Oil prices and recession

Over the past 50 years, when oil prices moved up sharply, causing inflation, or remained high with annual average price around $100, recession has followed in many OECD countries (see example for UK below the fold). As of 24th May 2011 the annual running average for Brent was $91.33.

The key questions are: 1) Has the world economy adapted to higher energy prices that may enable oil prices to go higher than the 2008 spike? or 2) Is the weakened world economy more vulnerable to higher energy prices?

With USA debt at its legal ceiling, QEII (US quantitative easing) due to expire at the end of June, the Portugal, Ireland, Greece sovereign debt crisis deepening in Europe, consumer goods inflation taking root in the UK and other countries and deep public spending cuts impacting OECD economies, a period of great uncertainty lies ahead.

Figure 1 Daily Brent oil prices in red and the annual running average in blue. On current trajectory, the annual average will reach $100 / bbl this Fall. Is the recent spike the new top of the oil price cycle? Or has the World economy adapted to high energy prices? Daily oil price data from the EIA.

Global events have moved extremely fast during the first half of 2011. It has been hard to keep up. Amidst the turmoil of earthquake, tsunami, and nuclear meltdown in Japan, "The Arab Spring", war with Libya and the assassination of Osama bin Laden, oil prices have also shot up from around $80 to >$120.

The political response to this, in the UK at least, has been mute at best, extraordinarily stupid at worst (see below). Many energy commentators have fresh memories of the financial crash of 2008. It is now clearly understood that growing supplies of cheap energy are required to promote economic growth. When these supplies run scarce and demand grows faster than supply, the economic response is toward higher prices that both promotes supply growth (with significant time lag) but also squashes demand, causing recession. The recessionary pressure are two fold. First, consumers spending more on liquid fuel and domestic energy have less to spend on everything else. Second, high energy prices feed through to inflation, which, in a monetarist world, should be squashed by raising interest rates.

The causes of the 2008 crash are complex, with "the credit crunch" taking centre stage and the role of high energy prices in toppling the world economy overlooked by the political elite. Jeff Rubin, in his talk at ASPO 9, provides a wonderfully laconic overview of the role played by high oil price in the 2008 crash.

The chart below shows the relationship between high oil prices and recession in the UK. Many others have produced versions of this chart which may vary from country to country. In the past 50 years the UK has experienced 4 major recessions; three are linked to oil shocks (in blue), the fourth to stress caused by an attempt at monetary union with Europe (in brown).

Figure 2 GDP growth and annual average oil prices in the UK. The oil shocks of 1973, 1979 and 2008 were all followed by recessions (blue bands). The 2008-2009 recession was particularly deep since it was underpinned by high energy prices and collapse of the banking system. The fourth recession (in brown) was caused by an attempt by the UK to pin the £ Sterling exchange rate to the Deutsch Mark. There is a lesson for Europe in there somewhere! Annual oil prices from BP Statistical Review of World Energy, UK GDP data from Office of National Statistics.

Where are oil prices heading?

It is impossible to forecast the oil price. In a recent report on "Global Commodity Watch" Goldman Sachs (GS) raised their oil price forecast for 12 months to $130 / bbl and their end 2012 forecast to $140 / bbl. They also see oil production growing to 91 mmbpd by end 2012. GS clearly believe that the World economy has adapted to high energy prices and that there is no issue with expanding production capacity.

If history repeats itself, with the annual average for Brent standing at $91.33, on course to hit $100 this Fall, then the second peak oil recession is already at the door.

Political response

The political response in the UK to this potential catastrophe has been woeful. In 2008, the UK passed the Climate Change Act committing the country to reduce CO2 emissions by at least 80% by 2050. This Act now drives all thinking on energy policy. In 2010 we had a general election, resulting in a hung parliament and an unlikely alliance of Conservatives and Liberal Democrats now lead the country, promising to be The Greenest Government ever.

In his recent budget, UK Finance Minister George Osborne cancelled a planned increase on liquid fuel duty and instead raised taxes significantly on North Sea oil production. The budget therefore promotes increased energy consumption whilst penalising indigenous primary energy production, the exact opposite of what the UK requires.

What has led us to such woeful energy policy?

Figure 3 A slide form my recent ASPO9 presentation in Brussels. The chart top left shows UK primary energy production in free fall with a yawning gap opening up between production and consumption. It seems obvious to me that the UK must do everything it can to maximise indigenous primary energy production whilst at the same time reducing consumption. The consequence of not doing so is having a crippling impact upon UK trade balance (lower left) leading to ever greater financial imbalance that together with scarcity of cheap energy lie at the heart of global economic woes.

Figure 4 George Osborne's budget will result in accelerated decline of North Sea oil and gas production with the consequences detailed in the slide. ASPO9 presentation in Brussels


There are no simple solutions to the global cheap energy supply crisis, the growing numbers and expectations of the Earth's population and the specific problems faced by the UK with plummeting indigenous primary energy production. I am not convinced that focussing on CO2 emissions in the year 2050 is the best way to tackle the clear and present risks posed by energy prices that much of the populace cannot afford.

It should be quite clear that the UK government must do all it can to promote indigenous primary energy production and this may mean assisting oil and gas and nuclear companies to "produce" more energy. At the same time we must devise ways of using less energy per capita whilst preferably maintaining a level of GDP to provide certain essential services in health care and education. The government must surely recognise that high energy prices leading to recession is not an ideal way of cutting energy use.

Surely recession is the only way energy use is going to be cut to a significant extent?

Well on a global scale, the worst recession in 80 years barely changed energy emissions.

Emissions were 29.3 Gt of CO2 in 2008 which dropped to 29 Gt in 2009 & then rose to a whopping 30.6 in 2010.

Interesting in the Guardian article that Fatih Birol seems to be quoted as the new guardian of the world's carbon emissions. Isn't the IEA the agency that has told us no need to worry about oil shortages forever & to keep on using the stuff at an ever increasing rate?

Absolutely not. Fatih Birol gave a warning as far back as 1998 that there would develop a large gap between oil supply and what would be demanded under BAU in the decade that we now find ourselves in.

Oil production is a good proxy for CO2 emission so the IEA is in a good position comment.

Did he change his mind by 2004?


"global production of conventional oil will not peak until 2030.


This was Kjell Akellett reponse


My assumption for a good while has been that Fatih knows the PO story but is not alowed to say so forhis employer. So now he takes the opportunity to hit the climate change drum instead in an attempt to make us reduce oil usage. Either way we will - hopefully - prepare for declining oil avilability.

Fatih Birol included a line in a table in the 1998 World Energy Outlook labelled unidentified oil. It showed up as 11mb/day. Colin Campbell spotted it and told David Fleming he thought it was a coded message from Birol quantifying the post peak oil decline rate. Fleming called Birol and asked if this could be true. Birol came to London to meet Fleming and confirmed the suspicion, saying that only half a dozen people in the world had spotted it and please don't tell anyone I said so... Birol has only recently come out with it openly and last year Fleming explained the whole story on video. Fleming died last November but his book, Lean Logic, will be published next month.

Oh yes I remember!

TEQ's is the system which would save the world.

A system where drug addicts could sell their unused TEQ quotas at a very high price to hard working families trying to keep warm.

The TEQ system which gives a quota each to six students living in a house, but only two entitlements to a family with three young children.

This is the man who said taxing fuels and large cars does not work, despite the evidence comparing the UK and countries like the US or Saudi Arabia.

His followers are so limited they do not realize you would have to TEQ food including imported food in order to make the system work. The consequence of not doing so would make imported food very cheap and bankrupt every UK farmer.

Is this the man who said Uranium stocks would start to run out in 2015?

Or are you talking about an entirely different Fleming?

well that's an interesting post

who does deserve the oil?

irrespective of who said what when we are now arguing around a new paradigm of limited availability and how its parceled out....

who gets what?

Very good question.

But giving everyone the same entitlement is so stupid only someone with a degree in economics could come up with it.

Imagine a plumber or gas engineer driving from house to house he will drive many miles a week doing a very vital job. To give him the same petrol TEQ's as a house mother who drives her kids to school and music lessons when she could very well walk is absurd.

Why should an unemployed person with no car get petrol TEQ's? During times of increased scarcity unemployed people could well be better off than someone working.

The plumber would have to buy extra TEQ's from those who do not use their quota, but as petrol gets more scarce the price of TEQ's would go up, as the very rich would be able to bid up the price of the TEQ's being sold.

Therefore the plumber, electrician, gas engineer would find they have a new massive cost in their daily jobs.

These people who come up with ideas like this do not have the ability to walk though the ideas on a practical level. Which is a diplomatic way of saying they are not very bright.

"missing post"

admin a post of mine disappeared... not sure if it was a brain fart by me or a genuine tech issue....


wouldn't this really just reflect the true market value as entitlement bid up is what we have now? except everyone in the middle has no access to any of those monies?

the plumber just charges for the TEQ from the rich guy... or alternatively the true cost of certain services find there true value? Because TEQs will end up concentrated in those activities that can not be done any other way... which is what we are trying to do? .. optimize the the use of FFs for critical tasks

the rich bidding up the price of TEQS to undertake unessential activity must curtail that activity more than money alone its a 2 step process

mr average income will need to weigh up whether he gives the TEQ to the plumber to fix his leaking pipes or sell it to mr rich.... what is the value to him?

moreover since its an ongoing allocation there is the ability for people to learn the true value of the TEQ compared to one off historical coupon schemes (EG Russia) so any short term emotive manipulation or using peoples inferior economic strength against them will not be as catastrophic in the long term?


You make a good point about TEQ's finding market value, but it starts on mindless assumption that everybody should have the same entitlement to the same amount of petrol or diesel or electricity.

What purpose is there to giving the same number of TEQ's to your plumber as to the unemployed alcoholic down the road.


There are millions of people on drink and drugs and TEQ's would in effect hand them a big pay check every week. This money would come from hard working people who need to buy extra TEQ's in order to carry out their daily work.

You would have the mindless situation of the unemployed alcoholic who sells his TEQ's to his local gas engineer, he uses this money to get his boiler serviced. The gas engineer fixes the boiler and is paid with the money he just gave the alcoholic for the TEQ's. So the gas engineer has to work many more hours for the same pay and the alcoholic has his addition supported by the state.

Multiply this a million times over and you have a social and national disaster, only a Green/LIB Dem think tank could come up with national policy to divert billions of pounds from hard working people into Special Brew for the permanently parched.

Increased taxes in the current system could easily pay for a massive increase in funding in public transport. That is all that is needed.

Yes I can see that socially funded drug addiction does seem likely except the real wealth is in TEQs which these guys free up anyway. moreover effectively we already have this situation. We already subsidise these guys..its not like TEQs create something new.... one problem we face as a technological based society is the increasing redundancy of people in general.. a decreasing proportion of them actually do the work at lot of jobs are glorified administration of parceling out the consumption(retail etc)

In a way there is no real difference except the alcoholic now diverts money into alcohol which includes having a more direct knock effect on FF access because both FF and money are embroiled in the same system... the market as a whole is subsumed in "cost"

where as with TEQs the damage the drug addled inflict on society is minimized to activities with low TEQ usage (they have flogged theirs)...

TBH I think we are stuck with subsidizing the "unproductive masses" in society irrespective of what ever solution you choose.

I do not think we are stuck with people like that, we just have to be bothered enough to force a change.
Do one should get any benefits without doing work or training.
Often people start drinking more when they lose a job and have nothing to look forward to.
If they would be forced to do apprenticeships or some sort of full time retraining they would not have the chance and time to stew in their sorrow.

Again the simplest way of reducing petrol and diesel use is to tax bigger vehicles much more and to tax fuel enough. This money is diverted to an efficient, safe and clean public transport system which people would be happy to use. This would reduce the consumption of oil even more.

If the US taxed vehicles and fuel as Europe does it's oil consumption would never have risen above 12 million barrels a day and it would have a public transport system to rival any in the world.

well we are talking politics here now aren't we? basic value if not moral assumptions are being made.

one problem is increased productivity has lead to a decline in meaningful jobs ...such as agriculture which in turn has lead to the ability to support larger populations who do what exactly?

once upon a time the bulk of the population laboured to produce the food, progressively over time this transformed into manufacturing consumer goods then changing again into administering consumption [service industries] and now thru computer technology just consuming the end product!

I know of one HR dept which basically is totally dysfunctional and is universally ignored by the rest of the organisation yet employs nearly a dozen people.

I am not being trivial or petty when I say a sudden removal of that dept would have zero impact..in my mind its a form of welfare almost? there are vast numbers of people sitting around drawing a wage not doing a lot.... basically their consumption is often used as a measure of GDP! Increased population has lead not just problems of resource allocation but also belittled the resource of human effort, because large economies of scale use less people.

back OT the issue of resource allocation via merit becomes problematic because merit is very subjective..and increasingly so. just giving people apprenticeships so they do not become addicts is really just a further form of arbitary welfare..even if it is a functionally idea?

....and here is the big point

lets say we do get 100% employment artificial or otherwise then what? are we saying you deserve a cut of the pie just for pretending to be doing something usefull?

the ff endowment is still the same size

What a depressing and bleak outlook you have of people and their value!!

It is morally obvious that a person who drinks until they are incapable of working and looking after their family is a tragedy and nothing to do with moral assumptions.

Most people work in order to better themselves and have some sort of fulfilling life hopefully in and out of work. The main reason communist countries failed is because everyone was rewarded the same regardless of how hard you wanted to work.
If you went into a shop, the assistants would ignore you if you wanted something, because nobody was sacked.

The high rate of unemployment in the UK has more to do with hundreds of factories going to Poland, Rumania, China, Korea and the like.

Capitalism and the free market can work very well within the framework of good law.
The lever factory and village is one example of what can be achieved.

"It would not do you much good if you send it down your throats in the form of bottles of whisky, bags of sweets, or fat geese at Christmas. On the other hand, if you leave the money with me, I shall use it to provide for you everything that makes life pleasant – nice houses, comfortable homes, and healthy recreation."


The great industrialist realized that if they paid and treated their workers well, the workers would work hard and be able to purchase the goods which were produced.

An ex alcoholic, who now works installing solar hot water systems on roofs, now has self pride can look after his children. Most importantly to most people on this website he cuts down use of FF and greenhouse gases.
Did you get the sarcasm in the last bit?

Was a little confused there, for others the Lever Factory made soap not levers :) The same philosophy is now being used at Google and is quite opposite to the philosophy at the other tech giant Apple/Foxcon.


Equivalent to Figure 2 for US data, official recessions in pink:

The'91 recession was essentially global and unrelated to euro-politics. It does, however, correlate strongly with the first gulf war oil price spike.

It's not at all unusual for locals to assume that "their" recession was due to local policy decisions. For example, in my country, '91 is know as "the recession we had to have", and is widely blamed on Treasurer Keating. Even more bizarrely, the recession of the early 70s is universally blamed on the policies of the Whitlam government.

Two more things the government might try are:

1. Educate an ignorant public. The great majority of the population has no idea what is going on.

2. Stop encouraging population increase by subsidising unmarried women to have children through the benefits system. In Britain a single woman who has a baby goes to the top of the social housing list and gets given a social housing apartment. She also gets sufficient benefits to make work unnecessary. Her usually unemployed boyfriend often moves in too and then there are effectively three dependent people living comfortably at the taxpayers' expense. One result of this policy is that social housing has become unavailable to younger people in low paid work - which social housing was originally intended for - and social problems resulting from dysfunctional child rearing are taking an increasing proportion of the national wealth. Why there should be any financial encouragement anyway in an overpopulated world for anyone to have children totally escapes me. And we can't afford it!

As with all the democracies we have short term governments afraid to take the right decisions for fear of losing votes, and so bad policies multiply. The sense of entitlement here in Britain by people who have contributed nothing to society and have no intention of so doing is truly astonishing. And don't forget, we have good free education and health care - most of it wasted.

Meanwhile the deficit grows like a cancer and taxes on the productive part of the nation increase. But this arrangement is totally unsustainable and will crash - quite soon I suspect - when the industrial wealth generator finally coughs up its last and takes our dependency culture down with it.

If the government would tell it how it is and make appropriate social and economic policies there might be some hope, but they don't, so there isn't.

Education is a good thing.
Just a fact or two needed perhaps?

I have just done a fact-check using google (world bank via google - remarkable interactive graphs btw) for fertility rate (births per woman over reproductive lifetime). UK dropped below the 'replacement rate' of ~2 per woman in late 70s and stayed that way for 30 years with recent modest rise back to 2 in 2008/2009.
Pretty much the same across rest of Europe, though with Germany, Greece and Italy staying very low at 1.4/1.5. Ireland was a bit of an outlier coming much later to the reduction and rising recently to 2.1.

Regarding UK finances - we certainly have a problem or two, both structural and more immediate. The roughly doubling of the financial services industry in the last decade or so as a proportion of the economy must now be seen in the light of the subsidy they needed in the recent period. According to the Bank of England, the subsidy to the banks was up from £11 billion in 2007 to £59 billion in 2008 and £107 billion in 2009. Does not say what 2010 was, but see Table 4 at the end of Haldane's transcript http://www.bankofengland.co.uk/publications/speeches/2010/speech433.pdf

Back to the big question on this forum: how will we and rest of EU cope with higher relative energy prices, which means essentially paying for commodities mostly coming from outside our national boundaries?

Actually I said "encouraging" population increase.

Spending scarce national resources encouraging dependency on the state is not good policy - unless you want a nation of total supplicants incapable of any form of self help of course; which might be the plan! And the population is expected to add ten million within a very few decades. I don't care whether this is expected to be home grown or imported (immigration); either way we have too many people and should attempt a reversal, and better by policy intent rather than waiting for events to do it for us.

My inference is that we should be husbanding scarce national resources and addressing the resource sourcing situation, which is our greatest national problem. It looks like the harvest this year will be disastrous too, so where will the necessary imported food come from, and at what cost?

However, both the rest of the EU and the US have similar problems, so the immediate future looks interesting for everyone.

I would modify some of your suggestions slightly:-

1. Educate an ignorant goverment. They are either wilfully leading us into the dark, or else do not have a clue.

2. Educate the rabid right about the realities of the UK benefit system. Question why anyone who had a choice would attempt to survive on the pittance given. I do have experience of this, fortunately for only a brief period after failure of a business venture. I was lucky enough to have the benefit of a reasonable education and professional qualifications, and was able to climb back again. Many do not have this, mostly thanks again to the failed policies of HMG - I for one do not blame those caught in the trap for working the system to thier best advantage. Good education - highly dependant on which school you are lucky (or rich) enough to go to.

3. Compare the miniscule amount "ripped off" by scroungers to the annual bonus's handed out in the City of London - I know who I would characterise as the parasites.

Rant over, feel better now.

I agree with you totally.

However, we have to encourage self-help and the present culture of entitlement cannot be supported indefinitely: we have to begin somewhere. I see kids and older people every day trapped in a cave of hopelessness and being told that they can find work if they try harder; they can't, not work that results in a decent life. It isn't quite the same for temporary immigrants who are prepared to sleep four to a room in return for no life and repatriate their incomes to eastern countries where the standard of living is cheaper. Interestingly though the Polish people I encounter have a very different work and family ethic to many of us, and this helps them.

One of the myriad problems here is that the parents of these people have zero expectations both for themselves and for their children, and it is here that I step away and ask, why then have children if you care so little about their prospects? That's my rant I'm afraid. And our faux sentimental policies encourage the problem.

The rich here have of course managed a very clever of transfer of a stagnating national wealth from the relatively poor to themselves, with the complicity of our conniving and corrupt political class. I hate them all!

Good news though, maybe:


If the British government really is going to take the reality of oil depletion on board and act we can only wonder at the policies to be embraced.

But there was nothing on this either on Bloomberg or the BBC, as far as I could see this morning.

Love how you emphasize unmarried women having babies, as opposed to unmarried people. Yes, i saw the toek n reference to the male involved.

Looking at this systemically, is it your opinion that not supporting (poor) pregnant single women is somehow going to solve some or all of the problems of society?

Last time I checked it is indeed women who have babies, and for too many single moms there is no male in evidence -- they don't know the partner or choose not to have the guy involved.

No, my opinion is that nothing is likely to solve this particular problem of society anytime soon. Chastity is passe, as is personal responsibility, and accountability. At best, Plan B is now plan A, and abortion is the new plan B. Adoption is a distant plan C. Choosing partners wisely is hardly even a consideration, it seems.

IMHO, the best thing society could do is convince people to have fewer children later, and as couples, regardless of peak anything. It just makes for better lives and better kids.

Oh my, I'm glad I have a habit of read before sip. I was told by one single girl that she was planning to have one or two more babies, however many the council required, so she could get herself a bigger council flat.


Tony Eriksen made many predictions over the years, many of which proved wrong in the short term. What do you and others think about this one for oil prices?

I wonder to what extent oil prices provide one of the most up to date indicators about the true health of economy. The currency crisis in the European periphery is deepening and growth seems to be faltering in UK and USA. UK just reported record borrowing for April of £10 billion against market expectation of £6.5. Whilst excuses have been made, it is surprising that taxation increases and spending cuts have not fed through to the wanted response of reduced borrowing. I'm left wondering if the economy has not gone back into reverse. And there are reports that China and India are slowing in response to increased interest rates.

Tony Eriksen made many predictions over the years, many of which proved wrong in the short term. What do you and others think about this one for oil prices?

This one is from 2 years ago, and is tracking well so far (on price):

AFAICT his prediction uses a simple elasticity model with (constant price) supply derived from a Hubbert model. Hence it can't know about the obvious strong, non-linear feedback to economic acitivity, and will fail to pick the next collapse. Interestingly, the production forcast that drives his price model is actually running way low (again...), so there must be compensating errors (or effects).

I wonder to what extent oil prices provide one of the most up to date indicators about the true health of economy. The currency crisis in the European periphery is deepening and growth seems to be faltering in UK and USA. UK just reported record borrowing for April of £10 billion against market expectation of £6.5.

This from US analyst Brian Pretti is perhaps instructive:

Oil price rise == print more $US

Total wealth does not change when you print more units of exchange. What happens is that the value of those already in existence is dilluted by the new ammount printed. It's probably the only way left for an economy like the US or UK to respond to ongoing escalation in the price of a major input. The debt route (transfer to the future) is exhausted. What's left is to transfer progressively more of your accumulated wealth to the seller via currency debasement. If the seller's wealth is simultaneously degraded (Saudi $US holdings), so much the better.

Central banks are between a rock and a hard place when oil prices rise. If they tighten money to prevent inflation, then they trigger a recession and get blamed bigtime. If they expand the money supply rapidly to counteract the recessionary impact of the oil price increase, they re-ignite inflation and get blamed bigtime.

It is a helluva time to be a central banker.

This is a great time to be a central banker. When Bernanke retires he will get a lucrative gig as a "consultant" at Goldman Sachs or some other wall street establishment. On the other hand this is a lousy time for an average salaried person or someone looking for a job.

Other than bemoan the Climate Change Act, you do not make a case that the Act is bad energy policy.

Certainly a case can be made that focusing on reducing reliance on the dwindling supply of fossil fuels is an excellent energy policy. You make not like how it such a policy is framed, but it nonetheless puts the ball in the right court. Now does not that policy force us to use "less energy per capita"--to use your words?

Your whining sounds like a knee-jerk reaction to climate change, when in fact reducing reliance on fossil fuels--whatever the rationale--is simply good energy policy.

The core of UK and other OECD country's energy policy is to improve energy efficiency with a view to reducing CO2 emissions. Energy efficiency will lead to higher energy prices, greater conversion of FF resources to reserves and increased emissions.

Since when has been doing the "right thing" for the wrong reasons become a good thing? See my ASPO presentation and the discussion here:


I might add, that having spent much thinking about this paradox that is energy efficiency, it matters how policy is implemented. If it is pursued as a "leading policy" it will lead to higher energy prices and greater emissions. It may also be applied as a "lagging response" to enable individuals to maintain living standard using less energy, for example in the context of TEQs (traded energy quotas).

If governments want to reduce emissions then they need to identify those portions of global FF that will never be produced. For example shale gas, and deep coal bed methane. In this context, Osborne's tax policy makes sense since he's deciding to leave more N Sea oil in the ground - smart chap?

"they need to identify those portions of global FF that will never be produced"

That is certainly a necessary but far from sufficient response. We have already overshot the amount of CO2 for a livable planet. We need to be spending all our time and energy on how to get the stuff already in the atmosphere out of it and not do any more spewing of this stuff into the atmosphere.

I'm partly with you, the problem is one of time. Gutting our own oil production and being stuck with world oil prices just to get motorisits off their backs, while doing nothing about the underlying problems is like gathering the wood to fix a hole in the boat, then setting it on fire because the crew think it's getting a bit nippy.

I left the UK some 6 years ago as I believed then it would be in desperate straits once Peakoil struck. I go back frequently; nothing I see when I travel back, or anything I hear (such as Euan's excellent resume) tells me that anything has changed. I was warning friends in the UK back then of what was coming down the track - despite much of what I warned about coming true around them all but 2 have done nothing in response. By 2015 I expect the UK to have hit a brick wall. It is frightening.

There are some very low hanging fruit when it comes to saving oil.


Why is the fine for driving without insurance only £250, no wonder there are 1.4 million drivers with no insurance.

The minimum fine should be a thousand pounds and the car should be crushed.

If it just saves a few of the 160 people killed each year by uninsured drivers it would be great.

1.4 million cars use about 400 million gallons of fuel per year.

I wasn't looking at peak oil in particular but I could see the writing on the wall and left too. Jaz, I have the pain in my neck that makes me agree with you.


As a matter of interested where did you go? The UK is in a really bad state, but I cant think of anywhere that will be insulated from this.

I emigrated from the UK to North Germany. Germany has a relatively healthy economy, a strong manufacturing base, cheap land and housing and no major enemies. There is a strong family ethic here, world class healthcare. The place is beautiful: there are vast forests of timber, lakes full of fish and a huge local agriculture that has not yet been assimilated into UK/US style industrial farming. Every other homestead seems to have solar PV, and any south facing farm/factory roof is plastered with PV panels. Within 5 k of my house are two dozen giant wind turbines. Energy wise I think Germany is on course to be well equipped for powerdown. No-one I speak to here wants nukes which is fine with me, and Merkel is killing off a bunch of them in response to Fukishima. That gives me hope for my grandkids not glowing in the dark. Compare with UK: Sellafield is a disgrace and UK energy policy is basically ostrich like. The German cities are modern and vibrant, the people far more welcoming than the UK. Crime in my area is very low indeed: I feel safe on the street when the young men of the town walk in a group, which is not something I could ever say in UK.

For the cost of a poky flat on a sink estate in the UK I can buy a 3 bed family home here. With GBP 170k (average UK house price) I can buy a 5 bed smallholding with land and outbuildings, yet still be 50 minutes from the Hauptbahnhof of a major city. Did I mention the wonderful rail system? Or the fact that the place is set up for cycling with proper cycle lanes separate to traffic? Did I mention the lack of petty bureaucracy compared to UK? Cost of living is low compared to UK, especially if you have lived in London at all!

The best bit of living here is the lack of criminality. I can best illustrate it in this way: In the UK the farmers block any gap in a fence to stop invasion of their fields by "travellers" who the police seem unable to move on. The travellers often behave like yobs wrecking and vandalizing stuff for fun. Here in Germany they don't even bother with fences.

Compared to UK, Germany is a paradise: Schutzenfests anyone? The attitude of the Germans is so different: if they have a fair they will drink beer and NOT have a fight or a stabbing. The police are well respected and apolitical (not something one says about the UK plod these days), and political correct boll*cks is not really a feature of life here in the same way it is in the UK. The legal system seems somewhat more sane, (UK libel laws/superinjunctions!). The politicians are not quite so blatantly corrupt either: No way can I support the UK parliament after all the recent expenses shenanigans. I am unwilling to work like a slave to pay taxes to a State I no longer trust, who have in recent years needlessly started several wars, committed war crimes, have taken away my free speech and right to a jury trial, who conduct secret trials, condone the torture and extraordinary rendition of innocent men, and who refuse to protect me from looters and robbers. Tony Martin was the start of my disaffection. I realized then the government was pro-criminal and anti-citizen then. The UK doesn't deserve my business, and is heading to the abyss. If immigration is not controlled then the UK will become ever more crowded and racially tense until die-off. Not the sort of place I want my kids to grow up!

The only thing I miss is the west Wales seacoast and the Welsh mountains, but the Baltic and Ostsee is not so far away and a days drive/rail will take me to the Alps.

The only downside is the need to learn decent German, but it really isn't that hard a language, and the rewards are worth it.

I went to New Zealand. Nowhere will be untouched by what is coming down the tracks but NZ has to be the closest there is to a lifeboat.

a) A pretty much homogenous population (2 major groups, European, about 80% and Maori/Polynesian 15%) of 4.5million living on islands the same size as the UK - a variable but generally equable climate. Plenty of water.
b) We obtain 78% of our electricity from renewables - if we need them we have considerable fossil fuel reserves (coal, gas, and likely fairly decent supplies of oil).We have some of the best wind resources in the world and substantial geothermal to come on line.
c) We are huge exporters of food - we have growing zones from cold temperate to near subtropical. Huge biomass resources (vast forests).
d) We control one of the largest exclusive fishing zone in the world and our fisheries are relatively well run.
e) Far enough away from anyone else to not have to worry about economic refugees etc. We maintain relatively strict control of our borders.

Given the above I remain gratified by how under the radar NZ remains........

Didn't realize my drumbeat post re "An economist's view of history and the reason for the USA "Great Prosperity" of 1945-1970" would be topical here.

Link to that drumbeat post is here

An economist's view of history and the reason for the USA "Great Prosperity" of 1945-1970

(Needless to say, no mention of US domestic Peak Oil or World War II):

The Great Prosperity

During three decades from 1947 to 1977, the nation implemented what might be called a basic bargain with American workers. Employers paid them enough to buy what they produced. Mass production and mass consumption proved perfect complements. Almost everyone who wanted a job could find one with good wages, or at least wages that were trending upward.
The Middle-Class Squeeze, 1977-2007

During the Great Prosperity of 1947-1977, the basic bargain had ensured that the pay of American workers coincided with their output. In effect, the vast middle class received an increasing share of the benefits of economic growth. But after that point, the two lines began to diverge: Output per hour — a measure of productivity — continued to rise. But real hourly compensation was left in the dust.

link to source is here

I think the great prosperity lasted from 1947 - 1971. Lots of the things happened around that time. Oil production in the US peaked, Nixon took the US $ off the gold standard, manufacturing jobs started to leave the country, etc.

Yes, real wages in the US flat-lined after 1970.

I, too, link part of that to the US peak oil (more $ flowing outside the US with little to show for it).

A very interesting but often overlooked bit of demographics...the leading edge of the babyboomers AND the women (both boomers and their moms) that were entering the workforce. A bit of "supply and demand?"

First half 19th century -- grab most of the best land in North America
Second half 19th century -- import labor and vigorously exploit natural resources
First half 20th century -- provide arms and supplies to the winning side in two world wars

Result -- only major intact industrial economy, biggest agricultural producer, dominant nuclear military superpower, and richest financial system backed by all the world's gold in Fort Knox

Second half 20th century -- blow it all on consumption

Excellent thumbnail sketch of US history.

I would just add to "consumption" at the end: "and useless military adventures."

I considered that, but concluded that useless military adventures are actually just conspicuous consumption at the nation state level. They are just one of the ornaments and trappings of state power that fall into the consumption category, e.g. monumental architecture in DC, futuristic weapons systems that may not work, the Baghdad embassy, etc.

Euan's posting is a good, concise summary of what is going wrong with UK energy policy.

It has been concerning me for some time that the UK government is more or less ignoring the very serious implications of the peaking of North Sea oil production in 1999 and its subsequent decline, which is getting to be very steep. As Euan noted, the policy of increasing taxes on oil production while simultaneously reducing taxes on fuel consumption is going to have exactly the wrong effect on the country's trade balance. The government's complete fixation on climate change rather than peak oil is like putting the crew to work in a frantic effort to repair all the wobbly deck chairs as the ship slowly sinks.

I would add to the article that now is a good time for the British government to start to modernize and improve the country's rail system. Trains are far more efficient than highway vehicles at moving people and goods, electric trains don't use any petroleum products, and Britain has old train tracks running almost everywhere. What it lacks is modern, fast, and efficient ways of using them.

If all else fails, Brits can take comfort in the fact that there is still lots of room left for them here in the colonies. Both Canada and Australia have vast energy resources, and vast amounts of empty space to fill up with refugees from the motherland.

The UK is in the thrall of the auto business just like all the other countries.

Retail and suburbia track the 'American Way', the 'waste- based' economy.


The UK economy requires growth. Everything -- credit, finance, infrastructure, market function, government -- needs growth to simply function. No growth with current institutions ='s collapse. No cheap fuel ='s no growth.

The underlying economic 'operating system' is dysfunctional. Oil interfaces with the rest of the economy as a loss- leader for the auto and chemical, real estate development and finance industries.

Since auto- related industries provide much employment (and money profits for owners), the countries that embrace them are trapped. A job source that excluded automobiles would certainly not waste nearly as much energy, but what would people do for themselves during the period from the end of the autos and the beginning of the 'replacement' jobs? What sort of jobs would these be?

Nothing like the now- familiar sales, marketing, construction and service jobs.

Agriculture reform, unfashionable non- tech production and reconfiguring built environments to exclude automobiles are the most fringe- of fringe endeavors. People don't know how to think about this stuff. Nobody knows how to get from where we are now -- at the end of the bag -- to where we need to go. Moderns cannot think outside the 'modernity' box.

Where we need to go: productive work by human hands, simple non- consumptive machines, almost zero energy use (and an environment that is designed around zero energy use) and a resort to 'civilizing' memes that aren't energy- wasting toys.

Our bosses are consumed with the 'frustration of growth'. Voluntary change is not going to happen, that's our tragedy.

I don't know enough to say what the right energy policy for Great Britain is. But it should address both energy insecurity and climate change simultaneously.

"Here's more, use less" probably won't work.

Conundrum? Predicament? It's been clear for some time that intentionally reconciling energy policy, environmental policy and economic policy will be prevented by political and social 'realities', especially in the UK and US. What one sector giveth, the others taketh away.

We humans have seen ourselves as being immune to physical law, i.e. energy can neither be created nor destroyed: it can only be transformed from one state to another, though I think this certainly applies to our hyper-complex attempts at gaming the system. The imbalances are becoming grossly unmanagable. The system will, of course, rebalance itself, though it will not be by our design. The requirements to do so will be politically, economically and socially unacceptable (since these human systems have little to do with physical reality) and we, the people, will find ourselves back at the Darwinian school of hard knocks.

One can only conclude, logically, that one must attempt to rebalance one's own affairs, personally and locally, feeble though those attempts may be.

"God bless us, every one ..."

There's really only one thing we absolutely need to be doing - everything possible to lower carbon emissions, to avoid a worst-case scenario.

Without a habitable planet to live on, efficiency, GDP, reserves and everything else we use to measure how "well" we are doing become irrelevant.

I'm not surprised politicians have a hard time figuring out what to do though. Every question has two opposing answers.

Oil Price :-
We have to raise prices
We have to lower prices

Food :-
We need more industrial agriculture
We need less industrial agriculture

Monetary policy :-
We need more intervention
We need less intervention

I could go on, but it just makes my head hurt.

I repeat : the only thing we should be concerned about is lowering carbon emissions. Any policy which enables that should supercede any other considerations.

But please remember that population is the multiplier of everything. Perhaps population control (i.e., humane population reduction) should be concern numero uno, as unpopular and unmentionable that may be.

Perhaps, but some populations multiply things a whole lot faster than others.

The richest seven percent are responsible for half the CO2 emissions.

This is the population, a mere 500 million out of about seven billion, that is most responsible for doing in the planet.

The bottom 500 million are responsible for so little of the CO2 emissions, it's not really worth measuring.

dohboi - But let's not forget that a good many of the top 500 mill despise the hell out of the bottom 500 mill for using up some of "our resources". I don't know how much longer we can continue to share with them. For goodness sake: look how miserable their lives are now. And they're eating up resources we could put to better use. Probably sooner than later we need to put a stop to that.

Some days I truly admire your optimism. Other days I want to thump your head for any expectation that these selfish SOB's will suddenly change stripes and decide to do right by Mother Earth and the unwashed lower 500 mill.

I hardly consider myself an optimist, and I deeply doubt the richest will suddenly walk away from their wealth (though there are some individual historical precedents for that).

But some people seem to need reminding of the actual distribution of wealth and power in the world. There's close to zero chance of doing the right thing if we have the wrong picture. But even with the right picture, the chances of getting it right are probably a small fraction of a percent improved.

But thump away, by all means '-)

I deeply doubt the richest will suddenly walk away from their wealth

There's no doubt about it - they won't. It will have to be taken from them, by the mass of the population, most importantly the workers, organising to deprive them of their ill-gotten gains. These views are currently unfashionable, but they will be shown as entirely relevant in a few years time, when the workers of China rise. In doing so, they will set a floor under wages around the world and smash all the myths of neo-liberalism to smithereens.

Peak oil will not prevent this occurring. It will, however, affect the total material standard of living that will eventuate at the end of the global political turmoil.

We live in a biophysical world. Money is just a marker for our productive capacity and various other tangible 'capitals'. I think oil -and cheap fossil fuels in general- originally acted as a 'pull' for money creation from the early 1900s until around 1975-1980. Since then, money creation has acted as the 'pull' for fossil fuel extraction as we've consistently grown our debt-as-money supply faster than we've grown our economic output. This fundamental paradigm shift between energy and money has been missed by most when looking at/forecasting oil prices. In effect, cheap fuel ~ 2-3 orders of magnitude cheaper than human labor ~ allowed money to be created out of thin air at commercial banks (and lately central banks) with no real consequences as more energy-labor combined with technology to ripple through OECD nations as higher and higher aggregate throughput. Once oil prices started to permanently rise (reducing the labor subsidy to society), combined with other biophysical limits and a much higher population, credit was needed in order to keep the system going. More credit allowed more affordability for oil for democracies and thus 'pulled' oil production forward in time via higher prices.

"money creation has acted as the 'pull' for fossil fuel extraction"

Nicely put.

If I could expand on this a bit, the entire economy is a machine that effectively extracts natural resources and turns them into pollution.

We are now facing diminishing access to the resources while choking on the pollution (which also happens to be choking the rest of life as well).

Some think in this situation the main thing to worry about is being sure we continue to have as much access to resources as we can so we can continue turning them into pollution, since we shouldn't worry too much about 'CO2 emissions in 2050'.

I happen to have a different perspective.

The machine itself must be smashed to bits.

The machine itself must be smashed to bits.

I don't think you really understand the implications of that. Globally interconnected system of parts, components, trade etc, based on functioning system of transactions with viable currencies. I just spent 3 days at a workshop with farm scientists, emergency prep people, supply chain folks, etc. looking at mitigation to our food system in the event of a sudden cessation of trade. It is far more daunting and complex than I originally feared. 'Smash the machine to bits' and we are in Kunstler world made by hand within months without adequate infrastructure prep. Be careful what you wish for.

I don't think you understand the implications of NOT doing that.

We are heading for far worse than Kunstler world.

It may be we are going to go there no matter what at this point.

But I would like to modestly suggest putting the brakes on full force before we go over the cliff, even if some without seat belts go through the windshield. And even if we can't be completely sure that doing so will keep us from going over the edge.

Of course others may have different priorities.

What I wish for is the sliver of a chance that some unknown unknown will be able to come along and save our sorry selves, or at least a good portion of life. But whatever it may be will not have a chance if we continue burning ff.

I would echo back, be careful what you wish for, if it includes more of the same.

(I would recommend Mark Lynas's "Six Degrees" but all but the last chapters are now irrelevant, at least as a warning of what might happen if we don't change our ways--three, probably four degrees are already baked in. That leaves nothing but unimaginable horror (4-5 degrees) or total silence (6).)

When I'm feeling particularly pessimistic I ponder the liklihood that we have already ventured beyond the point of no return from climate change that will ultimately extinguish our species and perhaps all others that we care about or have yet to discover. But in more optimistic moods I rejoice in the realization that there exist primitive microbes deep below the Earth's surface, which may be capable of re-initiating life on the surface once conditions have stabilized in a form that is conducive to supporting life. Who knows...maybe intelligent life will re-evolve at some point in the very distant future...and our remains will become the fossil fuels of that civilization.

"microbes deep below the Earth's surface, which may be capable of re-initiating life on the surface"

Yep, this is the slim hope we are left with.

Not just microbes - there are worms!


Thanks for introducing me to that little cutie. Here's another hardy but cuddly little bug (though not particularly known for dwelling deep underground, as far as I know) that might have a chance for a while in the very harsh environment we are turning our beautiful world into:


A microscopic organism called a tardigrade became the first animal to survive exposure to space when, in 2007, it was launched aboard the European Space Agency’s (ESA) Foton-M3 mission, in an experiment to test their ability to survive in the oxygen-deprived space vacuum, reports BBC News.

The little critter prevailed over the sub-zero temperatures and unrelenting solar winds as well as the lack of oxygen.

Tardigrades are more commonly known by their non-scientific name, the water bear. Their stocky bodies and gait have all the hallmarks of a bear, but that’s where the similarity ends. The tardigrades are less than 1mm long and are found in the world’s oceans, fresh water and even on land.

Genetic studies have shown that tardigrades originally lived in fresh water environments before adapting to living on land, but mainly in moist habitats. Tardigrades earned the title “hardiest animal on Earth” after studies showed the organism was capable of shutting down all of its essential biological processes when conditions are otherwise uninhabitable.

Professor Roberto Guidetti from the University of Modena and Reggio Emilia believe the organism’s ability to suspend life and withstand freezing and dehydration may explain why they can survive in space.

“Tardigrades can be found all over the world from the Arctic to the Antarctic, from high mountains to deserts, in urban areas and backyard gardens,” he told BBC News. “In terrestrial environments, they always require at least a film of water surrounding their bodies to perform activities necessary for life.”

But if conditions change, they are capable of entering in an extreme form of resting known as cryptobiosis. In this state, they are capable of withstanding extremely harsh environments.

On Monday’s final launch of the NASA shuttle Endeavour, the tardigrade once again got a ride into space on a new mission: to help scientists understand more about how this extremely hardy organism can survive for short periods in outer space.


(Thanks to CidYama over at POforums for the links.)

Perhaps we should start an honor roll of tiny critters that may have some chance of squeezing through the tinier and tinier evolutionary bottleneck we have managed to devise from our once lush world.

As Kafka (I think it was) put it, "There is hope, but not for us."


Back to the subject of the UK.

You should know the energy mix for electricity, how would you change it
How much Nuclear?
How much Gas?
How much coal?
How much wind?
How much solar?

and most importantly what would it cost?

Every time I have asked Greenpeace and friends of the earth, they have never been able to answer the second part.

No point complaining if you do not have an alternative which would work.

My family's domestic electricity consumption works out at about 250 watts, averaged 24/7.

This would be about the same as the average output of a 1Kw peak PV system grid tied, averaged over a year.

Of course output would be much less in winter. However, a 2 KW PV system, a 5-10 KW wind turbine, a largish battery pack and a couple of custom built cycle generators to see us over the winter lows, combined with rewiring the lighting and some domestic appliances to run on low voltage, would see us grid free for perhaps £15,000. That is less than the average price of a new car.

Of course that is simply one domestic house. However, we could cut our grid consumption nationally by 50% if we were prepared to invest our remaining national capital to do it. How many new cars does this nation buy every year?

(2 million in 2010).

The total quantity of demand is much more important than the mix.

Lower demand by 50 percent and many possibilities arise. Lower by half again, and you start getting close to supplying the remainder with renewables.

If you want my plan for fueling BAU, I have none. BAU is not in the cards in any scenario I can see, so why bother discussing it.

Even though it is now too late to avoid global temperature increases that equate to the end of life on earth, it is not to late to start living within our means.

Doing otherwise is just kicking our Cheyne Stoking gramma in the teeth.


Perhaps it is possible to lower energy demand by half, but not with the housing stock in the UK and not with the public transport system we have.

Winter in the UK there are 16 hours of darkness, so your solar panels are no help then, and often the UK has winter high pressure systems which causes wind power to fall to a few percent of name plate capacity.

So mix is crucial in ensuring the system does not crash.


Wind in the last half hour provided 1.65% of total power, which is only a sixth of it's nameplate.

You can see by the graph the percentage of Coal, Gas, Nuclear, wind and pumped storage. If we tried to get rid of coal and gas we would be stuffed. Trouble is Green Party members like Caroline Lucas and the like do not quite understand this.

Sorry to say, but people are going to have to have very cold houses in the winter, especially if they haven't been thoroughly sealed and insulated (a massive program to do so would be money well spent.)

And most will have to go back to walking or biking or moving closer to places of work.

IIRC, the UK reduced its domestic use of petrol by 95% during WWII. I don't have figures for electricity. We have to see the current crisis as the existential threat that it is and achieve similar reductions in energy use. We have to give up on the notion that this will come without sacrifice, but it should also be noted that general health improved significantly over the war years, as did reported levels of happiness, iirc.

And the UK is well known in the world for their well insulated houses...

Yet one more thing about that country to worry about.

Just because they have a bunch of cold, drafty, stone houses with rising damp, doesn't mean nothing can be done.

Here is an interesting account of taking a hopelessly inefficient brick house and achieving Passivhaus standards, in the much colder winters of Ontario.

You do have to give up the look of the cute stone cottage though, and the Brits seem to be particularly attached to that.


You don;t need to read the 30 page report, unless you are an anal engineer, just the summary and the 1 and 2 year updates tell the story - an amazing result.

It does show, that in order to retrofit for maximum energy efficiency, you have be prepared to give up many traditional notions of how a house should be insulated/heated.

The Brits don't have to give up the look of a cute stone cottage. They just have to get used to the idea that the look is just a facade, and the internal construction of the walls is radically different from anything they are used to.

Retrofitting their houses is going to be a bit of a struggle though. They have a choice between adding insulation on the outside and losing the quaint stone cottage appearance, or adding insulation on the inside and losing interior space - of which they have precious little to begin with.

Gosh, Nate. It seems that the machine is in the process of smashing itself to bits anyway, albeit in slow motion. Dohboi feels that to prolong the agony will be worse for the planet, and our species (among others) in the long run. It's an interesting, dark, though not invalid point of view. Most here sense the implications on some level, regardless of how it plays out.

BTW: Any links to the subject matter of the workshop you attended? Future post? Sounds fascinating.

Isn't it reasonable to argue that since prices for oil are already quite high, there's not much need for energy taxes to send the signal to conserve petroleum? And isn't it reasonable to want to preserve a little North Sea oil for future generations? It sounds to me that you're motivated by a sense of panic about maintaining the economy in the face of high oil prices, but if they're not high enough to make energy taxes redundant and recessionary, what's the worry?

I know you asked Euan, but I am going to opine on your questions a bit.

No, oil is vastly underpriced. A gallon contains the energy that even 2-300 energy slaves working for a day could not provide, since their energy would not be as compact--no number of slaves can provide the energy necessary for flying a plane. What 'reasonable' price would one put on having 300+ supermen as slaves?

And it does not regenerate, so every gallon we burn puts us closer to the day that there will be no more left. What would be a reasonable price for the last gallon of oil on earth?

And of course every gallon we burn makes it all that much more impossible for life on the planet to continue--what price, exactly, is it reasonable to put on life on the planet?

So whether it is enormously higher energy taxes (and yes, they should be at the pump as well as at the well head), or rationing, or both leading quickly to moratorium or total cessation of extraction, these are by far the most reasonable things we can be thinking about. Leaving the taxes unchanged or lowering them is the most radical and extreme thing we could consider.

I have cut my domestic electricity demand to 4.5 KWh/day, or an average consumption of about 0.2Kwh continuous (family of four). We pay about 13p/KWh

I have bought one of the most fuel efficient cars on the UK market, returning about 80mpg (imperial) at 60mph.

That equates to a continuous consumption of about 27 Kh. A factor of 100 larger. We pay about 13p/KWh for fuel.

That is about $9 /US gallon. We drive about 10,000 miles a year at an average of 65mpg. That works out at 0.8Kh,

Oil is vastly underpriced.

1) What car are you driving?
2) Why are no high mpg cars sold in the US? I want one.

Skoda Fabia Greenline Estate

1.2 litre 3 cylinder Diesel VW engine , 5 seater. manual gearshift . Bigger than the BMW Mini, but not much.

Fast it isn't. You need to drive very gently in light traffic to get the high milage. Drafting behind a truck at 55mph it gets over 90mpg (imperial). About 78 mpg US? Better than a Prius.

Does not meet US emissions or safty regulations, I expect. Probably not enough airbags or impact resistance. Keeps the weight down to rational levels.

Excellent. How do you get hot water, heat, and cooking?

Solar hot water,

natural gas,

wood burning stove. Some cooking by electricity.

We use as much energy heating the house with natural gas as we use for electricity and driving combined. We need
better insulation.

Good points Dan. That's the situation at the moment with respect to oil prices. But when they fall again as I think they surely will, this will promote demand. The government desperately wants demand since this connects to economic growth that they are understandably obsessed with - without it UK will soon be insolvent, unable to service burgeoning debt with falling tax receipts.

Regarding the preservation of North Sea oil for future generations - if that was Osborne's intent he should say so, but it won't work now. All he's done is hasten decommissioning of some infrastructure leaving some oil behind forever - the Greens will be ecstatic. I think Osborne's intent didn't look much beyond a simple tax raid to reduce his borrowing requirement giving little thought to consequences to energy security.

"But when they fall again as I think they surely will, this will promote demand."

OK, now I'm confused.

Why is that prices will fall? Isn't it something called "demand destruction"?

So how does demand destruction promote demand?

Or are those destroyed only those living outside the UK, and we are not talking about them?

Wow, I haven't commented for a while now. I love reading this site for the energy related information that is extremely valuable. If only it wasn't for all the Climate Change (or is it Climate Disruption now?) and Carbon Dioxide is 'bad' discussions. Is there a Peak Oil blog that isn't obsessed with climate change I can switch to ;-)

I still find it amusing that my kids in school are taught that CO2 is essential for plants to grow and at the same time that it is a toxic pollutant that will kill everything and make the planet uninhabitable. When I bring this up to them, it's almost as if they don't realize at first that they are talking about the same substance (CO2). I just tell them to think about it and figure it out for themselves...

I don't know what site you can switch to but I also think it is clear you have not really carefully read the comments here on AGW. I assume your story about co2 and your children was supposed to make a point but I am not sure exactly what point you are trying to make. Is your point that since co2 is good for plants (in moderation by the way), then it follows it is good for the planet in higher and higher doses? If that is your point, you have obviously seen some very effective ads sponsored by the Koch brothers. You know, water is also essential for life but you can have too much and even drown in it. Runners have died in competitions from drinking too much water to keep up their hydration.

How about the site www.friendsofscience.org>

Am I to understand that the hard data on it is incorrect?

Yes, pretty much. It's obviously a load of rubbish, I'm not sure what 'hard data' you're referring too. Also, what qualifies you to have an opinion on this? I bet you don't have such strong opinions on particle physics, or cancer research, or aerospace engineering, or coral reef formation, or a million other things you know nothing about, so what exactly qualifies you as an individual to stick your arm in on the topic of climate change?

Yeah, just like oxygen. It's essential for us to live, so we should be producing oxygen factories or creating sealed farms that have 100% oxygen atmospheres so the animals grow faster, that'd work wouldn't it.


Going to put myself out there.

I recognize your policy prescription was given in a neutral manner simply to indicate what might be in the national interest of Britain. Nevertheless, supporting even indigenous fossil fuel production has that insane right-wing conservative feel that ignores reality and simply prescribes the same remedy over and over and over - no matter how destructive.

The fossil fuel industry has already received perhaps the biggest subsidy in the history of the world with the recent run-up in oil prices (last 7 years). The trivial incentives that the bleeding middle class could put on the table, cannot possibly compare to the recent market created incentive for increased fossil fuel production. Can we please discuss the point at which decreasing marginal gain becomes dominant?

Also, what part of capital already being cheap, do supply-siders not get? Look at what cheap capital got us in the last growth period – a 20 year supply of houses that are too large for the market, even at record low interest rates. The problem is a lack of investment opportunities with adequate return (in the West).

In the US, income growth for the middle class has stopped because the tax and political structures have been so warped that all new income goes to the wealthy. The injustice of warping the economic system (yet again) to benefit the already wealthy at the expense of everyone else, by itself, should be sufficient to preclude consideration of such an option.

Further, as the US consumer has run out of borrowing ability, where does anyone think growth will come from, given internal consumption can no longer be driven by the middle class? A major problem for the west is demand, unless of course we adopt a policy of export driven growth (for which our economies are unsuited).

Then, of course, there is global warming to consider.

My prescription for the US:

1) Drive energy conservation with a carbon tax to be used to reduce the payroll tax
2) Strong incentives to produce and use green energy
3) Increased taxes on the wealthy (Obama plan to role back the Bush tax cut)
4) Stop starting and paying for wars (50% Defense Dept cut)

Then make Social Security sustainable and deal with healthcare. (not the topic here, but it is the elephant in the US room)

I do not favor putative penalties against fossil fuel producers – it is the junkies with a problem. Decreasing oil imports has many advantages. Combined with strong incentives for green energy and conservation, continued US fossil fuel production can allow transition to a carbon emissions free world that persistent recession will not.

1) Drive energy conservation with a carbon tax to be used to reduce the payroll tax

I'm strongly in favor of US introducing much higher gasoline taxes that would reduce trade imbalance, promote energy efficiency in US automobile manufacturers, and cut federal budget deficit. Not sure why you'd want to wrap that up as a C tax? And not sure you can afford to cut payroll tax with yawning deficits - though I'd agree that wages should rise.

2) Strong incentives to produce and use green energy

Depends what you call Green. I would mandate alternative energy producers to produce energy to a specific quality standard with regard to ERoEI, external environmental impacts and match to demand. Similar criteria could be applied to FF producers. This requires a much more sophisticated understanding of how energy interacts with society and global ecosystems than exists at present.

3) Increased taxes on the wealthy (Obama plan to role back the Bush tax cut)

I think the real problem here are individuals who contribute zero to society earning far too much - BANKERS and TRADERS etc. I've no problem with individuals who have earned it being wealthy. It is systemic theft that is core problem IMO.

4) Stop starting and paying for wars (50% Defense Dept cut)

Agreed. The UK is going down this route - and being criticised by USA for doing so.

This site endlessly flogs the meaningly EROEI canard.

The UK no longer exports energy(fergetaboutit), how are you going to make up for that? That's the problem. Secure your fuel sources.

You don't have many choices so what fuels you can import.

Then there's global warming. If GW goes on Britain will get smaller as we get a 3 foot rise by 2100AD.


If GW goes on Britain will get smaller as we get a 3 foot rise by 2100AD.

It's nothing new for the Brits. Parts of England have been sinking at nearly 1 foot per century for millenia. The sea level in places is nearly 20 feet higher than when the Romans were there. Large tracts of coastal land have vanished from Britain over the last two thousand years.

Sorry but those numbers aren't quite right (by an order of magnitude). The land area of Britain is actually larger than it was in Roman times. Estuary silting, fenland drainage, reclamation from the sea. I should know - I live at about sea level in Lincolnshire and the old sea cliffs are about 10 miles inland from my house!

Better move to the top of those cliffs :)


The country is also tilting, up in Scotland and down in the South East IIRC. The Earths crust (in the North Sea) is still in rebound from the loss of ice from the last ice age. I'm told it's the cause of most of our earthquakes.

Add in some erosion and deposition and we've got a contently changing coastline.

Yes, it's true that Scotland is rising while England is sinking. It's ongoing isostatic rebound from the last glacial episode, when Scotland was covered by glaciers and England wasn't.

If you go back far enough, there was a time when people could walk from France to England. I'm sure that quite a number of people did it back then.

This is true in sweden too. The north is raising about a meter/century. Or half that, I'm not sure. But the very south tip of Sweden (Skåne) is actually sinking slowly. Like 0.1 mm/year. The stuff underground flows north. I live almost excatly on the spot where the two cancels out so we are not moving anywhere. Sometimes we have earth quakes (small ones that are more fun than devostating). They all happen in Skåne, and always when I am away from the province or asleep. It is a conspiracy of geology.

This statement is somewhat erroneous and simplifies a much more complex history. sea level height trend is up since the Romans [and before] but land area has increased in many places, mainly due to land management and silting. Numerous Roman and medieval ports are now substantially inland, Sturry and Rye in Kent. Richbourgh and Reculver Roman shore forts highlight the complex and changing shorelines which occlude generalised statements about sea level rises. While Reculver has lost land to the sea to the north to the east land has been gained and the isle of Thanet is no longer a true Island.

Sea level during the roman period dropped but this was a temp blip in a much longer trend. this long term trend has many drivers... thermal expansion, isostatic lift etc.

sea level in 50AD in London was about 1.25m OD by 400AD it was -0.25m OD so land area was gained in this period.

In conclusion, yes large amounts of land have been lost to the sea but large areas have also been reclaimed by natural processes or otherwise.

Been busy, but felt I owed you a response.

As for the carbon tax (not just gas), why not. This is a win/win that drives green energy growth and addresses global warming.

If worried about the green energy mix, mandate a portfolio standard. While recognizing the potential problems, I am quite comfortable with government subsidizing green energy and an expanded energy transmission grid. No organization including business (with an emphasis on the finance industry) picks only winners and mass transit, wind and solar are so obvious.

The point of increased taxes on the wealthy is to fix the current economic system so the middle class shares in the income growth of the US again. Otherwise, why would business invest, productive capacity remains in excess of consumptive needs? Oh yeah, exports – not a real option given US cost structure.

As to the military, what can we do? The country is insane – where are the risks that justify spending more than the rest of the world combined? Even more importantly, we cannot afford it.

Only put my plan in because I felt integrity required it. The real issue is how to maintain sufficient growth in new productive capacity to allow transition. The alternatives are brutal.

I've no problem with individuals who have earned it being wealthy. It is systemic theft that is core problem IMO.

Nobody "deserves" to be wealthy. There is not a rich person on the planet who got rich by doing anything solely unto themselves. An inventor gets rich only because there are people to build what they invent, people to make the roads that get people to the store to buy it, people that babysit kids so someone can go shopping, e.g., ad infinitum.

Time value of labor/money. What a concept.

Depends what you call Green. I would mandate alternative energy producers to produce energy to a specific quality standard with regard to ERoEI, external environmental impacts and match to demand. Similar criteria could be applied to FF producers.

Sure, except by tying it to EROEI, you give FFs the advantage, then we all die off. We must reduce use to equal what the planet can absorb, which is independent of the type of FF used, or we must find ways to absorb what we release. Even in doing both of those, our chances are slim, so ANY use of FFs has to be looked at with a very, very wary eye.

This requires a much more sophisticated understanding of how energy interacts with society and global ecosystems than exists at present.

Article: http://www.physorg.com/news178178343.html

Paper: http://www.earth-syst-dynam-discuss.net/2/315/2011/esdd-2-315-2011.html

Mind you, I think he is correct in his correlation of energy and economic growth, but is wrong on solving the problem. he includes virtually none of the solutions we have at our finger tips. Hansen's numbers on this match reality much better. Still, Garrett's work illustrates we have no time for playing games with this topic.

I think we need a more accurate analysis than, "Focusing on CO2 in 2050 is wrong." It is exactly what we should be doing. PO will not stop GW.

When I look around the world at all the talk that's going on, I think good. But the talk has gone on for decades and I see no progress an and no action taking place, I think bad. Maybe we are all so lost and so off course that something will have to happen.

OsiXs (More Power and Technology to the People!)

"Fight the cause"? Over population? Good. How?

Please remember local solution just means the local group die out and the rest of the world fills in. The trilateral countries are already doing an excellent job of self extinction.

As I have said before many times, the UK solution is IGCC-CCS based on imported coal from the USA, Australia and South Africa.
Inject the CO2 into the North Sea saline aquifers and offshore CO2 EOR as they already do at Sleipner. I am certain this is the direction Germany is heading now that they have dropped nukes.
Coal has the energy density of LNG and is the cheapest fuel.
IGCC which gasifies coal to syngas can make hydrogen, methanol or synthetic natural gas on demand as well as electricity
The other wedge is massive wind.

The problem with Britain is austerity.
The world needs money so all the printing presses in the world should be running 24/7 not austerity which is welfare for bond holders. We are bailing out bond investors instead of forcing them to renegotiate their terms.
All investors know they may take a bath, their bonds are'nt guaranteed by God but currency is; Shared sacrifice for the bezillionaires.

Economics kindergarten lesson #1, if the economy is in a recession job#1 is to keep it afloat.

How has the population of the UK changed over the last 20 years? 10 years? Is it stable or is it a contributing factor? Positive or negative factor?

From the CIA Factbook it looks like a projected population increase of 8% over the next 14 year (2025). So an additional 5 million people. Is the UK peaked out on farm land? Will food increases come from imports or more local farms? More housing stock will be needed and energy to make the materials for the houses/apartments.

My earlier comment (see near the top) on fertility rate showed that average UK births per reproductive lifetime have been below the replacement rate for 30 years with a recent return to 2.0 or roughly the replacement rate. (google UK fertility rate and find the world bank interactive chart). A similar phenomenon has happened across Europe. You will be aware that we have free movement across the EU with rights for location and employment. Recently we see a large emigration each year and an even larger immigration, below 0.4M out, above 0.5M in, out of a total of ~61M. Extrapolation of future movement rates has to be very uncertain in the context of possible economic upheaval.

UK has somewhat more than 6M hectares of possible cultivated cropland. The 'peak' of ploughing (plowing) was in WWII at >7M hectares, but some proved unsuitable. We plough a good bit less than 6M now for economic reasons. There is more grass in wetter and less productive areas. Roughly 10 persons per hectare or 4 per acre for primary grain/legume/potato growing. UK has not fed itself since 1850 and 70% of food as calories was imported in 1939. Cereal yields have about doubled in the last 50 years and given present inputs we might just be able to feed ourselves for an extended emergency period on a very restricted diet, but would rely on EU to cover bad years. Too many hypothetical factors to make this calculation meaningful, I guess. We will stay stable or decline with the rest of Europe, whatever, in my opinion.

EDIT - addition

The utilised agricultural area (UAA) is almost 8.9 million hectares in 2010 with the total cropped area of 3.9 million hectares accounting for 44% of this land. Permanent grassland makes up another 43% of UAA and like the cropped area, permanent grassland remained stable between 2009 and 2010.

The utilised agricultural area (UAA) is almost 8.9 million hectares in 2010 with the total cropped area of 3.9 million hectares accounting for 44% of this land.

By contrast, out here in the colonies, Canada has 68 million hectares of area in farms, of which 36 million hectares is in crops. Australia has 473 million hectares of agricultural land, but 430 million hectares of that is used for livestock grazing in arid and semi-arid regions (120 million sheep and 24 million beef cattle).

In general there's lots of land out here to feed the mother country, just as there has always been. Why else do you think Britain colonized them? Britain has never had enough land.

At this point in time, the population of the UK (62 million) still exceeds that of Canada (34 million), and Australia (23 million), total 57 million. However, at current rates, Canada's population should exceed that of Britain later this century, and Australia early in the next - unless things totally fall apart in Britain, in which case it could be much sooner.

The idea that Australia can support 68 million people in the 22nd century is quite improbable. As it is, Australia imports 80% of its oil. Nearly everyone lives near one of the major cities - as the rest of the country is not liveable - certainly not without plentiful petrol. There are essentially no navigable rivers and the railways don't make sense with the distances and passenger numbers involved.

If you don't believe me, come and see for yourself.

Oh, I think Australia can quite easily support 68 million people. They just have to get used to the idea that they will not all be able to drive everywhere. Once global oil supplies start declining, they'll have no choice but to take the train. A few major improvements to their rail systems will do the trick.

I haven't been to Australia, but it is on my list of places to go. It's the lack of big mountains that has kept me away. I'm working my way down the list of the worlds major mountain ranges, and the mountains in Australia just aren't that big. Australia and Antarctica are the two continents I haven't been to yet.

The last couple of decades UK population has been rising, due to net immigration.

The surge in the last decade has largely been eastern European migrants from the expanded EU. Especially Polish.

They are generally young, hard working, and prepared to take low paid physical work and poor living standards, that the pampered UK population shy away from. They add considerably to GDP, but are unpopular among the UK underclass, as they are seen as driving down wages and taking jobs. Increasingly, they are taking many traditional skilled jobs as well.

When times get really tough here, many are likely to go home of their own accord.

The UK has been short of decent housing since - forever. Certainly never recovered since WWII. It is a perpetual national scandal.

The rabid press constantly complain about 3rd world 'asylum seekers' as being a major problem, however, the numbers that get in legally are quite low, and the number of illegals is very hard to track.

We have a rapidly ageing demographic, but the younger generation is so fat, lazy and full of sugar that we are likely to see life expectancy start dropping again in a decade or so. I expect UK population to be lower, a generation from now, if we can keep the starving third world out.

From my head i get that UK produces 63% of its own food. Not the place to be if world food export market colapses.

I'd suggest, Euan, that there are a few factors at play here:

  • Via the simulated annealing argument I made earlier, the global economy should be slightly better positioned to weather high prices than it was in 2007/08. Inefficient industries should either of improved, closed down, or moved to cheaper parts of the world. Say $5 improvement.
  • At the same time, global companies are not really recovered from 2007, with the financial recovery being less to do with real industry and more to do with banking and finance. Therefore they are less well positioned to deal with problems.
  • The dollar index is in a similar position to where it was last time round, so exchange rates are unlikely to share out the pain significantly differently.
  • You can clearly see the $80 support level for oil - echoing the price of production. No clue as to what level pain starts getting felt by industries, but it won't help.
  • Personally I think the strain placed on the global economy by high prices is more a function of area under the curve, not curve slope. We've been higher for longer, which suggests an earlier collapse.
  • At the same time, the recovery isn't a rapid as the run up before, therefore more time to adjust.
  • Banks have had time and funding to shore up their position, therefore although the property situation is still dire, there is no guarantee that it will be it that breaks the camel's back this time. Or that the contagion will spread as fast.

Overall, I'd say this year for the beginning of the collapse, with the nasty parts happening next year - unsupported by bailouts this time. The depths will be deeper, several countries will go to the wall, countries will default, and any future recovery will hit its head firmly on a declining oil supply and changed global economy.

eg this is the last collapse of the pre-peak world.

Why no bailouts? That is what the pols have been hired to do.

You make a very compelling argument. Personally, if QEII isn't replaced with QEIII(despite Bernanke's statements), the U.S. will surely have huge problems. What we have now in America is an artificial 'recovery' financed by huge debt, which can only work if you have growth. But you don't. Growth is anemic(1.8 % and could even be lower next quarter, for Q2, and then we would have a recession if using the textbook version of two quarters with falling GDP growth)

But I suspect there's a good chance that QEIII will in fact come into play, although it might be smaller and come under a different name(and shape), but it's main effect would be the same.

Even so, with the power shortages in China and Japan, as well as the seasonal highs in domestic use in Saudi Arabia, it's hard to see an increase in oil production. OPEC probably have a million or two barrels in spare capacity(and that's it) and it will likely be used this year unless we have a crash first or perhaps they won't simply use it(or don't have it).

When the inevitable happens, this year or next, it's an interesting question if the world can recover at all. My guess is like yours: no. Even if you get depressed demand, the low point we're at is now higher(especially in China, India, Brazil et al), but you also have depletion to work with. According to the IEA, we have a 10 mb/d shortfall between 2010 and 2015. A depression will lower investment, and even if investment is max, it'll be hard to keep up supply even at current levels in 2015, especially with Saudi Arabia needing over $95 dollars per barrel to finance their bribing of their population. Can Iran's budget be doable with $50-60 dollar per barrel? Probably not, nor can it investment. And the world after the second crash just won't be able to handle triple digit oil prices.

And as they ask OPEC to raise the quotas - a third time in 7 years - OPEC will yet again fail. And this time I doubt most people will be fooled, at least among the intelligent, independent population. We might as well have mass panic as the thought settles, or we might not. Either way, I think you're right. We're approaching the beginning of the end game now. The plateau, even if it continues, is unsustainable. And that's a big if, it can even be sustained.

The major question for me, now, is to estimate how severe the downfall will be and how 'civilised' the transition will become in my part of the world. I am guessing that it will be pretty brutal but hardly 'end of the world as we know it, and now we're all cannibals or worse' á la Orlov.

Time to immigrate to Canada, Norway or Australia now, methinks.

My “Thelma & Louise” Metaphor:

“Thelma and Louise” is an American movie that ends with the two main characters committing suicide by driving off the edge of a cliff. I’ve often thought that this cinematic moment is an appropriate symbol for the actions of many developed OECD countries that are in effect borrowing money to maintain or increase current consumption. The central problem with this approach is that as my frequent co-author, Samuel Foucher, and I have repeatedly discussed, the supply of global net oil exports has been flat to declining since 2005, with “Chindia” taking an increasing share of what is (net) exported globally. Chindia’s combined net oil imports, as a percentage of global net exports, rose from 11% in 2005 to 17% in 2009.

At precisely the point in time that developed countries should be taking steps to discourage consumption, many OECD countries, especially the US, are doing the exact opposite, by effectively encouraging consumption. Therefore, the actions by many OECD countries aimed at encouraging consumption in the face of declining available global net oil exports can be seen as the OECD “Thelma & Louise” Race to the Edge of the Cliff. I suppose that the “winner” could be viewed as the first country that can no longer borrow enough money, at affordable rates, to maintain their current lifestyle. So, based on this metric, Greece would appear to be currently in the lead, with many other countries not far behind them.

My word Leiten,

QE is pretty much what the US has had since Reagan, with a few years of governmental sanity during the Clinton administration. I say governmental because private debt expansion did not let up.

As you correctly note, the US government is the borrower of last resort, given that middle class consumers have been KOed and industry is sitting on a pile of cash with few profitable investment opportunities.

This is the flip side of supply side economics and large governmental deficits during years of economic growth. The exact economic environment for which Keynes developed his theories.

What is amazing to me, is the absence of discussion (that I have noticed) concerning the incredible contraction of money supply that the recent financial and economic collapses has caused. I understand this is hard to estimate and depends on how one views various multipliers, nevertheless, beyond encroaching resource depletion these multipliers are the issue.

Beyond that, my prescription for the US economy is posted above.

"What we have now in America is an artificial 'recovery' financed by huge debt, which can only work if you have growth. "

"The Federal government borrowed and spent $6.1 trillion over the past four years to generate a cumulative $700 billion increase in the nation's GDP. That means we've borrowed and spent $8.70 for every $1 of nominal "growth" in GDP."


Diminishing returns is here.

Thats one way of looking at it. Another is we did not have a depression, 20-30% unemployment and 10-20 million more ruined lives. Of course we all know that would not have happened, because the money was wasted and made no difference. Thusly we round the circular logic.

In UK at least, impact of higher taxes, reduced public spending, high energy prices and threat of rising interest rates is a lethal brew. I suspect we are already back in recession and with borrowing spiraling out of control, are on collision course with insolvency. When US steroids get switched off end June the bubble will begin to deflate.

With Obama facing re-election next year I'd guess that after a few months QEIII may be rolled out with unpredictable consequences.

Increasingly, I think recent spike is top of energy market cycle - closely aligned with the Glencore IPO - they got their money out just in time.

Dear Euan,

I appreciate very much your insigths, and particularly this piece. But for me is really disgusting to see how this "PIGS" nomenklature has become, popular, taking in account that it is unfair and despreciative. You may think it is just a joke, but it is starting to be more serious than that. I believe that in Europe prejudices as well as nationalistic prejudices are bacoming the norm, and that should be allowes. A fresh example is the unfair blaming that was placed on spanish cucumbers about the E.coli disease originated in Hamburg. I believe that popular prejudices in "core" (another stupid term) countries facilitate such unfair behavior. This is in turn generating outrage in Spain against Germany (and the germans by extension).

At least for me it is sad to see this and I believe that in the current situation all these verbal expressions that help to disseminate prejudices and populism should be avoided.

I would like that you, Euan, avoid in the future the use of "PIGS" or "PIIGS" as a descriptor for Portugal, Ireland, Greece and Spain (and Italy).

"The european countries formally known as stable?"

A PC fixation on what simple catchy nomenclature gets used for those country with a big debt problem is missing the point massively. They are in trouble and could collectively bring down the euro. Less focus on feeling hard done by and more on fixing the systemic problems would probably be a good move. Diatribes against 'PIIGS' is best left to the tabloid press and their desire to avoid addressing the problem.

Hi Marai, I agree that PIGS is a derogatory and unfortunate acronym. Quick scan through my comments here and I couldn't see that I had used it - sorry for any offence if I did. But unfortunately its an acronym that is here to stay.

Regarding your wider point I think there are some harsh realities that those Mediterranean lands + Ireland need to face up to. I think you are as well facing up to the fact that there is an old core to EU and that monetary union is now causing some great friction. I've been told the only reason that Germany keeps bailing out Greece is because Greece owes German banks a great deal and a default is still not in Germany's best interests. On the one hand I think the great European experiment has been a fantastic thing - the integration of former dictatorships in Iberia for example, but it is unfortunate how, along with The British, you got swept along by a property bubble, believing you had become wealthy whilst in fact this was not so to the extent many believed.

Blaming Spain on the E.coli outbreak has been very unfortunate. I dare say "we" will be looking for many more scape goats in the months and years ahead.

If you have time you should try and watch Jeff Rubin's talk from ASPO9 - he gave a wonderful example of how Greece and Germany would have coped very differently without monetary union.

Best, Euan

Worries about Europe are very much overblown IMO.

Germany has experience bailing out East Germany. Germany also has been handling their current job situation well.
So forget about the Porcine Threat, these countries are tiny.

The problem is leadership. Europe and the US need to join together to fight this Deflation. The Plutocrats and their Media lapdogs are doing their best to create a crisis mainly by opposing reasonable stimulation of the economy and distracting the governments from handling the situation.

Forget about the Brics(the overblown Phantom Menace).

The real threat to Greece (really the entire Balkan Peninsula), Italy, Spain and Portugal (and Turkey--at least) is that they are about to become part of the Sahara desert.

There will be a greater degree of permanent drying out (not just temporary drought) around the Mediterranean than in any other area of the world:


(A note on the Palmer Drought Severity scale used here--just a -3 in the American plains of the '30s--with occasional dips to -6--marked the difference between a land that supported agriculture and ranching, and the Dust Bowl. Note that the projected range for the north Mediterranean goes from -6 to -20.)

It will start with longer and longer--and deadlier and deadlier--heat waves and droughts. But eventually (but probably before the dates posted here, since crucial feedbacks like tundra and sea bed methane, have been left out of most models), the major peninsulas of the north Mediterranean, the birth place of Western and much of world culture, will be barren desert.

I would like to be more optimistic about this, but the IEA report that we just posted the highest level of CO2 emissions globally in history does not leave much room for optimism any more. It is time to stare coldly at the hellish very near future we have created for ourselves.

So forget about the Porcine Threat, these countries are tiny.

What do you mean by tiny? the GDP of Spain equals the one of Russia, the GDP of Italy equals the one of Brazil.

Italy+Spain have a higher GDP than Germany!
Spanish companies have bought 6 British airports (including Heathrow and Stansted), bought a few British banks, and have some of the largest banks in the world... so maybe not so tiny!

Greece used a lot of the money borrowed to buy weapons from (surprise, surprise!) Germany. And Germany and France are only happy to lend more money ... if only ... they buy more weapons. Turns out Greece is the 9th country in military spending per capita ... even though it's got no other threat than a territorial dispute over cyprus.

So perhaps we should call for some facts and sanity here. These are not lazy countries where people sit in the sun. They are a big part of the world's economic engine, house some of the world's largest multinationals, and are under the scrutiny of other countries now because of mis-investments (real estate, war, weapons, politics, etc). Sure, there's corruption and mis-management. Sure, it's a different culture. But are other economies as healthy as they claim? Or is it just that they're calling the shots?

Hi and thanks Euan.

I don't know what is exactly what Ireland, Spain or Greece have to face as countries, but in the particular case of Ireland and Spain I don't think that government malfunctioning/overexpending had a lot to do with their housing bubbles, except for some misguided incentives. Private speculative money flows from, as an example, Germany to Ireland or Spain were MALINVESTED in real estate. I do not believe that the public sectors should pay the losses for those malinvestments as it is really happening (particularly in the case of Ireland), and bondholders (in Spain or in Germany) should bear most of those. Particularly in Spain we are already facing those problems in the form of very high unemployment rates for many years to come. Do you suggest that we should face it with higher unemployment rates? What would be the fair suffering we deserve according to the "core"?

This is not to say that adjustments are needed, but sure we don't need or deserve unnecessary pain.

I suspect that consumers in developed countries, especially consumers dependent on discretionary spending for their livelihood, have not yet begun to experience anything like the pain that is coming. The discretionary spending sides of developed country economies will, by and large, continue to just get crushed, IMO. I suppose that high end luxury spending might initially be less affected, by I suspect that conspicuous consumption will become less and less wise.

Given the reality of "Net Export Math," as the rapid decline in UK net oil exports demonstrates, developed countries--especially the US--should be taking steps to reduce oil consumption, through much higher energy consumption taxes, but as noted up the thread, most developed countries are borrowing like crazy trying to keep BAU going.

Agreed, consumers will have to change attitudes in richer and poorer countries.

We should all call it "GIPS" instead!

Seriously, your mission is dead. As a christian I take it as offensive to be called "religious". I am most certainly not. Almost all my christian friends share this view. But people will not stop calling me that. Because they are used to it. Once the name is stuck, it realy is stuck.

Take an example from the Bible. In the Book of Acts it is revealed that it was in Antiochia the believers where first called "christians". This is the only reference to the word you find in the Bible. Obviously the christians did not like to be called that and never used the name inbetween them selves. I am pretty sure they tried to stop it. 2000 years later the name still lingers.

A more modern example: I saw a guy on a movie demonstrating the concept of a modern computer when it was still just a concept. It had everything, screen, keyboard, mouse, even some sort of internet conection. When the guy demonstrates how the device that move the pointer around on the screen works he calls it "mouse", then apologises and says it is a stupid name and he is trying to make people stop calling it so. You all know how well it worked.

Take an example from the Bible. In the Book of Acts it is revealed that it was in Antiochia the believers where first called "christians". This is the only reference to the word you find in the Bible. Obviously the christians did not like to be called that and never used the name inbetween them selves. I am pretty sure they tried to stop it. 2000 years later the name still lingers.

Well a quick online search at


shows a few other mentions of "christian", including in a letter traditionally attributed to St. Peter.

However you are right that there are very few; and if early christians didn't like the name, then that's another reason to doubt the attribution...

The difference with the UK is the austerity measures gets financial market approval, and therefore support (provided things don't go obviously wrong). Add to that the disconnect between the UK and the euro and there is scope to navigate the next downturn.

If the US property market collapses again, the contagion into Europe will be bad. However if China hits the buffers first then most of the pain will be in Asia/Australia. In the middle is a domino collapse of the PIIGS tearing apart europe. The Pound might benefit from the currency strength whilst getting hit in the export markets. Not sure how that would play out.

Regarding the subject of this post, it is clear that there is a link between some recessions and oil shocks. But I don't believe that the depth of the recessions has any relation wirh the oil price shock, even with the share of UK produced oil. If so, we would see that any recession should be much deeper in countries which depend 100% in oil imports, and I don't think it is the case.

The author calls the government response "woeful". He doesn't explain why, though.

Every single comment about peak oil is the same, boring rant. Oh no, recession. Oh no, higher prices. Oh no, the end of civilization. But we definitely want our energy clean at the same time. Any of you highly educated Einsteins see a problem here?

Peak oil is GOOD. I'll say it again. It's good. Anything that drives up prices will put a stop to all the waste we have from prices being too low. What waste? When only the rich have SUVs and every structure is super insulated, then maybe oil is priced right.

Peak oil solves overpopulation as well. You all talk a good game about unsustainable population. Has it occurred to you that too much food (low prices) causes that? You've seen it happen in every other animal species. We need higher prices, so people stop having so many offspring. Sooner, rather than later. Because the longer we wait the more likely we have a painful fast decline.

How about alternate energy? Anybody see a pattern where high prices stimulates innovation, then low prices drives the innovators bankrupt? Once again, peak oil solves this. We need SUSTAINED higher prices to make alt energy a profitable pursuit.

Peak oil is good for alt energy. It's good for sustainable population. It's good for conservation. It's even good for sustainable economics and jobs. Yes, there will be pain. But only because cheap oil/commodities has enabled so much imbalance.

I agree with much of your post, but on "too much food (low prices) causes [overpopulation]" please note that the places with the highest food security have the lowest birth rates while the places with the highest birth rates have some of the lowest levels of food security.



So while it seems to make a certain amount of sense, the equation: "more food = more people" seems to be a bit too simple to explain the picture we see in the world.

"So while it seems to make a certain amount of sense, the equation: "more food = more people" seems to be a bit too simple to explain the picture we see in the world."

I agree, it actually goes the other way around. The way to stop population growth is to raise standard of living (and educate women). The question is, how do we do this without destroying the planet and sending everyone back into poverty, and therefore having more kids to repeat cycle?

"We need higher prices, so people stop having so many offspring."

It does not work that way. People will continue to have more than replacement level number of children. Higher prices will just insure that some, the poor, will not be able to feed their children. They will die in numbers large enough that society as a whole has replacement number of surviving children. So, yes, we will return to the norm of the past 3 billion years of life on Earth. Population equals food supply. It was a fun 200 years while it lasted.

Food supply is one limit on population.

Since food supply is typically highly variable, population is normally somewhat lower than could be sustained by average food supply. In hunter gatherer populations there are failures in game availability and in natural food crops. These lean years result in reductions of population such that in normal years the food is relatively abundant. Alternatively, such societies may also practice warfare and infanticide to curb population gowth to avoid famine and the associated epidemics of disease.

The introduction of agriculture, such as into Europe from the middle east and by the Bantu spread across Africa does not lead to an increase of the hunter gatherer population, but mainly results in their replacement by the agriculturalists. There is some evidence for cultural diffusion and the adoption of agriculture by the native populations, but that is not predominant.

New technologies have resulted in more or less step functions upwards in population growth, e.g. the introduction of 3 year crop rotation in northern Europe or the introduction of 2 crop per season rice in southern China.

However, there have been long periods where the population either is constant or rises slowly as gradual improvements to agricultural productivity are made. Mughal India and Shogun Japan are examples.

The major steps downward in population have typically been due to war and epidemics. War has been particularly effective when it destroys complex systems needed for agricultural productivity, such as the disruption of irrigation works. The Black Death is a good example of epidemic.

In the past, climate change has generally been slow enough that populations decline fairly slowly, although volcanic eruptions causing multi-year cold snaps and crop failures are the exception.

mk - Alrighty...I'll offer a few alternative answers.

"we definitely want our energy clean at the same time" - If by "we" you mean the majority of Americans you're obviously wrong. "We" want cheap energy and we will burn every pound of coal we can get our hands on if that's the cheapest route to our true goal. Easy to prove: if "we" really wanted clean energy "we" would elect politicians who would have led us down that road. And that includes today's politicians. Did you catch my post about a coal-fired power plant about to be built on top of a NG field I'm developing. And they just got their final clean air permit from the Obama administration to start the project up. BTW: all that dirty/nasty coal they'll burn for the next 30+ years will be shipped in by rail from Illinois. A coincidence, I'm sure.

"We need higher prices, so people stop having so many offspring" - Again, easy to counter: it's the poorest people who already have little money for food that have the highest birth rate. Being poor doesn't stop folks from having babies. Only being dead accomplishes that. Now if you had a doable plan for killing off a lot of those folks before they reach sexual maturity you might have a plan I could get behind. (see dohboi...I told you I really care aout over population).

"We need SUSTAINED higher prices to make alt energy a profitable pursuit.' - On this point we actually agree...at least about the need. But sustained higher prices aren't possible. Late '08 proved that and many of us think the current trend will prove it also: sustained higher prices leads to economic down turn which unsustains those higher prices. And this volatility holds back the alt more than any other factor IMHO.

"even good for sustainable economics and jobs. Yes, there will be pain" - so your definition of good must be "pain". Families broken apart; folks forced to live on the street; lack of social support systems; inevitable war IMHO...as we see today in the ME; etc; etc. I guessing the pain you foresee as "good" is that of other folks...not you and the folks you care about.

"And this volatility holds back the alt more than any other factor IMHO."

other less humble opinions also agree.


Demand is supposedly up, but inventories are up even more and prices dropping.

Nate made some good points further up about cheap energy and the creation of value

Given the large government overburden on most economies, and given a floating currency system, and given the great difficuly in downsizing and propensity for deficit financing, I cannot see an alternative to fiat currency collapse, or at very least the collapse of the US dollar as reserve currency.

we the people - living in the OECD bubble - have had a hell of a run during the postwar period. now its ending.

Forbes is now pushing for a return to a gold standard

I agree that we are in for a fiat collapse but a few other points of disagreement. We don't have a floating currency system, the Yuan is artificially pegged low and the dollar is artificially propped up by the Fed. This allows poor Chinese people to have jobs, and Americans to buy cheap products that they didn't actually work for. This has gone on for a few decades and the end result has been that the US economy has become a hollowed out shell based mostly on consumption. This is only made possible by the US dollar being the reserve currency. That is quickly ending and when the ponzi scheme finally does crash the dollar will go to zero, very quickly (in a matter of weeks). Then we will see what the real price of energy is, when the Fed loses all control and can no longer manipulate prices to keep the illusion of normalcy going. Then we will all have wished we took Peak Oil and alternative energy and electric cars more seriously.

Another minor point is that it is not just the government that is overburdened, everyone is. The government must borrow money from the Central Banks at interest just like everyone else does. Our entire monetary system is issued by and controlled by private bankers who are not elected and have zero accountability to anyone (and who control our government). And I too see some sort of gold standard as inevitable but this will not provide long term solutions either. In short the world is in for a VERY rough time when the ponzi scheme does finally collapse, and it seems that this could likely happen this year. If you live in the US, or even Canada or Europe, I strongly advise you to leave the continent and head for Africa, Asia, South America, or Oceania.

I have a different take on the relation between recessions and high oil pries. The authors point out that high oil price spikes typically precede recessions, that that this is what causes recessions. I come from the opposite approach -- that the factors which lead to recessions are the same ones that lead to oil price spikes. Oil price spikes and recessions are the RESULT of other more fundamental economic problems. Those factors are unsustainable easy credit booms leading up to the crashes. These credit booms (created by lower than sustainable interest rates) create new money which fuels a feeding frenzy into unsustainable business activities that are not efficient allocation of capital (eg, the US housing boom). This causes speculation for commodities to go up. But then when it crashes all those poor investment decisions must be purged from the system and deflation occurs.

I tend to agree. For instance, in the present situation: is the oil price spike causing a recession (or just making the recovery more difficult), or is it that the recession caused the social problems in Egypt and Lybia that in turn are causing an oil price spike?

It is difficult to identify the causes precisely.