were called Reagan Democrats ... I was one .... President Carter forced me to come grips with the standard academic leftie kool-aid indoctrination I, as many American college students receive(d) every year, with the realities of life). Go ahead Mr Grantham, if it makes you feel better about your 'paradimg-shifting' analysis to seek to resurrect President Carter and his 'wise' 'energy policy', that is your perogative as the author. I guess America is also a less better place, more unscientific, less numerate, nasty, brutish, whatever... that former Massachusetts Governor Mike Dukakis got 'Willie Hortoned' just as Senator John Kerry got 'swiftboated', etc. and so sadly could not lead us in a better, more enlightened direction.

So in long-winded conclusion, I was heartened to see you conclude the way you did, Mr Grantham, about the supply/demand challenged availability of commodities going forward which matched my own investment positions thankfully. But truly I was surprised, stunned really, that such a very smart person as yourself, and your partners & employees in your firm GMO, would permit you to write a 'paradigm shifting' analysis piece with some excess, unconnected verbiage that any self-respecting college professional academic would have critiqued your peice heavily as border-line sophmoric.

Just one Fox News viewer's (and a reluctant one at that as the other news media are so largely compelled to be NYTimes/Boston Globe wannabes) take on you otherwise very interesting piece.

That is as impressive an example of linguistic contortion as I've seen in a looong time.

I'll bet even Noam would be impressed.

analysis piece with some excess, unconnected verbiage that any self-respecting college professional academic would have critiqued your peice heavily

Is the pot talking about the kettle? Didn't even use the witch.


Aww, c'mon, NAOM.

Give peice a chance.

Holy smokes Batman!

?- )

Fourth, to add to the preceding 'cowardly' theme, I do not have enough time or access to data or staff to go after this piece the way I think it may deserve before Mr Grantham's piece gets transmitted & absorbed 'directly' so wholeheartedly in the extended global cloud of the blogosphere

So with the preceding said, I cannot take issue with Mr Grantham's data or generally analysis. But what troubles me mightily is the tone of the presentation ... which by itself suggests to me where the flaws ultimtely might be in this overall portrayal ... and therefore 'conclusions'.

So I will do a 'Chomsky' on this ... meaning a linguistic analysis and what it belies versus straight on data/analytical challenge because I cannot ... but that it itself may be a 'red herring' issue to the central problem methinks exists with Mr. Grantham's piece.

So...someone calling himself "reaction to closed minds" wants to "go after" a data-driven argument piece; knows he can't win the argument on the facts; senses an opening in his opponent's intellectual-elitist style and tone; selects a playing field and rules of the game advantageous to himself (and to hell with the scientific method); and in the rest of his "peice" (not quoted) embarks on a classic "Culture Wars" political hack job which he calls a linguistic analysis, in the full knowledge that all he needs to win is a draw.

Sounds exactly like the S.O.P. defensive mechanisms of closed minds that I have had the misfortune to come across.

That was easily the most verbose, aimless, self-absorbed, obfuscatory and generally worthless piece of trash I've ever read on this site.

"Am hesitant to add my 2 cents". You should have been MUCH more hesitant than you were.

Whatever point there might have been in that windy heap of hay could have been reduced to 100 words. Or less.

Yair...whew!...are we there yet?

Perhaps one insight here is that the investment community will be best placed to benefit from a situation they helped create rather than some random assortment of ecologists and survivalists stepping into some power vacuum?

just a thought

excellent essay

in my (very limited) experience the more senior the executive, the better the manners, the longer the view, and the deeper the thinking

Witness, e.g., The Donald, Chairman and CEO of the Trump Organization; Richard Bruce Cheney, Chairman and CEO of Halliburton (among many other very senior positions); Lawrence Joseph Ellison, CEO of Oracle Corporation; and as many others as one might care to list.

Gentlemen and scholars, all.

Wow, I've read this blog for over a year. I have zero scientific background, I'm a retired financial planning analyst, but that
post by Closed Minds motivated me to post here.

We are so fortunate to have had eight years of George "The Brain" Bush
as our President. Um okayyyyyyyyyyyyyyyyyy.

ReactionToClosedMinds has eight hours seniority on ya.
Yer 1 for 1 on comments.
Be fruitful and multiply.

Astroturfer and sockpuppet?


Could be... I've often wondered about characters like "salonlizard" etc. Are they regulars having a gag?

If I am right, we are now entering a period in which, like it or not, we must finally follow President Carter’s advice to develop a thoughtful energy policy and give up our carefree and careless ways with resources. The quicker we do this, the lower the cost will be. Any improvement at all in lifestyle for our grandchildren will take much more thoughtful behavior from political leaders and more restraint from everyone. Rapid growth is not ours by divine right; it is not even mathematically possible over a sustained period. Our goal should be to get everyone out of abject poverty, even if it necessitates some income redistribution.

Jeremy tends toward long paragraphs--that might be a good thing. This section is buried in the center of his second. The double whammy--'listen to Jimmy Carter' and even if it necessitates some income redistribution. (my emphasis)--will pretty much guarantee most investors will not read the rest. Heck those are points with which I mainly agree and its' still going to take effort for me to push on.

Stuff like that should be spoon fed throughout the meat of the article, not disgorged in a chunk at the start...that is if the writer is at all interested in converting the wavering and getting the steadfast holding the opposite viewpoint to waver. Now maybe Jeremy's following at GMO are the faithful this may energize them...that I don't know

But Nate said in his intro
I expect his message will fall on deaf ears within the industry,
at this moment in time I'd say the above section guarantees that.

Well I'll take that back a little, It looks like ReactionToClosedMinds at least read the whole thing. I will admit the once JG got rolling his style was quite readable, he can almost make commodities seem exciting (yes I'm being facetious, I've known a few of CME thrill junkies over the years). The mix of opinion and analysis was quite a weave and if the analysis stands on its own, quite unnecessary, certainly the author should have made clear distinctions between the two. The section I quoted above should have been edited out along with several others. That would have made it a much more powerful piece.

I thank jonathan.s.callahan for focusing on the analysis and bringing more to it.

And under the "OMG, they can't be possibly dumb enough to try that again category", we have this

"Kan has urged Japanese consumers to open their wallets to help spur the economy, stressing that the upcoming Golden Week holidays will be a particularly good opportunity to spend."


I thought the Japanese actually studied history, having somewhat more than the 300 years of it the US can come up with.

Good grief.

Wow. Shades of George the Lesser, post-9/11.

If only the vending machines hadn't fallen victim to rolling blackouts...

I know, I smell chestnuts roasting too......

Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein

Actually, that is good advice that Kan gave to his people. Japanese people (unlike Americans) tend to save too much and spend too little, from a Keynesian point of view. One thing the Fukishama disaster has shown is that Japan is rigidly organized and not resilient when it comes to dealing with catastrophes. This does not bode well for Japan's response to Peak Oil.

Japanese people (unlike Americans) tend to save too much and spend too little, from a Keynesian point of view.

No doubt. However, it's easy to see why a Japanese family, watching the astonishing incompetence of their government and corporate culture in the wake of this catastrophe, might decide to hang on to their savings for, oh, maybe getaway expenses--and damn the macroeconomic inefficiencies.

Christ, compared to whom? How about 3 mile island, Katrina, the gulf oil disaster? This is the same, 20/20 hindsight, if a response to disaster did not work out well (according to some arbitrary belief system) then X is obviously incompetent. You know, sometimes 1 in a 1000 year disasters occur. They had a complete blackout situation at 6 reactors. How many civilians died, zero.

They had a complete blackout situation at 6 reactors. How many civilians died, zero.

And if we stop counting now, the death toll won't rise. ;^(

Agreed, and I apologize for my tone. Four beer blogging is never a good idea. Still, I maintain the point I was attempting to make; how many human systems are designed to withstand 1 in a 1000 year events. What would a one in a thousand year hurricane look like hitting the east coast. If it stalled over a nuclear plant perhaps it would be combined with 1 in a 1000 year flooding. I am nearly neutral on nuclear power, but seriously doubt any plant designed to withstand 1 in a 1000 year natural events (let alone man made ones) would be cost effective.

I also wish to offer this example of windmill failure and the associated consequences:

How did you calculate 1 in 1,000 year event?
Yes, they had a complete blackout, but "why" is the question; why, for example, there and not at Daini?

"Japan is...not resilient when it comes to dealing with catastrophes"

I don't see this at all. I lived through Andrew and saw what Katrina did - I would say Japan has done very well indeed compared to the performance put up by its Western counterparts in less dire straits.

Lots on The Automatic Earth today - Japan just another complex system doing it their way? (A system accident? A bit like a pre-programmed George W head on with a large chunk of reality?)
Also on TAE a big chunk about Jeremy Grantham and his history of predictions and his watching the economic train wreck. Also in that piece some nice quotes from the financial masters of the World Hegemon.
UK, EU? We can't claim we know any better.

Yeah, Phil, I liked the right/left brain explanation of why leadership doesn't see these things coming:

But what we need is “more people with a historical perspective who are more thoughtful and more right-brained.” Instead America ends “up with an army of left-brained immediate doers. So it’s more or less guaranteed that every time we get an outlying, obscure event that has never happened before in history, they are always going to miss it. And the three or four dozen odd characters screaming about it are always going to be ignored.”

It's something I suggested years ago: Those who reach a certain level of management are too much in the now to have much longer-term perspectives. It's why we they keep repeating the same mistakes, and certainly aren't going to see anything new/different coming down the pipe. It goes to imagination I think.

re. See Paul Farrell's piece

They are not resilient compared to what? How would the U.S. have faired with a disaster of this magnitude? We in the U.S. have never experienced the kinds of disasters that the Japanese have gone through and yet they endure. TMI was a picnic compared to the Japanese nuclear disaster.

Yes, from a Keynesian point of view, spend like there is no tomorrow. But there is a tomorrow and resources will be even more limited.

To quote John Maynard Keynes, "In the long-run, we are all dead."

Neither TEPCO nor the Japanese government behaved well in response to events caused by the earthquake and tsunami. With all its faults, the U.S. government clearly did a better job of dealing with disaster after Hurricane Katrina than the Japanese government did with dealing with its nuclear disaster--which is ongoing after many weeks.

Don, sorry for my tone above, but I think a good argument can be made that TEPCO faced an insolvable situation. Perhaps they should have asked for more international help, but how many nuclear experts speak Japanese. What a tower of Babel that could have been.

Even with what is probably the worlds best emergency evacuation system, the Japanese appear to have gotten only ~90% of citizens in flooded areas to safety. State alternatively, how miraculous that 90% evacuation was achieved in about 20-30 minutes.

What about the tens of thousands of Japanese who are currently being subjected to dangerous radiation from fallout? What has the Japanese government done for them except to tell them to stay indoors? The mandatory evacuation area is much too small.

After Katrina, most of the refugees were relocated within a few weeks. Many of these were extremely poor Black people from New Orleans, who were helped to establish new lives in Houston or in other locations hundreds of miles away from New Orleans. Relocating half of a big city, now that is something to be proud of. I have read nothing whatsoever of Japanese government efforts to relocate fallout refugees (and earthquake refugees) hundreds of miles from Fukishima. If the Japanese government is doing something substantial along these lines, they sure are keeping quiet about it.

Maybe the government doesn't need to do it, because the Japanese are capable of bottom up organizing in a time like this.

Part of the problem in America is that everybody believes the government should help those who refuse to help themselves. That's not the only problem in this country obviously, but it's part of it.

A surprise: China’s energy consumption will stabilize

As China’s economy continues to soar, its energy use and greenhouse gas emissions will keep on soaring as well—or so goes the conventional wisdom. A new analysis by researchers at Lawrence Berkeley National Laboratory (Berkeley Lab) now is challenging that notion, one widely held in both the United States and China.

Well before mid-century, according to a new study by Berkeley Lab’s China Energy Group, that nation’s energy use will level off, even as its population edges past 1.4 billion. . . according to this new forecast, the steeply rising curve of energy demand in China will begin to moderate between 2030 and 2035 and flatten thereafter.

Of course, one tiny problem is that at Chindia's 2005 to 2009 rate of increase in their combined net oil imports, as a percentage of global net oil exports, in 2025 Chindia would be consuming 100% of global net oil exports.

...according to a new study by Berkeley Lab’s China Energy Group, that nation’s energy use will level off...

Jeez, WT, I wonder what gave them that idea :-/ Most TOD regulars could have told them that (likely for different reasons).

I expect it'll "level off" much sooner than 2035.

I thought that the referenced article offered a little bit of (unintentional) comic relief.

Oh, yeah. Just your pull quote was worth a giggle.

Well, it will level off. LOL. The rest of us will have leveled off by not having a heart beat. Guess we need to figure out how to get along with nothing.

And oh, btw, even if drill,baby,drill policies could increase U.S. domestic production, would that production necessarily go to the U.S? We do live in a world market, don't we? I guess there could be export controls.

thorium reactors

any thoughts? i'm not a proponent or opponent, just heard people saying they are the next thing to save us. what data has anyone come across that supports or refutes this? just curious.

First of all they are not (yet) commercially available.
And wind turbines are already significantly cheaper than conventional new nuclear power plants:

On the other hand efficient cars, efficient appliances, efficient lights, efficient computers, wind power, PV-power, CSP, HVDC, hydro, geothermal, biomass & waste incineration plants etc. are available now.

With wind power alone the U.S. can produce 10 times more electricity than what it needs (without even considering Offshore wind power).
Btw, in 2010 China installed almost 4 times more wind power than the U.S.:

With PV on the roofs alone it can probably already cover over 50% the entire electric demand in the U.S. (If Germany can already cover about 50% of its demand with its roof area so can the U.S. with more sun and typically larger roofs: http://www.solarserver.de/news/news-7381.html)
Needless to say that a fraction of the desert areas in the U.S. can easily cover the entire electricity demand in the U.S.

anyone - Mucho thanks. Now that we know the solutions our problems are over.

I'm not slamming you friend, honestly. But since joining TOD I've been exposed to many clever folks with similar ideas. But as I've pointed out recently the ideas are not relevent unless they are applied. What we need are viable ideas of how to get such "solutions" implemented in time to make a difference. I haven't seen one proposal yet to achieve this goal. As far as I can tell society is still destined to react to the future when it happens as opposed to planning for it.

Actually, I simply mentioned that the Thorium reactor is not commercially available and efficiency and renewable energies are.

And facts show that the world installed 80 GW of renewable power in 2009 while nuclear power capacity actually declined.
In addition, China also installed 29 GW of solar hot water capacity (while the entire U.S. may have installed one or two systems):
And since 2010 China installed almost 4 times more wind power than the U.S. last year, wind power is still growing in the double digits in China: http://bit.ly/eX1QUj

And don't worry, of course, the U.S. will probably not even invest 1% of its military budget in renewable energies and efficiency and continue to increase its dependence on imported resources.
(Btw, if the U.S. were to invest only 10% of its military budget in wind farms in the next 20 years it can cover its entire electricity demand with wind power alone. The U.S. imports oil from Mexico and Canada, so it could just as well export surplus wind power to Mexico and Canada. But again, don't worry, it probably won't ever export renewable power.
Electricity can indeed be transmitted over long distances very efficiently - at least in more modern countries such as Brazil: http://www.abb.com/cawp/seitp202/06c9cd09d993758cc1257601003db274.aspx

And I agree, America's increasing dependence on imported resources is not necessarily even a bad thing (at least for those who don't live in the U.S.), thanks to the rapidly declining USD, vacationing in the U.S. is actually quite cheap.

anyone - Well said. I suppose the darkest cloud can still have a silver lining. LOL. Frustrating, ain't it?

Rockman - at least the above silver lining holds true as opposed to this NY-Times lining (and which apparently seems to guide US-energy-policy):

Oil remains abundant, and the price will likely come down closer to the historical level of $30 a barrel as new supplies come forward in the deep waters off West Africa and Latin America, in East Africa, and perhaps in the Bakken oil shale fields of Montana and North Dakota.
we can’t let the false threat of disappearing oil lead the government to throw money away on harebrained renewable energy schemes or impose unnecessary and expensive conservation measures ..

Needless to say that it is actually cheaper to save fuel than to buy fuel.

anyone - The irony is so thick, eh? A generally considered liberal paper is pushing BAU and a cornucopian’s wet dream to millions and a dirty lying oil patch bastard like the Rockman, who has been struggling for 36 years to find a few more bbls of oil, acknowledges PO and the end of BAU. Suddenly it seems as though we’ve been flung into a parallel universe. And not in a good way, LOL.

I don’t think the word frustrated even comes close.

Hi Rockman,

What we need are viable ideas of how to get such "solutions" implemented in time to make a difference

I agree with you. TOD has been awash in great "solutions" since I joined the site over 4 years ago. I don't visit the site as often now because I just don't think that "solutions" are all that relevant - certainly we need to know that viable solutions exist but this is really getting to be old news.

The problem is the "problem" not being understood by most people - at least not in a realistic, factual, science supported manner. Conspiracy theories, religious beliefs, and goofy ideologies of all sorts do not constitute an understanding of the problems facing humanity and the planet.

Even if the problems are understood there is another critical step before solutions are implemented: broad acceptance of workable goals that actually address the underlying causes of our problems. For example, many of us think that a major cause of our problems is an unsustainable level of human population. Lets assume that solid research suggests that only 3 billion humans can be sustained instead of the nearly 7B today.

So, we might state the goal something like: "Reduce human population to 3B by 2100". OR, we might state the goal as: "By humane and equitable means gradually work towards a global human population of 3B by 2100 - no group or nation can be treated unfairly in this process".

If it is generally understood that earth's human population is facing the very real possibility of catastrophic collapse and even extinction, then the first version of the goal might appear to justify some pretty nasty policies. If the second version is an ironclad guiding principle, then the solutions should be far less onerous and discriminatory.

Even with a good understanding of our problems' symptoms/causes along with rational goal setting, there is another issue with "solutions". By their very nature, many solutions have yet to be proven to be truly effective. Dealing with the future is tricky business. In my experience, it is best to prototype as many different approaches as practical and then go forward with the ones that are most effective in meeting stated goals.

Obviously, this type of problem solving process (or other rational variants) is very hard to imagine in the current state of affairs nationally and globally. Most of us understand the resource commitment, lead times, and sacrifice that truly effective solutions would require. It is not comforting to mull over the most likely scenarios that will play out over the next couple of decades.

dave - Thanks for the long and detailed reply...you should post more often IMHO. Maybe in reality I'm just torn between two poles. I can be just as optimistic about potental tech/political solutions (or least more reasonable reponses) as any on TOD. But I can also be a major pessimistic when I consider the low probability of any positive changes in a reasonable time because I see little will to make such changes.

Just consider a major problem in this country (obessity) that has a very simple and easily applied solution for the vast majority: reduce calore intake. But is the solution being applied? And this is butt simple compared to energy poduction and consumption. Damn difficult for me to have much hope.

Damn difficult for me to have much hope

Rockman, I'm not sure of your age - I'm pretty sure I'm a bit older than you - but I come from that generation (especially for engineers and other techies) that believed we could fix darn near anything. No problem we couldn't solve if we put our minds and bodies into it. Now, I share this difficulty with hope.

I think we also prided ourselves on being realistic and pragmatic - perhaps this is the rub - hard to be very hopeful when much of the evidence keeps pointing elsewhere. But, I guess there is always that tiny bit of hope that we are just not seeing the "green shoots" of a new vision by younger generations. Lets hope they all don't look like this:

Well, there may be a pragmatic aspect to body art. In this fast changing world the owner is always able to carry that piece of wealth with them?- ) And though the art may be a fair investment of the owners savings it doesn't put near the stress on the planet hot sports car or yacht wealth displays do. Just trying to put a bright spring spin on things for you Dave.

I think you got a bit better than a decade on ROCK.

of course the attitude
we could fix darn near anything. No problem we couldn't solve if we put our minds and bodies into it has certainly 'fixed' a lot of stuff that would seem to have been better left 'unfixed'--that is the real rub isn't it? Puts me in mind of a good old song.

It's a strange, strange world we live in, Master Jack
You taught me all I know and I'll never look back
It's a very strange world and I thank you, Master Jack

You took a colored ribbon from out of the sky
And taught me how to use it as the years went by
To tie up all your problems and make them look neat
And then to sell them to the people in the street

It's a strange, strange world we live in, Master Jack
You taught me all I know and I'll never look back
It's a very strange world and I thank you, Master Jack

Hi Luke,

'fixed' a lot of stuff that would seem to have been better left 'unfixed'

Very much agree. However, I think much (very much) could be written about this observation. I've often reflected on this - I recall when I was planning on leaving the North Woods and headed for some big city, an older gentleman advised: "Look for the city with the most and biggest smokestacks - that's where you can make some money". I took him seriously and Milwaukee, WI fit the bill perfectly and, indeed, I did make some money. At the time this seemed perfectly sensible. All kinds of "values" from the 50s now seem so wrong headed. Things we were so proud of then now seem so obviously bad for humans and the planet. Who in thier right mind would now decide to create our current car culture? And (full disclosure), I had a great love affair with cars.

We considered ourselves to the smartest, most hardworking, even noblest folks on the planet. I don't recall many people in the 50s thinking that big corporations were bad guys (oh, I guess there were some exceptions) but mostly they were looked upon as means to the good life - good jobs, modern conveniences, exciting technical frontiers, etc.

So, very interesting how "the road to hell is often paved with good intentions".

Hi Dave,

Don't know if I'd have done it a lick different than you if I were born a few years earlier and up north rather than in the Windy one. I just let my first shot as SS go by last month. We mostly play the hand we are dealt the best we know to at the time--'know to' being the catch there. Its' been pretty good for us by and large--it would be a waste to have too many regrets.

Quite a mystery to be involved in...this life!!! Milwaukee isn't all that bad a sized city. You can't tell, things could work out. Heck, we were all pretty darned lucky to get past 1962.

How has the bicycle riding been this spring? Its' only eight days since I got my last 20+k ski in, but there are only the remains of the bigger piles near my house now. Took the bike out of the shed and may lube it up tomorrow.

Good to hear from you.

Hey Luke,

Yeah, I think people of my age and circumstances had a very good run - not that we always saw it that way and appreciated it! Folks a few decades from now may look back at this time/place and see it as a very nice bubble.

For the past 30 years, we've live about 20 miles north of Milwaukee along the lake - we have some very nice bike trails and quiet country roads. Of course, the main roads and towns have the usual risks from our lovely car culture.

Weather here has been exceptionally cold and wet for April. I've been biking with my woollies and rain gear. Today was a great change - sunshine and 50 - great day for a ride. We are very near the Kettle-Moraine area created by the glaciers. Got in about 35 miles with some respectable hills (at least for this part of the world).

Hope your bike is enjoying some sunshine also.

Hi Dave,

I know your area, or at least I passed it by many, many times. My mom still lives up on the lake side of the thumb in what used to be our summer cottage when I was chitown suburban brat (I rebuilt and expanded the place so my parents could retire there). I believe there was a TV series set in your town that my kids liked--had a couple stars who had kept JR company in 'Dallas.'

That's a pretty moraine area, those were fair sized hills to me when I was a kid, but we didn't go through them often. Now I live on more hill than I like to bike climb. Often enough I throw the bike in the back of my pickup and use it to run my town errands--Fairbanks itself is riverbottom--then throw it back and motor up the hill, no purest here. It's not a real steep hill but a couple thousand feet pretty much in three miles or so is more than enough for me generally.

Still dinking around the yard clearing my near thousand feet of ditches and raking a few leaves as the last big snow piles disappear. Might not bike till the weekend--I don't seem to bike near as often as I ski. Well that works out for where I live. One of these days I might happen into a recumbent that fits me at our bike shop and decide I have to have it. That could change everything.

Hope you get some more nice weather, happy trails.

Just consider a major problem in this country (obessity) that has a very simple and easily applied solution for the vast majority: reduce calore intake.

Ah, but... In reality, it is a very simple solution, but not easy to apply, at all.

We evolved to eat whatever was available, whenever it was available, including "excess" calories, because food supplies tended to be erratic and uneven, for gatherer-hunters. We also evolved in an environment that required much more physical activity than is typical of "modern" techno-industrial Americans.

A few hundreds or thousands, of years of steadier and "cheaper" food supply has done nothing to alter the psycho-biological imperative to EAT.

OTOH, changing conditions may well have permitted the survival (and reproduction) of more individuals with metabolic tendencies that would have been maladaptive during most of our evolution, while consigning those with "more efficient" metabolism to the risks and problems of obesity now that endogenous stored energy is less important (for the moment). We'll see how it all plays out.

OTOH, changing conditions may well have permitted the survival (and reproduction) of more individuals with metabolic tendencies that would have been maladaptive during most of our evolution, while consigning those with "more efficient" metabolism to the risks and problems of obesity now that endogenous stored energy is less important (for the moment). We'll see how it all plays out.

Good point, which of course has much broader implications and applications than to just the obesity issue.

Just consider a major problem in this country (obessity) that has a very simple and easily applied solution for the vast majority: reduce calore intake.

Hmpf! No more Blue Bell for you either!

Seriously though, how are you going to fight something like this? I'm not intending to single out Pepsico just using this list of their products to make my point. http://www.pepsico.com/Company/Our-Brands/Pepsi-Cola-Brands.html
How much money has been invested in learning how to exploit our natural desire to store fat, our sweet tooth and our desire to eat salt? The average person doesn't have a F**King snowball's chance in hell against this.

This is just a list of the Pepsico drinks: I'll let you check out their other brands and then examine any other similar company...


* Pepsi
* Pepsi Max
* Pepsi Max Cease Fire
* Pepsi Natural
* Pepsi One
* Pepsi Throwback
* Pepsi Wild Cherry
* Caffeine Free Pepsi
* Diet Pepsi
* Diet Pepsi Wild Cherry
* Caffeine Free Diet Pepsi

Sierra Mist

* Sierra Mist
* Diet Sierra Mist
* Sierra Mist Cranberry Splash
* Diet Sierra Mist Cranberry Splash
* Diet Sierra Mist Ruby Splash


* Slice - Diet Orange
* Slice - Grape
* Slice - Orange
* Slice - Peach
* Slice - Strawberry


* Tropicana Fruit Punch
* Tropicana Lemonade
* Tropicana Light - Lemonade
* Tropicana Light - Orangeade
* Tropicana Orangeade
* Tropicana Pink Lemonade
* Tropicana Strawberry Melon
* Tropicana Twister Soda - Diet Orange
* Tropicana Twister Soda - Grape
* Tropicana Twister Soda - Orange
* Tropicana Twister Soda - Strawberry

Ocean Spray (License)

* Ocean Spray Apple Juice
* Ocean Spray Blueberry Juice Cocktail
* Ocean Spray Cranberry Juice Cocktail
* Ocean Spray Cran-Grape Drink
* Ocean Spray Cran-Pomegranate Juice Drink
* Ocean Spray Orange Juice
* Ocean Spray Pineapple Peach Mango Juice Blend
* Ocean Spray Ruby Red Grapefrui Juice Drink
* Ocean Spray Strawberry Kiwi Juice Drink


* Fiesta Mirinda Mango
* Fiesta Mirinda Pina

Mountain Dew

* Mountain Dew
* Mountain Dew Code Red
* Mountain Dew Distortion
* Mountain Dew Live Wire
* Mountain Dew Throwback
* Mountain Dew Typhoon
* Mountain Dew Voltage
* Mountain Dew White Out
* Caffeine Free Mountain Dew
* Caffeine Free Diet Mountain Dew
* Diet Mountain Dew
* Diet Mountain Dew Code Red

AMP Energy

* AMP Energy
* AMP Energy - Elevate
* AMP Energy - Lightning
* AMP Energy - Lightning Sugar Free
* AMP Energy - Overdrive
* AMP Energy - ReLaunch
* AMP Energy - Sugar Free
* AMP Energy - Traction
* AMP Energy Juice - Mixed Berry
* AMP Energy Juice - Orange
* AMP Energy with Black Tea
* AMP Energy with Green Tea

Mug Root Beer

* Mug Root Beer
* Diet Mug Root Beer
* Mug Cream Soda
* Diet Mug Cream Soda

No Fear

* No Fear
* No Fear Motherload
* Sugar Free No Fear

Seattle's Best Coffee

* Seattle's Best Coffee - Iced Latte
* Seattle's Best Coffee - Iced Mocha
* Seattle's Best Coffee - Iced Vanilla Latte


* Tazo Brambleberry
* Tazo Giant Peach
* Tazo Organic Iced Black
* Tazo Organic Iced Green


* SoBe Adrenaline Rush
* SoBe Sugar Free Adrenaline Rush
* SoBe Energize Citrus Energy
* SoBe Energize Green Tea
* SoBe Energize Mango Melon
* SoBe Energize Power Fruit Punch
* SoBe Lean Fuji Apple Cranberry
* SoBe Lean Honey Green Tea
* SoBe Lean Raspberry Lemonade
* SoBe Lifewater Acai Fruit Punch
* SoBe Lifewater Agave Lemonade
* SoBe Lifewater B-Energy Black Cherry Dragonfruit
* SoBe Lifewater B-Energy Strawberry Apricot
* SoBe Lifewater Black and Blue Berry
* SoBe Lifewater Blackberry Grape
* SoBe Lifewater Cherimoya Punch
* SoBe Lifewater Fuji Apple Pear
* SoBe Lifewater Goji Melon
* SoBe Lifewater Mango Melon
* SoBe Lifewater Orange Tangerine
* SoBe Lifewater Pomegranate Cherry
* SoBe Lifewater Strawberry Dragonfruit
* SoBe Lifewater Strawberry Kiwi
* SoBe Smooth Black and Blue Berry Brew
* SoBe Smooth Orange Cream
* SoBe Smooth Pina Colada
* SoBe Smooth Strawberry Banana
* SoBe Smooth Strawberry Daiquiri
* SoBe Vita-Boom Cranberry Grapefruit
* SoBe Vita-Boom Orange Carrot


* Aquafina
* Aquafina FlavorSplash - Grape
* Aquafina FlavorSplash - Peach Mango
* Aquafina FlavorSplash - Raspberry
* Aquafina FlavorSplash - Strawberry Kiwi
* Aquafina FlavorSplash - Wild Berry
* Aquafina Sparkling - Berry Burst
* Aquafina Sparkling - Citrus Twist

Starbucks (Partnership)

* Frappuccino - Caramel
* Frappuccino - Coffee
* Frappuccino - Dark Chocolate Mocha
* Frappuccino - Light Vanilla
* Frappuccino - Light Mocha
* Frappuccino - Mocha
* Frappuccino - Vanilla
* DoubleShot Coffee Drink
* DoubleShot Light Coffee Drink
* DoubleShot Energy - Cinnamon Dulce
* DoubleShot Energy - Coffee
* DoubleShot Energy - Mocha
* DoubleShot Energy - Vanilla
* DoubleShot Energy - Vanilla Light

Lipton (Partnership)

* Lipton Brisk Lemon Iced Tea
* Lipton Brisk No Calorie Lemon Iced Tea
* Lipton Brisk Raspberry Iced Tea
* Lipton Brisk Sweet Iced Tea
* Lipton Diet Green Tea with Citrus
* Lipton Diet Green Tea with Mixed Berry
* Lipton Diet Iced Tea with Lemon
* Lipton Diet White Tea with Raspberry
* Lipton Green Tea with Citrus
* Lipton Iced Tea Lemonade
* Lipton Iced Tea with Lemon
* Lipton PureLeaf - Diet Lemon
* Lipton PureLeaf - Extra Sweet
* Lipton PureLeaf - Green Tea with Honey
* Lipton PureLeaf - Lemon
* Lipton PureLeaf - Peach
* Lipton PureLeaf - Raspberry
* Lipton PureLeaf - Sweetened
* Lipton PureLeaf - Unsweetened
* Lipton PureLeaf - White Tea with Tangerine
* Lipton PureLeaf-0Cal Naturally Sweet Raspberry
* Lipton PureLeaf-0Cal Naturally Sweetened Lemon
* Lipton Sparkling - Berry
* Lipton Sparkling - Diet Strawberry Kiwi
* Lipton Sparkling - Strawberry Kiwi
* Lipton Sweet Iced Tea
* Lipton White Tea with Raspberry

Outside North America

* Fiesta Mirinda Mango
* Fiesta Mirinda Pina
* Manzanita Sol
* Kas Mas

Good luck with calorie reduction!

my lord!!!

Manzanita Sol, Miranda and Kas are available in Mexico. We are part of North America.


yes, quite an amazing list. Interesting to see that both Mountain Dew and Sierra Mist are made by the same company!

Really, they shpul;d just call themselves the bottled sugar company or something like that.

Anyway, how do you defeat this? - never go into a convenience store, for starters.
And if you do, just a bottle of water, or a coffee, or a tea
I personally have not bought one thing on that list for more than a decade, and that was an Aquafina.

Well, Fred, I admire your persistence and its result. I have never had enough patience to justify in solid data my scorn for human behavior, but I still like my unit of foolishness -- the POP, defined as amount spent on soft drinks per year by USA. What numbers I have happened across indicate that this unit may amount to about 70 billion dollars/year. So when Gail and others say as they do so often that solar "costs too much", I want to hear them put it in units of POP's., just to show how much solar costs relative to the obviously criminally stupid things we do so casually that REALLY DO cost too much in terms of health, environmental destruction., opportunity.

Now back to the fun of inventing solar widgets that are gonna save the world and make me so rich that I can afford all that POP.

BTW, has anybody noticed that if you take the same area that you presently have covered with PV, and use it to run a low temp organic rankine thing, you get just as much juice for less money?? haha ha? OK, prove it.

There is no need to find a solution.
The solution has been found: Prosperity

The above 2002 UN report indicate that world population would reach its peak in 2075.
The latest 2008 UN report has revised the peak to be 2050. Quite a few analysis reports I have seen on consumption stop their projection at 2050. It will be quite scandalous if the line that is going up starts to go down.

Most likely, if a new report is out, the peak will be closer to 2030 - 2040 ( the estimated peak has been revised several times as the latest report is out and each time, it comes closer).
By the end of this decade, there will be no worries about overpopulation, instead it will be underpopulation. Population decline will naturally bring about the eventual decline of consumption.

By the end of this decade, there will be no worries about overpopulation, instead it will be underpopulation

!?!?by 2020 we will be worrying about underpopulation!?!? Did you get that prediction from Sarah Palin's facebook page? ?- )

Population decline will naturally bring about the eventual decline of consumption.

well that agrees perfectly with the most doomerish predictions--so no controversy there.

by 2020 we will be worrying about underpopulation

It depends on who "we" is. For better or worse, mainstream public policy in places like Japan, Italy and Russia (where the fertility rate is well below replacement) is focusing entirely on raising fertility to reverse the current "baby bust".

I guess some people would call that racist wouldn't they--no shortage of people with a slight shift in immigration policy in any of those countries. Lordy them's fightin' words ain't they ?- )

Anecdotally I left the city for less crowded haunts but always tended towards areas that were growing noticeably after giving the declining 'Great North Woods' more than a passing shot.

Even when I went back east for a few years I moved to a small town that was having having its biggest spurt since the post war years. The feeling in the air of a place that is prospering and growing seems far healthier to me than that in a declining or stagnant town...until it gets too crowded. Of course the fact the wages and work were better in growing areas influenced my perception. We haven't been much at growing economies without growing the population at the same timem thus far.

Wonder if we could manage a undulating growth, decline cycle geographically wandering the planet as we maintained a stable or even declining population? But then maybe people who grew up where stable population was all they ever knew would feel very uncomfortable with growth.

Wind made 45 Giga-watt hours of California's power yesterday.
Renewables made 99GWh.
Nuclear made a bit less.
The demand was 606GWh.

Transportation was more than that again.

Full size image:

These are probably the last decades to make a transition.

The problem is leadership.


I don;t think it's fair to lay the entire problem at the feet of the leadership (presidents).
congress blocked some of their initiatives.
Big business steered things their way
Hundreds of millions of massive PU's and SUV's have been sold over the decades
Annual vehicle miles driven has increased.

The presidents alone were not responsible for that - they happened to be in the White house when it did happen. And, really, the only one who tried to do anything serious about it was quickly put out of the white house.

Really, the current energy predicament has been a highly successful group effort. A group effort could possibly solve it, but that won;t happen until the whole group is forced to act - and by then the time for sensible solutions will probably have passed.

Would I be correct to assume that the tax break for businesses that purchase SUVs is still in place?


A little bit of hope here. I spent an hour with a bunch of kids in a local sunday school ( actually, "first day school" - Quakers) during which I gave my standard spiel about energy, emphasizing how we could in fact run on sun and its immediate derivatives. They got it just fine, and I gave them a bunch of reflective mylar and other stuff they could experiment with.

I also told them to go home and chew out their parents who were leaving them such a mess- esp. the ones, not a few, who had driven them there in obese automobiles.

My point- adults are children, alright, hardly worth working on, but a lot of children are getting to be adults- work on them.

"And wind turbines are already significantly cheaper than conventional new nuclear power plants"

I don't see enough info in the links to evaluate that statement on any kind of blanket, level-playing-field basis. Plus, availability is low enough with wind that just looking at cost per nameplate megawatt doesn't tell a useful story. As a practical matter wind has to be evaluated for now in the context of the existing system, not just in some alternate universe. (Unless someone is rolling in enough money to finance building that alternate universe, which doesn't seem to be the case.)

And further we can grow gardens and foods on every flat roofed building that exist,especially in the cities.In addition greenhouses can be built to extend the growing season in the colder climates.Imagine how prices could be easily cut in half or more by growing local.Another thing that can be done on a massive scale now.

I remember an article on this in the past and the growers used a type of light weight soil so not to overweight the roofs.With a bit of ingenuity good things can happen.

And too,some have brought up experimenting with raising livestock on roof tops.It's certainly worth investigating.

And too,some have brought up experimenting with raising livestock on roof tops.It's certainly worth investigating.

Great idea!



and too,some have brought up experimenting with raising livestock on roof tops.It's certainly worth investigating.

Not quite sure about that, but if you are going to do it, I would suggest some livestock from this book about "micro" livestock;

Wouldn't want to try to get 1000lb of cow off the roof!

Some imagine vertical farming in the cities,keeping your meat local and dirt cheap.I wonder after adding the cost of the tall structure needed to house the livestock if it would be worth it or not.

Vertical Farm:


"imagine" is the key word there. Computer graphics have just made it a lot easier for dreamers to make their dreams look like reality.

What is the point of a multi level constructed thing for livestock. if we no longer have enough open land for them , then we won;t have the money to build such things.

using an existing rooftop for a garden is a good use. using it for livestock is questionable. Rabbits/chickens possibly. people might think a pig is good to eat scraps, and it is, but there is more to keeping them than most people think, and then you have to deal with manure on your rooftop.

Al of which can be done, but the garden is getting complex.

Keep it simple is the thin g for an energy/food constrained world - that image is just a dream, and was not made by anyone who has ever farmed for a living.

Talk about imagining, imagine a cow blowing over the edge on the umpty second floor. One good gust of wind and there would be a very liberal distribution of chickens.

On a more practical side someone is suggesting growing low rise versions of crops using LEDs. Stack them in racks like a warehouse structure and get a huge crop from a small area.


I don;t think that LED's for growing plants is practical at all.

Plants are well designed to collect sunlight already. If you use electricity to power LED's to grow food (where the light to sugar conversion is about 3%) you have the most inefficient conversion loop I can imagine. Why use scarce fossil or renewable electricity resources to grow food at such low efficiency? The only possible exception might be using nighttime surplus wind, but even then i doubt it is worth it.

Much greater gains in plant growth can be had simply by putting CO2 into the greenhouse during normal daylight hours, especially the mornings - you double or even treble biomass growth by doing this And CO2 in air is pretty easy to come by - the exhaust of a biomass powered engine/CHP will do nicely (or a cattle barn, or a compost pile) and give orders of magnitude greater return than LED lighting.

I don't know why people keep coming up with these fantasies - we are not running out of farmland and if what we have got is not enough, then a few rooftops won;t solve the problem. Doesn't mean we can't use the rooftops, but LED lighting to grow food in an energy constrained world?

The cost of setting up any such rack system etc is far greater than just using some more land. if your backyard/rooftop doesn't have any more land and you really want to grow stuff, then maybe, but there will be a negative return on the electricity cost for any crop that is legal to grow.

The idea of these things, IMO, is to make opportunistic use of spare resources, like a rooftop, and waste heat/solar gain from buildings. When you load it up with stuff like electric lighting then you are consuming scarce resources and defeating the purpose.

Well, I did say more practical rather than practical ;) Your summary is about what I thought when I read it, no sense at all. I wonder what acreage of land could be freed if people turned lawns into gardens.


The idea of these things, IMO, is to make opportunistic use of spare resources, like a rooftop, and waste heat/solar gain from buildings

somewhere upthread/s the idea that it might save a bit of energy to grow the food closer to the people was thrown out. No doubt its' a complex interplay--but gardening can be good way to spend time, and many a city dweller might well find they enjoy it--though I'm guessing very few would want to dedicate a full time farming effort. Those elements are all part of the discussion-- some small scale production and a more varied landscape--it would be an interesting change of direction, though one we don't seem to be moving toward as we spend more and more our time interacting with electronic devices.

But the cities hold a lot of people and more than a few might spend some time growing things if it became a bit more of a mainstream activity. No doubt the CO2 capture aspect could help that happen. For some crops racks and CO2 capture might go hand in hand--though I'm with you on the LED idea.

There will need to be a paradigm shift to get in city growing to take--right now an awful lot of us have got pretty used to taking an overwrapped chunk of food out of the freezer and popping it into the microwave and calling it good. Actually touching real unprocessed food, much less food and dirt together...Joe and Jane American don't do much of that these days.

When I was a young man I found myself moving to marginal edge of agriculture where land was cheap--I couldn't bring myself to build anymore on the outskirts of Chicago, where they would hook up two D-9s to big blade and scrape the six to ten feet rich top soil into a pile and haul it off so a crop of subdivisions could be grown.

That said I never got into gardening on much of a scale--I prefer to move the dirt around into new configurations and sow a structure here and there to growing the plants.

Fortunately my wife seems to have a bit a green thumb, rather surprising since she comes from a long line of people who have gained near all their sustenance from the sea for thousands of years. Well they did gather a good many bird eggs and a whole lot of berries to go with caribou hunted on her part of the penninsula so the land was in play, but they did not grow food at least until after the Russians arrived. Life is full of surprises?- )

Grantham's analysis is almost entirely about Peak Oil, and I'd say it's spot on: The US will face reduced growth during a transition away from oil, and many poorer countries will be in deep trouble.

The idea that we face Peak Everything is unrealistic on it's face: most of our other resources, like sun, wind, uranium/thorium, iron, aluminum, silicon, carbon, (etc, etc) are effectively unlimited, and will be substituted for the small minority of non-fossil fuel commodities that truly face limits, like copper. Oil and copper are important, and it will take quite a bit of work to wean ourselves from oil in particular, but it can and will be done.

He talks about the move away from the trend line being too large to be random - well, that kind of technical chart analysis is silly. We know the fundamentals of what happened...China happened. Just because China dramatically raised the price of iron ore, cement, gold and silver doesn't mean that iron ore or cement supplies face any kind of limit.

It's an old fashioned short term boom and bust event, which will go bust when China can no longer sustain 50% of it's economy going into capital investment. They're close now, with a lot of underutilized real estate sitting around waiting for buyers/tenants that aren't coming any time soon. Japan did the same thing.

Yes, he should have mentioned peak helium and peak organic phosphates as those definitely aren't renewable.

There's no reason to think either of those will affect economies any time soon, right?

Helium is an interesting problem, but there's no sign of a shortage within the period in which we can reasonably forecast technological change. (50 years?). Should there be a real shortage, the likely solution for cryogenics would be higher temperature superconductors.

There's a lot of phosphorus to be mined, giving quite a long lead time (100 years) to establish recycling:

Phosphorus limits are greatly exaggerated: Florida provides 25% of world production. For decades, it has been said that the phosphate in Florida could be mined for about another 25 years. Technological advances and market changes, however, have continually lengthened the expected life of phosphate mining, allowing mining of rock that wouldn’t have been mined in previous years.

The Hawthorne Formation, which contains much of the Florida phosphate deposits, covers much of the Atlantic Coastal Plain of the southeastern United States. In the heart of the Central Florida phosphate district, the Bone Valley Formation overlays the Hawthorn Formation. The two are separated by a limestone layer of varying thickness. It is the Bone Valley Formation that has produced the majority of mining activity in central Florida to date. The Hawthorne Formation is being mined in North Florida. It is also the Hawthorne Formation that is being mined in the southern extension of the central Florida phosphate district.

Florida phosphate reserves alone contain about 10 billion tons of soluble phosphate rock. Based on the current mining rate in Florida, this would last more than 300 years.


It appears that the USGS resource is understated, if the footnotes on the 2007 report are accurate:
"Large phosphate resources have been identified on the continental shelves and on seamounts in the Atlantic Ocean and the Pacific Ocean. High phosphate rock prices have renewed interest in exploiting offshore resources of Mexico and Namibia."

Offshore resources would certainly be more expensive, but they'd create a buffer to prevent overshoot - a zone where consumption became more expensive, and pushed us towards recycling.

After all, consumption could go down, with improved farming practices and recycling - roughly half of US ag production goes to livestock - recycling their phosphorus shouldn't be that hard, in the grand scheme of things.

I'd say we have quite a lot of time to set up recycling.

Helium is a big problem as it is non-renewable.

Easily mined organic phosphates such as that from guano on various islands definitely hit a peak. That is the grade of phosphate that had a huge EROEI-like return on investment and is essentially non-renewable in that form. The other mined stuff takes a lot more energy to recover.

Well we could make more helium. How many years away is fusion? Fifty just like it was forty years ago?- ) I'm not sure we'd get the right isostope even if we someday do master the trick.

Helium is a big problem as it is non-renewable.

You didn't reply to my earlier comment.

1) there's no sign of a shortage within the period in which we can reasonably forecast technological change. (50 years?). Per the Wikipedia article on helium: "At rates of use at that time (72 million SCM per year in the U.S.; see pie chart below) this is enough helium for about 58 years of U.S. use, and less than this (perhaps 80% of the time) at world use rates, although factors in saving and processing impact effective reserve numbers. It is estimated that the resource base for yet-unproven helium in natural gas in the U.S. is 31–53 trillion SCM, about 1000 times the proven reserves(50)".

2) The primary high-value use of helium is cryogenics. Should there be a real shortage, the likely resolution would be to eliminate the need for very low temperature cryogenics through the use of higher temperature superconductors, on which research is intense.

Easily mined organic phosphates such as that from guano on various islands definitely hit a peak.

Didn't they hit that peak more than 100 years ago? That doesn't seem relevant to 20th/21st century discussions.

I was agreeing with you originally to focus on resources that are non-renewable. I gave a couple of them that you could use in your arguments. I agree with you that metals are recyclable.

I put the Helium as a inset footnote in my book. I have noticed that scientists are concerned about it, and if we are concerned about conventional NG, we will be concerned about Helium.

I spent time on organic phosphates in my book and used it to show the Gompertz model. Does that answer you?

Yes, I think we're on the same track.

I'm thinking things can be placed on a continuum of "resource difficulty", with things that are renewable for billions of years at one end, and things like oil (that are facing real limits right now) at the other end.

Figuring out where things fit on this continuum is a bit of a trick, but is important. Grantham's presentation suggests that everything is at one end of the continuum, and that's misleading.

Prioritizing and classifying indeed is very important as otherwise people can't distinguish the importance of an issue.

According to Treehugger New York City has 14,000 acres of rooftop available for planting gardens,crops,fish farms,maybe even livestock mini farms etc.They estimated the 14k of acerage was enough to feed 20 million people.I'm not sure if they were talking about feeding 20M seas only or all year.

Imagine what could be done Nationwide or even Worldwide.Also we could turn this into a whole new business with jobs for the unemployed,at least this could be done now.

Whats that factoid,72% of the cost of a potato is from transportation cost getting it to your table.That cost could be brought way down if that potato were grown locally.

I have read some recent research (and I have to apologise because I do not have the link to hand) that suggests that the transportation costs of food have been overstated somewhat and that the largest percentage is in things like packaging and cooking the food once it arrives.

But I think its a great idea to use spaces that are not currently used for productive means. This will not be conventional farming with a sustainable crop rotation type system so there is still the question as to how it is sustainable.

The "jobs for the unemployed" bit kinda solves itself if the system collapses and this is the only way to get food!


There is no way to feed over 1000 people per acre.

I was with him until he got to the CO2 bit.

The problem with referring to the AGW theory as confirmed science is that if that particular theory accidentally gets upset by future data points (say a few more cold winters), then in the public’s eye the rest of the body of knowledge is discredited as well.

If the AGW theory gets discredited, it will likely be quite impossible to convince the public that scientist remain correct about the scarcity thing. They will hear none of it.

And with the concentration of CO2 at only 380 ppm, and in theory only going to rise to 440 ppm by the end of the oil age, it is likely AGW will appear discredited at some point. We are putting a lot of faith in 60 ppm of CO2 being able to prevent a multiyear cold trend from ever forming.

I am not saying AGW is wrong, I don’t know, but if we keep referring to it in the same manner as Jesus and the Saints, it better damn well not be proven wrong or the whole argument will be lost on a lot of other pressing issues.

On the other hand if we managed to sequester CO2 down to under 270 ppm, all the plants will die and soon thereafter so will we, and the resource problem will be solved!