New Dept. of Energy Priority-Setting Analysis Seriously Flawed

The US Department of Energy (DOE) recently issued a report called Report on the first Quadrennial Technology Review (QTR), which has as its purpose helping the DOE choose among conflicting priorities.

The new report sets priories based on a distorted view of the future. One issue is that it is trying to set priorities based on an overly optimistic view of energy supply presented in the EIA's International Energy Outlook 2011 (IEO 2011). Another issue is that it overlooks the way the US and world economy can be expected to change as a result of lower oil and natural gas supply. A third issue is that its view of climate change mitigations is based on a view of fossil fuel supply that is far greater than is likely to be the case.

The DOE needs to re-think its priorities for an entirely different kind of world--a world of energy scarcity. In a world of energy scarcity, citizens are poorer and less able to pay for basic services, much less higher-priced services. Maintaining basic transportation and electrical services for as much of the population as possible needs to be a top priority. Some government agency, presumably the DOE, will need to make certain that rationing systems are set up so that essential industries get the fuel they need and essential workers are able to obtain transportation to work.

This change in approach in priority-setting requires a very different mind-set than is currently being promulgated through the press. Let me start by explaining where we are today.

Where we are today

Oil and Substitutes. If we believe the QTR, global "liquids" production (oil and oil substitutes, like biofuels) will begin rising to 110 million barrels a day, after its flat period since 2005.

Figure 1. Global Liquids Production from QTR

Data in Figure 1 is based on IEO 2011. I recently wrote a post called IEO 2011: A Misleadingly Optimistic Energy Forecast by the EIA, explaining why the forecast is unrealistic. Among other things, oil prices would need to be much higher than EIA is forecasting to reach the production amounts shown in Figure 1. Unfortunately, these high oil prices would lead to recession and economic decline, resulting in lower oil consumption. Because of these issues, the increase in production shown above is not feasible. In fact, I would expect a decrease in production by as much as 50% by 2035.

Many people do not understand the issues behind the likely decline in oil production. There is plenty of oil in the ground--this is not the issue. The problem is that the oil that is left (such as that in the Bakken and in the oil sands) is slow and expensive to extract, because the "easy-to-extract" oil was mostly removed first. There is plenty of demand for low-priced oil, but high-priced oil tends to "choke" the economy, leading to recession. James Hamilton has shown that 10 out of 11 US recessions since World War II were associated with oil price spikes.

Some people would describe the phenomenon as "peak oil," but I am not sure that this is the best description of the issue. The problem is that the price of oil is increasingly high, partly because of the high cost of extraction, and partly because governments of the countries where the oil is extracted are increasingly "needy," and require high taxes on oil companies to meet their budgets.

High-priced oil tends to choke economies because high oil prices are associated with high food prices (because oil products are used in food growing and transport), and people's salaries do not rise to offset this rise in food and oil prices. People have to eat and to commute to their jobs, so they cut back on other expenditures. This leads to recession. Recession leads to lower oil consumption, since people without jobs can't buy very much of anything, oil products included. In some sense, the reduction in oil extraction is due to reduced demand, because citizens cannot afford the high-priced oil that is available.

Natural Gas. If we believe QTR, US natural gas consumption is expected to rise modestly by 2035, because of a huge increase in shale gas production. IEO 2011 indicates the expected natural gas consumption increase to 2035 is 10% (24.1 tcf in 2010; 26.5 tcf in 2035).

Figure 2. US Natural Gas Supply according to QTR.

The huge increase in shale gas shown in Figure 2 is by no means assured. The United States Geological Survey recently produced an estimate of Marcellus Shale resources, which will cause the EIA to reduce its estimate of shale gas reserves for the Marcellus Shale by 80%. There is also considerable uncertainty about long-term decline rates of wells, which would make a major difference in the ultimate recovery of wells. Furthermore, there are concerns regarding whether fracking and disposal of waste water can be done safely, especially near highly populated areas.

If shale gas production in fact decreases, Figure 2 suggests that US natural gas consumption could drop by as much as 30% or 35% by 2035, rather than rising. So there is a wide range of possible outcomes, with DOE's optimistic estimate being a 10% increase in US natural gas consumption. US natural gas consumption is smaller than oil consumption (about 68% as much), so the 10% increase in natural gas consumption would do very little to offset the likely oil supply decrease between now and 2035.

As with oil, there is an economic issue in all of this. How high can natural gas prices rise, without inducing huge recession? How long can shale gas producers "hang on" if natural gas prices are as low as they are now? Without higher prices, there is not much incentive to produce shale gas. If there is recession because of high oil prices, this may cut into demand for natural gas, because laid-off workers cannot afford products made with natural gas, either.

Liebig's Law of the Minimum Effect. If we think of the economy as a "system," it is very difficult to make changes to the economy quickly. We have a huge number of cars, trucks, trains, farm equipment, heavy construction equipment, and airplanes that are not designed to run on anything other than petroleum products. There is no way to change to another energy source for this equipment in the next several years because of the research timeline and the cost of building replacement equipment.

If there is inadequate oil, what happens is that oil prices rise. Because of the long timeframe required to change existing equipment to use other fuels, the rise in oil prices leads to recession. Recession cuts back on demand for all energy products, not just the oil that is in short supply.

If we think of the economy as a system, and oil as a necessary input, this is really an application of Liebig's Law of the Minimum. In agriculture, this law says that if a necessary nutrient is lacking, overall output will be reduced in proportion to the amount of the limiting nutrient. With the economy, if there is not enough oil (reflected in high oil price), the rest of the economy is restricted as well--the amount of electricity used; the number of workers employed; the amount of new loans outstanding; the demand for new homes, etc. This seems to be what happened in the 2008-2009 recession, and is threatening to happen again.

Climate Change. Climate change models do not assume that fossil fuels are a limiting factor before 2100. If more realistic amounts are assumed, the CO2 amounts forecast will be much lower. See for example this estimate by De Sousa and Mearns. If fossil fuel limitations were reflected in the models, the indicated temperature rise would be lower. If the indicated temperature change is lower and if fossil fuel use is declining rapidly regardless of what happens, the need for climate change mitigations would appear to be lessened.

Carbon Capture and Storage (CCS). CCS burns fuel more rapidly than today's approaches, because of the large amount of energy used for sequestration. If oil and natural gas are in limited supply to begin with, CCS is likely to cause us to exhaust the economically feasible supply sooner. Adding CCS also tends to make the cost of electricity higher. Because of theses issues, CCS research should probably be halted, and CCS options should be removed from consideration in the choice of future fuel sources.

Renewables vs Fossil Fuel Extenders. "Renewables" such as wind, solar PV, cellulosic ethanol, and biogas could more accurately be called "fossil fuel extenders" because they cannot exist apart from fossil fuels. Fossil fuels are required to make wind turbines and other devices, to transport the equipment, to make needed repairs, and to maintain the transport and electrical systems used by these fuels (such as maintaining transmission lines, running-back up power plants, and paving roads). If we lose fossil fuels, we can expect to lose the use of renewables, with a few exceptions, such as trees cut down locally, and burned for heat, and solar thermal used to heat hot water in containers on roofs.

What the DOE Should be Focusing On

We do not know precisely how soon oil and natural gas supplies will be declining, but it would seem to be worthwhile to start preparing now. It is clear we are already running into recessionary forces. Since these recessionary forces are tied in with high energy prices, they can only be expected to get worse with time, rather than better. The two major issues I see are

1. We need to keep some form of transportation system operating as long as possible.

2. We need to keep some form of electrical system operating as long as possible, probably transitioning to only local electricity.

What do we need to do to accomplish these goals?

This is too complex an issue to handle fully in a single post, but let me point out a few things that I can perhaps expand upon in later posts.

Low-Priced Oil Substitutes. The DOE should be focusing on dealing with a world that is in long-term recession, with many people unemployed, and governments limited in their ability to pay subsidies. Since a major reason for recession seems to be high oil prices, it would seem to be clear that any substitute for oil that is more expensive is likely to make the situation worse. What we need is oil substitutes that cost $50 barrel or less--cheap substitutes--to help counter the recessionary force of high oil prices. The idea of waiting until oil prices rise, so that some high-priced substitute is competitive, is ridiculous.

Remove subsidies. High energy costs lead to economic contraction. This is true even if the true cost is "buried" through subsidies or feed-in tariffs, because the true cost must be paid, one way or another, either directly, or indirectly, through higher taxes. Subsidies relating to high-priced energy products tend to increase the amount of high-priced energy consumed, so are counterproductive from an economic point of view, unless the subsidy is temporary, and truly leads to a lower-cost energy product.

Alternative Transportation. As the economy encounters more and more recession, fewer will be able to afford to drive. Because of this, there will be a need to provide transportation for poorer people, without adding huge costs to the system. Car pool systems would probably make more sense than adding buses, but buses might be helpful as well. Substituting bicycles for cars would be another worthwhile approach.

People will be giving up their cell phones, not adding them, so systems for using car pools should be simple ("Pick up a rider if you have room, and are going that way") not technically complex ("Call on your cell phone, and an operator will log you into a registry and send a vehicle your way.") Furthermore, technically complex approaches depend on oil for their maintenance and repair, so are more inclined to breakdowns over the long term.

Long-Term Maintenance of the Highway System. As oil becomes less available, highway maintenance will likely become more expensive. At the same time, the number of vehicles using the roads will likely be decreasing. Vehicles that do operate will use a variety of fuel sources--gasoline, diesel, electricity, and natural gas. In such a situation, an efficient approach for collecting needed funds for maintenance might be to use more toll roads. Eventually, as costs become too high, some roads will need to be changed back to gravel, or no longer be maintained.

Long Distance Electrical Grid. The electric grid was never set up for long distance transport of electricity, but in recent years, we have been attempting to use it for this purpose. If we want to use it for this purpose, and in fact upgrade it to add wind and solar production, it seems to me that some governmental organization needs to take ownership of the long distance transmission system. This organization needs to charge fees to long-distance users of these lines, analogous to tolls for highway use, to obtain adequate funds for maintenance, upgrades, and electricity storage. These fees will tend to raise the cost of wind and solar electricity.

Maintenance of the electric grid is petroleum dependent, so costs can be expected to rise over time. At some point, we may find it too difficult to maintain long-distance lines (because of inability to obtain fuel for repairs using helicopters, for example), and may need to abandon some long distance transmission. We need to plan our long-distance electrical use with this in mind. It may make sense to go back to more of a vertically integrated electrical utility model, applicable to individual communities, instead of a system based on long-distance trading. As with "local food," perhaps we need to be thinking of "local electricity".

Solidity of the Electrical System. The electric system and the oil-based transport system are very interdependent. Oil is needed for maintenance of roads and electric transmission lines. At the same time, if there is an electrical outage, oil and gas pipelines stop running, so gasoline stations lose their supplies. Furthermore, pumps at the gasoline stations don't work without electricity.  Thus, if we lose one, we lose the other.

We keep making demands of the electrical system that the system was not originally designed to handle--for example, to incorporate more renewable energy; to run the system with less slack through the use of "smart meters," and to sell electricity long-distance using competitive pricing.  It seems to me that there needs to be an organization that oversees the electrical system from the point of view of what really makes sense for the system. With the current ad hoc system, even basic maintenance is a problem--much of the transmission system was built in the 1960s, and is beyond its expected lifetime.

Some of the problem areas may be indirect. For example, if the pricing system for wind and solar electricity causes financial problems for companies generating electricity using natural gas and coal, this could lead to the bankruptcy of operators needed to keep the overall system working. In Europe, where more wind and solar PV are used than in the US, the pricing system already seems to be having an adverse impact on companies generating electricity using fossil fuels.

Rationing. At some point, rationing may be needed for both oil products and for electricity usage. The DOE should probably be the one coordinating planning for this contingency. Even if rationing is not needed for quite a few years, planning the details ahead of time would seem to be helpful.

Adapted from a post at Our Finite World.

Gail, while I agree with most of your points here I'd be more cautious about assuming the inevitability of the pending demise of industrial society. The impact of high energy prices upon our economies are two fold. First there is the inflationary impact and as you know price changes drop out out of the statistics one year down the line. The main run up in the recent oil price spike began over a year ago now and by April 2012 most of the inflationary impact of that will drop out of the stats.

The second impact as you point out is on the squeeze on discretionary spending. And here adaptation and improved energy efficiency may make us more tolerant of higher energy prices in the future enabling large lower grade energy resources to be produced. Shale gas presents an interesting test case. If the USA can adapt to run on shale gas then a vast new FF resource enters the CC equation.

"The second impact as you point out is on the squeeze on discretionary spending. And here adaptation and improved energy efficiency may make us more tolerant of higher energy prices in the future..."

Since a huge segment of employment relies very much on discretionary spending, what will those people be doing to "become more tolerant of higher energy prices"? I'm just askin', because many commenters here seem to be systemically challenged. Even greater efficiency and conservation has it's costs. Case in point: My propane guy just left after telling me they've laid off 4 employees due to conservation and lower sales. Two of their five (new) trucks went back to the leasing agency. All of these discretionary and non-discretionary modifications to the economy affect jobs, debt repayment, and growth. Our economy isn't setup for flat or negative growth, and sufficient capitol won't be available to invest in these transitions being spoken of here.

Our family's transition to being far more self-reliant has been quite successful, all-the-while depriving the formal economy of thousands of dollars each year. The propane company, mentioned above, has been only one of the victims of our increased efficiency and adaptations.

As you say, we'll adapt, but I consider Gail's vision of that process to be more realistic. Robbing Peter to pay Paul doesn't make Peter disappear.

I usually draw an important distinction between conservation and efficiency. Conservation is consumption foregone and will be highly recessionary. Efficiency is extracting greater energy service from each unit of energy consumed, enables consumers to afford a higher price and will ultimately be good for growth.

Whether it's efficiency, conservation, or demand destruction, someone is deprived of the opportunity to extract, produce, market, distribute, whatever, said product. Current levels of consumption support current levels of commerce/taxes, current levels of money velocity, current levels of debt, and current levels of employment. Even a one to one replacement of anything for something else requires growth, all underwritten by finite resource extraction, processing, servicing, etc.

Higher efficiency and productivity in the service sector also results in loss of jobs or reduced incomes, in turn depriving the economy of both discretionary and non-discretionary expenditures (inputs). It's what we're seeing now. Our western economies are bloated with non-essential services and products which our planet can't support much longer. Our economies are also bloated with jobs related to these non-essential services and products.

Governments are desperate to maintain this layer of non-essential production/consumption as long as possible because they have nothing to replace it with, at least not at levels required to maintain reasonable employment levels and revenues. Resource extraction will continue until it can't, along with the resulting biosphere degradation. At some point (now?) even the essentials (soil, water, air, rock phosphates) are being depleted to support the layer of non-essential production/consumption (e.g. biofuels, rare-earth metals for smartphones, fish for sushi, on and on), because the jobs/incomes/taxes,etc. that they provide/support are considered essential to the immediate needs of economies. The PTB know their survival depends on maintaining the illusion. Populations will not choose to adapt; they will be forced to, only to find that the essentials for adaptation are in critically short supply. Negative feedbacks ensue.

Higher efficiency and productivity in the service sector also results in loss of jobs or reduced incomes, in turn depriving the economy of both discretionary and non-discretionary expenditures (inputs). It's what we're seeing now. Our western economies are bloated with non-essential services and products which our planet can't support much longer.

I'm afraid I find this part to be full of contradictions, though I agree with much of your comment, but then would return to ask what you regard as "essential" and then ask when we last had a world running on "essential" and how we got from then till now without collapse?

...but then would return to ask what you regard as "essential" and then ask when we last had a world running on "essential" and how we got from then till now without collapse?

Maybe we could agree to define 'running on essential' as the time before fossil fuels became readily available.

We basically got from there till now without collapse because we were able to exploit the cheap energy contained in oil.
That cheap oil it seems is no longer quite so readily available and all indications seem to point to increasingly more expensive (whether you frame it in terms of capital or EROEI) energy.

So the fact that we haven't yet seen the complete collapse of our industrialized civilization should be of very little comfort to any of us. It really is just a matter time before we do see clear and undeniable signs of collapse.

IMHO it is already happening all around us even now! I invite you to spend a day with me, listening to the stories of the people who bring me scrap metal to be recycled... If these people aren't already suffering the consequences of collapse then I'll eat my hat.

The reality is that many of us are still safely isolated from the very stark realities of what is actually happening to more and more people!

"I'm afraid I find this part to be full of contradictions..."

Please clarify. As for what is essential and when we last had a world running on essential,; I find this thinking to be a bit binary. I expect virtually all human societies have expended time, resources and energy on non-essential endevours. Were cave drawings and red ocre truely essential to survival?

The questions should be: When, if ever, has a human society devoted as much of its energy and resources to non-essential production of what is essentially junk destined for the landfill? When, if ever, has an economy been as reliant upon the production and marketing of said junk to support a huge percentage of its population? When, if ever has such a small percentage of a population been employed in the production of things that really matter. When has there been a convergence of unprecidentedly massive resource extraction and a systemic, utter reliance on these declining resources to support economies devoted to the production of things other than shelter, food, clothing, water, and the tools to provide these things?

While these paradigms aren't unprecidented, the scale of our current paradigm certainly is, and while civilizational collapse is in no way unprecidented, the potential scale of this one certainly is. Seven billion humans, running blindly, swiftly into hard, permanent limits to the things they need to survive, suddenly realizing that they squandered must-haves on didn't-needs.

I ask again: What will perhaps billions of humans do to support themselves when it becomes apparent that their economies (and the planet) can neither support, nor need, the services and goods they provide? This is the inevitable result of overshoot. Like Hebrews, suddenly "freed" to wander in the desert because the Pharaohs could no longer support their consumption or afford their Roman Legions, suddenly "released" from duty because the gold ran out...

Obviously they will be all be working double-time for decades to build out those hundred-thousand Gen III/and/or Thorium Breeder fission reactor complexes hooked up to the atmospheric CO2 mining and synthetic liquid fuels production facilities! There will be Spandex jackets for everyone...what a beautiful World it will be! :)

Or, folks are going to adopt much simpler, slower lives, and be engaged in gardening, carpentry, etc.

Or, ...well, go rent Mad Max...

Or some combination of the above, depending on where one is on the future time and location domains...



If your area is like the middle of the US where I live propane is a rural fuel.Maybe this is just an indication of people speeding up of rural flight.The cost of transportation plus the heating/cooling the load on a structure standing by itself can be 3x or more than a city home.Just remember 50% of the US population wasn't even born when we had gas lines,10 gal max purchase, even odd tag number days to buy gas and no Sunday sales.

In our case the reduction in propane consumption is the result of efficiency gains (passive solar, more insulation, solar hot water, clothes line, biodiesel generator replacing a propane generator, wood stove). In our (rural) area, heating with wood has seen a resurgence, families are moving in together, combining trips, staying home more, eating out less, turning lights off, etc. There are also many empty, foreclosed homes, as the real estate, vacation home markets crashed.

Lets take added insulation, etc. as a point: Good for energy efficiency; not so good if your job is selling/distributing propane. The propane business is an ongoing system; insulation a one time installation. While you may save 50% of your propane consumption, that 50% reduction in propane sales to you is essentially gone forever, as are the related jobs. The answer is "growth", which is facing hard limits. Distribute this meme across many sectors of the economy and you have to find something for a lot of folks to do. Even the local electrical utility is raising rates and cutting jobs, increasing employment pressure, driving pay down, forcing folks to conserve and be more efficient. Feedback loops.

"Since a huge segment of employment relies very much on discretionary spending,"

That's a point a lot of people keep missing. Even if the Keynesians managed to ban home kitchens (due to health and sanitation concerns, wink wink,) that is only 21 meals a week I can eat out. The increase in the velocity of money has an upper limit. I only need a haircut so often. I suppose the government could ban home use of razors too, and hope the vast increase in barbershops could drive the economy onward.

And of course twice in my life I've listened to an in-office politician promise me that the key to a prosperous future was eco-tourism. Both completely missed the fact the eco-tourism requires cheap oil.

So where exactly the economic growth, or even economic stay-even is supposed to come from is an open mystery.

So where exactly the economic growth, or even economic stay-even is supposed to come from is an open mystery.

There are sure to be at least a few growth industries... How about debtor prison guards and undertakers?

Debtor prisons are not profit centers. Their only "benefit" was to terrorize people into paying their debts. To make them profitable the government would have to convert them to labor camps. If we had a labor shortage then it might work, but a labor shortage is not one of our problems.

Undertakers are a luxury often dispensed with when times are tough. So no help there either. A CAT 320 track hoe can convert diesel or bio-diesel into 'instant hole' with commendable efficiency. Given the health consequences of large number of corpses laying about, a few gallons of oil will certainly be reserved for that purpose even in Gail's most pessimistic scenario.

PVguy you did realize that was sarcasm on my part, right?

As for:

Given the health consequences of large number of corpses laying about, a few gallons of oil will certainly be reserved for that purpose even in Gail's most pessimistic scenario.

Actually, newly deceased corpses, especially the plump ones, have a reasonably high btu content and could be used as fuel, so you probably wouldn't want to waste them by burying them in a hole... In case you are wondering, that's also sarcasm.

Thanks Ghung for raising an important point.

I might mention too that besides the problem you mentioned with the laid-off workers, people with less income are less interested in more expensive homes. So their lack of demand tends to hold down home prices, and leads to pain for people who try to sell or refinance their homes.

Once oil prices rise, there is a substantial chance they will rise a year later again as demand rises, and supply is in even shorter supply (unless the economy has fallen into recession again). So then there are yet more layoffs.

And when it comes to energy efficiency, usually there needs to be a cash investment, for that greater efficiency--say buying a new or used car to replace an old car; or buying a more efficient furnace (or heat pump) to replace the old one, or perhaps adding insulation. If people have less discretionary income, they may be less able to afford the capital investment required for greater efficiency. For example, new auto sales are down significantly since the early 2000s, when people could refinance their homes (because of the appreciation), and use the cash taken out to buy new cars or fix up their homes.

If there is an example of a country losing a significant amount of energy/resources without taking a major hit to their standard of living, I can't think of it.

Hi Euan

re: "assuming the inevitability of the pending demise of industrial society."

Can I offer a change of wording and a question?

1) What about the current trajectory?

A. Can it be analyzed?

B. Does it lead to the demise of industrial society?

C. Can this demise trajectory be altered in any way?

D. If so, how?

In other words, is there any case to be made for assuming and then analyzing, based on the assumption?

2) It seems your points are omitting the "relentless decline" aspect of peak, regardless of peak what, although we are primarily talking oil, yes?

In other words, "run on shale gas" - for how long run?

Run to where?

To a different infrastructure?

Can I offer a change of wording and a question?

I count 10 questions:-(

Aniya you got me here, can you simplify so I can respond?

Hi again Euan

First, I was trying to respond to your saying that Gail is quick to assume the demise of industrial society.

I was trying to put it a little differently: Gail may not "assume" this, per se, (or she may, I'm not sure) In can any case, my argument is: it may be what she sees as the trajectory, if nothing changes. BAU leads to "demise."

You propose two ways that peak impacts the economy, and then one factor that will make each not "demise." In the first case, time makes the inflationary impact not matter, and in the second case, you say a new resource (shale gas) can offset the negative impact.

So, what I was trying to suggest:

1. Not to think in terms of assumptions, but rather scenarios with particular trajectories. I ask if those trajectories can be altered in any way.

2. Then, I tried to ask you a question about shale gas and what's the "adapt" you speak about? Doesn't it require a different infrastructure or changes in infrastructure?

Euan makes a good point about predicting a pending demise of our industrial society. Notwithstanding all of the challenges we face with an ever decreasing EROI, and other ecological offenses, I would argue we need to focus more of our time and energy on trying to improve upon our situation. There are lots of things that can be done at least in the short to medium term while we still have oil to make us more resilient and it is important to be open to these possibilities.

For example, here is a recent report on the leadership role that Nordic countries are taking on energy

Author, Vicktor Frankl, wrote a very famous book, "Man's Search for Meaning" about the personal characteristics of those who survived the concentration camps during WWII. Generally speaking, those who made the best of a bad situation had a better chance of survival....those who gave up early, died early.

Gail, this is an interesting post. However, I would like to point out that USA have a huge energy consumption per capita; twice the European one. In consequence, there is a lot of place for energy saving that can be done without damaging the productive economy unless you believe that US economy is based on pickup. In consequence, you could extend the transition over a very long period of time.

IMHO, the main problem is psychological. I way or another people will have to drop to notion that growth is the goal. We have some embryonic economic vision able to deal with that. But, for a population that has been brainwashed that growth is the only thing that matter, this will be unacceptable.

"...for a population that has been brainwashed that growth is the only thing that matter, this will be unacceptable..."

For a nation (the US) with a $15 trillion (and rising) public debt, growth is an imperative. The opposite of growth is recession/depression. Add in trillions more of private debt, also unrepayable over time without growth, any sort of transition to greater efficiency, austerity, and a non-growth economy becomes problematic at best; very problematic if history is an effective predictor.

I disagree. It is no problem to repay debt with constant income. You just allocate a part of that income to amortizing the debt and eventually, it will be gone.

Sounds good until you realize that debt has been increasing faster than real incomes or GDP (for decades); a system banking that debt will be repaid by growth. When growth slows or stops, income must be realocated (redistributed) from other sources, already supporting systems that are reliant upon that income to continue. Robbing Peter to pay an ever-hungrier Paul, all enabled by declining resources (oil).

The other option is to default on the debt, which, in our world, has been leveraged to support other systems. This is the nature of a debt bubble.

Sounds good until you realize that debt has been increasing faster than real incomes or GDP (for decades)

Doesn't matter. As long as the rent burden is bearable, the debt can be repaid.

a system banking that debt will be repaid by growth.

Debt is repaid by income. Loans are seldom given on any other premise than current market conditions and incomes.

debt can't be paid in the current system. only a small fraction of money is covered by coins and banknotes. basically if the debt would be paid there would be no money. without debt there would not be enough money to do business.

As PVguy says, FED can expand the money supply to counter contracting credit.

The key point you both agree on, though you may not realize it, is that the debt has to stop growing. Then it can be paid back out of current income. But since paying off debt destroys money (see fractional reserve lending) and given that net new debt can't be issued, the money supply contracts.

So Congress has to issue money to replace the repaid debt without borrowing it into existence. They can do this, but keeping the balance between inflation and deflation is not easy, especially with all the squalling as those companies that expected perpetual exponential growth collide with the flat line.

Note that the term "money" above includes money + credit. On the macro scale, which is what we are talking about here, they are the same thing. On the home scale they are not the same thing, or at least those who think they are end up in trouble.

It is no problem to repay debt with constant income.

Bless your heart, you live in a world where income is constant, debt is constant, and spending on other things is constant.

In the world where most of us live, the prices for things that are considered needed are rising. Like food, heating, taxes et la.

Constant income and constant debt with rising prices for other things leads to problems for real humans.

I'm talking about constant real income, of course. (inflation adjusted)

As Ghung points out, there is the need for growth, so that in the aggregate, there are enough funds to pay back debt with interest, and not have to cut back on discretionary spending, so as to avoid layoffs, and other negative effects (falling home prices, for example).

The other issue is that US population is spread over a larger area, and within that area, homes are laid out in a way that can most efficiently be served by a private passenger auto. If population is very dense, public transit works well, but it is much more difficult to make work when homes are scattered with little density. It is not easy to make a change, once the homes have been built up that way--theoretically, some homes would need to be torn down and moved to a different location.

Again, that's what quantitative easing is for - keeping the money supply up when debt rewinds. You can avoid layoffs by liberalizing labor markets.

Making US population density higher requires investments in construction and lots of labor.

As I 'drive' to work every morning at 6:00am, I meet a horde of pickup trucks heading out to the bush for their work....some driving 150 km each way. They will then spend the day using machines to harvest wood for the Chinese market. Sooner or later, the Chinese debt bubble will pop like everyone elses and the trucks will dwindle to nothing like they were just two year ago, or the rising price of fuel will simply choke the feasability out of it.

At work, yesterday, two colleagues came to me for advice, (my grey hair an all), and said how they just wern't making it anymore. They cited rising costs....particularly the culprit. To one I simply asked "is son in hockey a need or a want"? (Canada....hard choice). And suggested he lose the truck and buy a beater.

he was going to refi to pay off the debts. No No NO NO.

Life is changing for people who still seem to be okay. I see no option to an evitable decline. Looking at history and the great idea of increasing debt to solve debt problems....all in order to sustain the impossible paradigm....if Industrial civilization does not drop to zip I will be astounded.

We are broke, busted, and running out everything but population. What other inference can their be?

Cheers and good morning Paulo

I was at the ASPO-USA convention today, and a person came away with some of that same feeling. Wes Jackson of the Land Institute told us that soil was as much a problem as oil, if we want another problem to add to our list.

Guy Dauncey of British Columbia Sustainable Energy Association told us that GDP really stands for "Gross Depletion of the Planet".

British Columbia actually has a very small proportion of Canada's agricultural land due to the fact that most of the province is mountainous, so naturally they worry about disappearing farmland. However, the vast majority of cropland in Canada is in the prairie provinces:

Land in Crops ... Province

586,238 ... British Columbia
3,660,941 ... Ontario
4,701,010 ... Manitoba
9,621,606 ... Alberta*
14,960,103 ... Saskatchewan

source: Statistics Canada 2006 census data. One hectare = 2.47 acres.

* Alberta, due to the amount of potential farmland in the far north, could probably double its amount of cropland if there was a local market for the crops produced.


Referring to Fig. 2. A couple of points that many here already appreciate. First, everyone should be familiar with the decline rate of the fractured shale reservoirs. A 50% to 90% first year decline in flow rate is common. Within the first 4 - 5 years of production flow rates of individual wells will have dropped 95%+. Thus the reason the public oils are accelerating their drilling efforts as fast as possible: the more NG reserves they book the more wells they have to drill to replace those rapidly produced. That replacement is the primary metric Wall Street uses to value their stock. Just eyeballing the chart it appears we'll be producing 3X the volume of SG by 2035. The wells drilled after 2030 will have to be contributing almost all that rate. Wells drilled 5+ years prior to that date will be contributing almost nothing to that number. So the bulk of the 2035 volume will have to come from wells drilled just 2 to 3 years earlier.

Today we have a little over 2,000 rigs drilling. If we triple NG flows during 2035 then it reasonable to assume we'll have to have 6,000 or so rigs drilling in 2035. Maybe we will...maybe not. And during the next 23 years well have to average 4,000 rigs drilling (2,000+ 6,000/2). So to get the curve represented we have to drill twice as many wells per year (20,000) on average as we are drilling today X 23. Just a rough estimate but around 10,000+ SG wells are being drilled per year today. So the math, however accurate, is simple: the chart projects we will drill 460,000 SG wells in the next 23 years. At around $6 million per well (drilling/completion, land and overhead expenses) that will require about $2.8 TRILLION in capex. And that with no inflation factor. That doesn't include my estimate of $100+ BILLION to expand the oil patch infrastructure required for those extra 4,000 rigs. Each can decide the probability of this much capex being available.

And let's not forget the obvious: to prevent the NG flow rate from crashing post-2035 the drilling efforts needs to continue drilling at least as many wells as were drilled in 2035. If not the rate will drop very quickly.

I bet no one paid much attention to the conventional non-associate NG both onshore and off. First and foremost, the onshore projection is absurd. Many here know my primary exploration target is onshore conventional NG. I'm about to return $50 million of my 2011 budget back for lack of prospects. And that's not because we weren't able to generate them: we don't generate any of the projects we drill...don't have the 4-5 year time lag required. We buy them from prospect generating shops. And everyone of them knows we have a fat check book and a maniacal desire to drill. And we can't find enough prospects. The chart indicates we'll be producing about 70% of current rate of onshore conventional NG. That must mean there's a lot of these reserves out left to drill: virtually none of the existing convention NG will be producing anything in 23 years. Remember we're not talking shale gas...convention NG fields. Fields that companies like mine will have to drill. Fields that I have all the money I need to drill. And fields that I can't find enough of to drill today. And the projection is that in the next 23 years we'll find at least 70% of all the conventional NG fields we've discovered in the last 20 years or so? I suppose me and my cohorts just aren't smart enough to find all those hidden treasures out there. And neither are the rest of the oil patch who aren't finding enough conventional prospects for me to drill. Despite the fact that we have exploration tools today that are easily a magnitude better than we had 20 years ago. I'm guessing the chart assumes some group outside the existing oil patch will generate all those new discoveries. I sure wish they would give me a call. I've got a $300 million budget for next year and it seems unlikely I'll spend even half of it.

Offshore conventional NG development also seems rather optimistic but not as much as the onshore projection. DW GOM will likely be the majors source of those reserves. Individual NG fields out there tend to be large compared to onshore fields. OTOH the cost of developing those fields is also much greater. There will likely be 100's of smaller NG fields offshore that will never be developed for economic reasons. There won't be that many major offshore fields found IMHO. In fact, just my WAG, but in the next 20 years we will have likely developed the vast majority of the big fields left out there. And remember offshore DW fields are designed for rapid depletion...typically around 7 years. Thus nearly all the offshore conventional NG fields developed in the next 18 years will be depleted by 2035. Thus we must assume a huge increase in offshore conventional NG discoveries post 2028. Time will tell. And notice that I haven't offered any guess to the capex required to support this projection: my calculator doesn't go that high.


i'm not sure if i understood correctly. so basically "wall street" uses the amount of reserves to value the stock? but if the company just keeps the reserves without producing then surely the value of stocks will diminish? i mean i don't quite understand the logic of producing and finding reserves. for example if prices are low then why not wait with reserves and produce them later? especially since you say that there is money around. so why don't companies just keep on finding the reserves, at least for some time? they could just produce a small amount now and then increase the production when prices go up?

jukka - The key metric for WS is how much reserves a company adds net to their books every year. If a company produces X millions of bbls of oil during 2011 WS will reward them with positive recommendations if the add X+ bbls of oil to they books the same year. IOW they consider a company's value to hinge on their oil/NG assets in the ground. Produce more than you find and your asset base declines...not good. Add some asset base...good. Add a lot more asset than you produced...very good. Remember: folks might make a little money from the dividends. But the prime reason most buy a stock is to sell it at a higher price later. Seeing growth in the asset base gives them confidence they'll be able to do just that. See little or no growth for a couple of years and they get worried...maybe worried enough to sell at a loss. See negative growth and they run like hell.

But you notice I didn't mention what that new asst base cost me to find. I might sell that X bbls of oil for a nice profit compared to what it cost me to develop them. I may replace them with X+ bbls that same year but maybe I drilled a lot of dry holes in that effort. And the wells that were successful cost a lot more than planned. So maybe I made very little profit (maybe I even lost money) adding those X+ bbls. And it's very difficult for folks outside a company to figure this out.

Given the time lag between the monies being spent and the production life of the well it's not an easy matter even for a company to project its ultimate profit. How screwed up can WS's view of the oil patch get? Here's a real example of what I personally did 20 years ago. For a very small public company I drilled 4 horizontal wells in a producing field. These wells were drilled into reservoirs already on production but the vertical wells were producing very slowly. The 4 hz wells I drilled increased company production from 10 million cu ft/day to 50 million cu ft/day. But since these wells were in existing reservoirs the effort didn't add $1 worth of new reserves. IOW no increase in reserve base. And what did WS do? So impressed with the increase in cash flow they quickly bumped our stock up over 250%. But understand it cost $18 million to drill those 4 wells. IOW the company spent (LOST) $18 million. And the stock shot up. And we didn't lie about what we did: it was all spelled out clearly in our outside audited reserve report.

There's an old saying by some WS brokers: they don't sell the steak...they sell the sizzle. WS didn't care that the company lost money in the effort...they sold the sizzle of the increase in cash flow. BTW: one of the big successful(usually) WS raiders bought it hook line, line and sinker. He was successful in the hostile takeover of this little company. Not too long afterwards (after me and the other oil/NG finders left) the company filed bankruptcy and disappeared for every.

Low prices??? I know it sounds logical to cut production when prices drop. In reality more often than not it works just the opposite: many companies will try to increase production in the face of declining prices. The oil patch is very much dependent upon cash flow. Add that to the need of public companies to add reserves year over year. They keep producing and take that cash flow and drill to add back to the reserve base what they've produced. Privately owned (non-public companies) have a problem reducing production when prices drop: they still have loans to repay and employees to retain.

A recent example was the NG price bust in '08. I was working with Devon at that time. They were spending $'s as fast as possible in the shale gas play of E. Texas. Had 18 rigs running. But prices dropped so fast and so far they dropped 14 of those rigs and paid $40 million to cancel those contracts. Yep: paid $40 million to not drill wells. And without drilling they couldn't maintain their reserve base let along increase. As a result their stock dropped from the high of $124/share to $38/share. The CEO of Chesapeake had the margin called on the money he used to buy his company's stock and lost many $billions as a result. The wells both companies were still able to drill were profit The wells both companies were still able to drill were profitable. But WS didn't care: that didn't create the sizzle the earlier hype about shale gas created.

If you try to apply logic to this process it will just drive you nuts. LOL

"If you try to apply logic to this process it will just drive you nuts. LOL"

yes maybe the logic was a wrong word...

but anyway: "many companies will try to increase production in the face of declining prices"

so they have so much debt that they can't wait?

jukka - Not just debt but overhead to maintain, production operating expenses that don't decrease as prices drop and, equally important, capex to drill more wells. Unlike a manufacturing company they deplete their assets daily. Stop drilling and you lose future income. A widget plant can shut down completely and restart when the market improves. An oil company shuts down drilling, depletes its reserves to pay debt and eventually when prices recover there isn't enough cash flow left to function. I've personally seen at least 100 companies disappear during my career for this very reason.

And remember there is a time lag for profits in the oil patch. In the last 2 years I've spent $140 million drilling successful wells. Yet we haven't gotten our first $ of profit yet. Close but not quite yet. Profitable wells often don't go into into the black for 18 to 24 months. And we all drill dry holes that have to be recovered by the good ones. So companywise a successful operation may take 3 years to show a net profit. Reduce you production rate and they can extend that period much too far in the future. When you see reports that Company A made $X billion profit last year that doesn't mean they drilled profitable wells that year...they just had more income than outgo. When prices fall many public companies will quickly layoff folks to reduce the outgo to keep "profit" up. But they keep drilling in order to continue the reserve replacement game. I've spent much of my consulting career replacing those laid off employees. Did it by knowing how to be very efficient and very bottom line.

Well, if you squint your eyes just right...

Some one could have put the wrong numbers into the NPV function in 123, (this was 1991, when serious businesses used Lotus, after all) and decided high cash flow today was worth $18,000,000 more than low cash flow for X years, and therefore a good deal.

Or they wanted a tax loss

Or they were simple idiots :-)

Take your pick.

PV - Actually none of the above. Their objective was simple: run the company stock price up as fast as possible, cash in their stock options and bail out. They knew the drilling program reduced the NPV of the company significantly: I did the calculation and presented it to them. This was my first experience with a very small cap public company. Like they say about making hot dogs: if you watch the process up close it kills you appetite for the product.

My engineer and I did all the work…busted our butts. And then sat back and watched them ruin the company. And then sat back and watched the next idiot forcibly take over the company and drive it the rest of the way to the grave. Made me a tad bitter with corporate games so I spent the next 10 years doing well site consulting. Now I work for a private company. No games: just drill wells and make a profit.


Thanks for your wonderful perspective! A few trillion here and a few trillion there or needed expenditures for development, and opportunities for drilling that you can't even find today make the story we are being told totally ridiculous.


Gail - I truly wish my expectations weren't what they are. Especially with the potential to eventually swap more blood for oil. I also have 12 yo daughter who will likely be confronting the beginning of the worst of PO as she moves into adulthood.

But "perspective"" is what I strive to share. I entered the oil patch just after US production peaked. As I've said before my first mentor clearly explained the reserve replacement problem (what folks call PO today) the oil patch then faced…36 years ago.

Perspective: the simplest I can offer – In 1975 I was drilling 12,000’ wells testing potential 2,000+ acre reservoirs. Today I’m drilling 16,500’ wells (that cost 3X as much) to test potential reservoirs that cover 100 acres…or less. Globally we still have big targets. But just as we did here they will be exploited and removed from play as they deplete. It’s impossible for me to ignore the perspective I’ve developed over 36 years and not see the same path for the rest of the world. Perhaps I’m so blinded by my experiences I can’t see another alternative.

I’m always open to other visions of the future. But that story has to be built on concrete facts and not what-ifs. I’ve had world class explorationists try to blow smoke up my butt my entire career. Someone wants to try they better tie their story down tight. I’ve heard it all a 100 times before. LOL

"And remember offshore DW fields are designed for rapid depletion...typically around 7 years."


Thanks for your insightful comment.

Why is it that offshore depletion rates are so fast; geology, the cost (get in and get out quick)?



aws - Exactly. Offshore development is very expensive and companies view it as a simple rate of return proposition. Thus the longer it takes to produce the lower the ROR. Additionally offshore operations costs during the production phase is much higher than onshore. You won't see stripper wells offshore: can't justify the overhead. So companies will spend extra money to engineer the highest possible flow rates possible.

Thanks a lot for the down to earth detailed field info RM, when you say "we don't generate any of the projects we drill." that is you don't prospect/discover any of the projects you develop/produce ?

Otherwise about the "non-associated offshore curve" on figure 2, there are these strange "waves" with a top around 2020 then a bit down, then going back up around 2030, do you think it corresponds to some background figures/studies, or is it more like "ok it cannot be just just a straight line that would look a bit ridiculous, let's just draw something a bit more irregular" ? :)

Y - Company A will buy the seismic data and hire a staff to generate drilling projects. Then they'll lease the land and market the project to companies like mine. Typically they'll recover the money the invested and get a little extra back. Additionally we'll pay 100% to drill the exploratory part but perhaps only earn 75% of the production with the rest going to Company A. This is the "promote" on the deal. Company A might be required to pay for their 25% of the completion costs but at that point they know they have a profitable well.

Why do we pay the promote? It takes many years to generate a portfolio of viable prospects. And not all efforts lead to marketable prospects. We're a new start up created to take advantage of the oil patch collapse back in '08 as well as the coming of PO. We didn't have time to wait to generate our own projects. But we are doing some of it now since we've been finding too few outside deals to buy. BTW; in August of '08 we went to a prospect expo: over 300 companies trying to sell their projects. We were one of about 10 potential buyers there. Obviously a true buyers market if you had the capex.

And yes...the wavy line is to give the illusion of having such details IMHO.

Thanks for the clarifications RM, I don't know the oil/gas industry directly at all, but from the info I got reading or seeing docs, the US is truly unique in this aspect of having many companies on the oil gas/patch, and this from the beginning, this also being a result of the law being that you own what is below your land, which isn't the case in most countries.

About the promote part, is it also a way to make the deal honest, company A having a share of the project production revenues ? Are there some trials or penalties/recrediting if a sold project doesn't deliver as promised when sold ?

Canada is similar to the US in that there are hundreds of companies drilling for oil and gas (the US probably has thousands).

It is not true that the law in the US says you own the land under your property. Both American and Canadian legal systems evolved from British common law, in which you can slice land more ways than baloney. You have to look at the title to the property to see who owns what. It is entirely possible that a previous owner separated the mineral rights from the surface rights and sold them separately.

In the older US states, people got mineral rights by default, but in much of the American West which was settled after oil drilling was invented the federal government retained the mineral rights when it gave away homestead land, and of course it owns the mineral rights under the federal land which constitutes most of some states.

Y – In the oil patch it’s real simple: you pays your money and you takes your chances. You drill a dry hole on the prospect I sold you that’s too bad. Now suck it up and get on with your business. A company does its own evaluation of the prospects it buys and makes the decision. How good you are at doing this determines your profitability. How bad can this be done? Back in the insane boom of the 70’s a company bought into a drilling program with a promoter company. They paid to drill 18 DRY HOLES…not one success. And how did the promoter make out? Besides recovering their initial investment the senior guys retired millionaires. Drill 18 dry holes and make millions…now that’s a company that knows how to cut a trade. And the company that paid for all the drilling: obviously not very good at the job. BTW: that company went out of business not too many years later. I was just starting my career and got out of there a fast as I could.

This is why I’ve always strongly recommended individuals to NOT make direct investments in drilling projects. There are many con men out there just ready to skin those folks alive. Back in the 80’s a company moved onto our floor. It was a “boiler room” selling an investment in a Texas well. I looked at their deal…an obvious scan. I called the state attorney general and gave him the company’s name. They knew of the company and had shut down their operations in Dallas. Told them they were up and running in Houston. One of my great regrets was not being there the day the Texas Rangers hauled of the two managers off in hand cuffs. The really irritating part was that the managers figured since we were oil patch we didn’t have a problem defrauding investors. BTW: the manager’s previous job: selling used cars. I’m not kidding.

A fair promoter will recover their investment. And if they generate successful prospects they’ll make a very nice return. Both the buyer and seller do well if everyone knows how to do their job.

Thanks a lot for the info RM (and a pleasure to read)


Referring to Fig. 2. A couple of points that many here already appreciate. First, everyone should be familiar with the ...

Some weeks when I think I've read about the best Rockman post ever, he moves the peg higher by laying out the logic, the timeline, the investment cycle, and production rate profiles in even more substantive and clarifying terms...

Hmm, so we will have to build around 200 rigs a year plus ancillary equipment plus fracing equipment. I wonder if current production lines could do that or would that entail new factories as well. Then we need to triple the output of muds, pipe, other consumables, frac fluids etc. Tall order?


2.8T/23 years is ~$122B/yr. For $122B/yr at a ridiculously high cost of $2M/MW, you could build 60,000MW of wind power per year. Now, building more than ~15,000MW a year is probably silly (boom-bust), but let's say we wanted to replace the total kwh production of all existing natural gas fired electricity in the U.S. instead of producing the natural gas to run it. In 2010, 30% of U.S. natural gas consumption was used to produce 23.8% (981.8 million MWh) of electricity net generation. If a MW of wind produced 3000MWh/yr (conservative 34% capacity factor), then to fully replace that energy would require 327,266MW of installed capacity. To replace 30% of natural gas over 23 years we'd need to build 14,228MW per year at a cost of 23% of your estimate, if turbines cost twice as much to develop as they 'should.'

This has more than a few issues as a wholesale solution, but it is clear that at the margin, building wind turbines to displace natural gas consumption makes more sense than ramping up drilling $6M dollar wells.

21 – Your logic is obvious. Unfortunately it’s also irrelevant froma practical standpoint. Neither the public nor the govt will be spending that capex…the oil patch will. The oil patch doesn’t make alts…it drills wells. It doesn’t employee folks who know how to build alts. And most important: the shareholders who bought the stock of the public oils didn’t do so expecting these companies to build alts.

If ExxonMobil decided to build alts and not drill wells they would first have to fire a lot of employees. Then hire folk folks to build the alts infrastructure. But we don't have a lot of folks who know how to build alts...they have to be educated/trained. And then watch their stock become nearly worthless as shareholders bailed from a company with no certain probability of profitability.

Now had the govt enacted policies 30 years ago that offered an incentive for energy companies to begin a very slow transition to alts we might be in a different situation. But they didn’t and IMHO it’s too late to take that tact now. Just don’t have the time.

Hopefully, either government or utilities like the one I work for will provide the capex for the alts to supplement/compete with the drillers when they realize that if they don't, the fuel they have been increasing dependence on for the past 25 years is going to get progressively more expensive.

ben - Hopefully. And as much as I don't care for too much govt involvement in the free market, I think the challenge is so big/expensive/immediate it can't be done alone by the folks you mention. The oil patch needs to continuing doing its thing because without that economic input we have no chance of changing the system. That's the point I think some folks keep missing: without the energy the oil patch brings into the sytem today the alts don't have much of a chance IMHO. Even with it the future will still be very difficult. As we keep saying: we're at least 30 years late beginning the transition.

Gail, you really need to tone down the doomsday predictions. It doesn't help your cause. It just makes your whole movement and everyone involved appear shrill and in need of strong meds.

Others have pointed out the logical flaws in your arguments, so I won't repeat them. I'll just say, you have no more skill in predicting the future than anyone else -- which is to say, zero. You could at least be humble enough to admit that much.

Here we go with the “Meds” talk. I think anyone who assumes that we can have infinite economic growth on a finite planet is in need of medication. The global economy is on the verge of a meltdown, with crippling debt rampant throughout industrial civilization, but everything is fine. I guess the German military may need meds to after publishing their peak oil report so Gail has some good company. I know of plenty of investors who have researched trends, made a prediction, and been right. You should fire off a letter to Richard Rainwater and Michael Burry to inform them no one can predict the future.

Mark (and others), for bonus points, pick the type and subtype that mkkby exhibits;

now that was funny, thanks Will.

You really need to review the fundamental basics of economics. Your polyanna approach does not help your cause. It makes your comments appear shrill and in need of a strong dose of reality medicine.

Our economy runs on transportation. 97% of transportation depends on liquid fuel from petroleum and natural gas liquids. See Peak Oil Perspective

Available net crude oil exports peaked in 2005 and have declined 12% since then (after China & India's imports.)

High fuel prices directly reduce economic growth and increase unemployment.
Consequently, trillions of dollars easy money has not raised the economy. Thus the current economic malaise is directly constrained by transport fuel prices - with projections for worse to come!

Wake up and look at the reality.

>>Wake up and look at the reality.<<

David, you might do well to drink some of your own medicine. You claim that the economy "runs on transportation," but that is bogus. 17% of the total 98 quadrillion BTUs used in the US last year were from non-fossil fuel sources, and only 28% of energy used in the US was used in the transportation sector. Electricity is an easy, if not always the most efficient, substitute for any form of energy. There is no need for fossil fuels, only for a cheap source of electricity, such as renewables (wind is now below grid parity and solar is on the cusp) or thorium. Even helicopters can run on biofuel (and they are not used to maintain transmission lines as much as you think). I agree that we need to continue to move away from fossil fuels, but the argument here, and in this greater claim that renewables need fossil fuel, is deeply flawed.

There's an old saying, 'If you bought it, a truck brought it..'

It's not just the sheer quantity of energy used by the transp sector, but the dependence we all have on everything it does for our current way of getting things done. Sure, it can be somewhat replaced by electric rail and cars.. for a hefty price, and on a cumbersome schedule. I'm in favor of both of those options, but I also say again and again, we're starting far too late, with an economy that is already staggering.

Almost anything you want to do today to change something significant in your world will require ordering stuff, be it led lightbulbs or I-beams and Windmills, stuff that trucks will have to bring down the road from a hub with a lot of other trucks.. we have to build tomorrow with little but the brick and mortar we're starting out with today.

Trucks and trains are minor uses of petroleum, it's mostly about light vehicles. Only about 1/7th of petroleum use in the U.S. is for trucks and trains.

And just the same, as shortages and price hikes hit, more and more things that once were shipped that are today available on your nearby shelves will become scarce, or suppliers who built their companies on models assuming the availability of farflung sources will start to shutter.

It's not just the overall 'Amount of Petroleum' but the balancing of the system that has driven multiple routes to supply various bits for every product and service.

You might think it's no big deal. We differ. I think it could be a really big deal. Each chain only needs one weak link to fail.. and while we can do workarounds and patch the bad links for a bit.. and ultimately we can create 'non FF chains' for things.. at this point we have so many FF dependent blindspots where shortages and price-induced closures can block the flow of stuff, we simply don't have enough of an alternate plan assembled to get much through it for some time. (It seems to me)

I tend to think that increasing oil prices will reduce 'just-in-time' and increase local inventories, shift freight from road to rail, and from air to road, and squeeze personal auto use so that freight is a higher proportion of a smaller consumption of oil for transportation. At some point in the next few years, I anticipate a wholesale shift from diesel to LNG for rail.

electricity is no good substitute for transportation. the energy density of fossil fuels is around 42 MJ/kg (oil) and about 0.5 MJ/kg for li:ion batteries - that's a factor 100 (ballpark) of difference! making energy efficient transport requires lighter vehicles, which is hard with electric (the nissan leaf battery weighs 300kg and you get less than 100 miles range....). for air travel, you need oil in some form (can be biofuel of course, but electric is a no go for aviation).

also keep in mind that typically something like 80-90% of all energy use (depends on which country you look at) comes from fossil fuels. replacing this with electricity is very hard to impossible. after the oil shock of 1973 the french decided to build out their nuclear power at an unprecedented rate, i.e. using a well known and proven technology of that time. it took them 15 years to basically switch over from fossil electricity generation to near 100% nuclear, building 50+ nuclear reactors in those 15 years. and remember, this is only something around 20% of the energy the french are using. this gives you an idea of the timeframes involved - we can't just "switch" to electricity. even if we do absolutely massive crash programs, it takes decades. and if every country on earth wants to build out on the same resource, you can already project big supply shortages of everything needed...

"electricity is no good substitute for transportation.." ??

That's a bit too broad, Fierz, unless you have a way to apply it to Electric Railways, which beat Fossil Fuels on Rubber Tires with a wide margin.. They just demand a big investment, but also can deliver a substantial return.

I seem to recall you being from Switzerland, and maybe were one who has taken an inconoclastic view of the successes of Electric Rail developments in your own country and elsewhere..? I'd be curious to know why, if you are him.


Hi Bob,

of course you are right, I only talked about cars. Trains are by far more energy efficient (factor 10 or so more efficient than cars), and electrification there is easily possible in contrast to cars. But in the big picture, electric trains today are not important at all - in Switzerland, they provide a bit under 20% of all passenger transport, and that's here with one of the best and most electrified railway networks. the challenge will be to replace the cars! That isn't easy, because our trains are already full, and the tracks are full too...

the energy density of fossil fuels is around 42 MJ/kg (oil) and about 0.5 MJ/kg for li:ion batteries - that's a factor 100 (ballpark) of difference! making energy efficient transport requires lighter vehicles, which is hard with electric (the nissan leaf battery weighs 300kg

The Leaf is rated at 99 miles per gallon gasoline equivalent (2.4 L/100 km), which should be three times better than a comparable ICE car. Thus the "kilometer density" (km/kg) is more like a factor of 30 better with ICE. Then that is somewhat offset by the rest of the drive train being lighter in an EV.

building 50+ nuclear reactors in those 15 years. and remember, this is only something around 20% of the energy the french are using.

Actually, it is more like half of their energy, since you should either count the waste heat of nuclear production OR the three times higher energy efficiency in transport. (Two sides of the same coin, actually, you trade heat for improved energy quality.)

we can't just "switch" to electricity. even if we do absolutely massive crash programs, it takes decades. and if every country on earth wants to build out on the same resource, you can already project big supply shortages of everything needed...

If we need to wean off oil by electric transport due to high oil prices (i.e. "scarcity"), then we'd simultaneously ramp all electricity sources to avoid bottlenecks, but first and foremost, we'd provide more fuel to electricity plants that doesn't go all the time (to let cars charge in off hours). We can also save some electricity that we use for other purposes to fuel our vehicles. The electricity production issue is really, really easy, in fact. The crucial bottleneck should be in electric car production, especially batteries.

The VW polo bluemotion is rated at 3.3 l/100km. The leaf is a whopping 1.5 tons heavy, which is one of the reasons that it isn't that much better despite the electric drivetrain. And whether we are talking of a factor of 30 or 100 doesn't really change the picture - the energy density of the batteries is so much lower that electric vehicles need very heavy batteries and nevertheless have a very short range.

If you want to count the French electricity as half their energy, that is fine too. The point is, it took 15 years, all with a technology that was readily available to them. The Germans have been building solar PV and wind turbines at high speed over the past years, and are still in single-digit-energy-production with these. It takes a lot of time to move to a new technology!

I disagree that the electricity production issue is easy. It's technically easy, but practically, you are limited in many ways. For example, current nuclear reactor technology with its one-way-through fuel cycle cannot be ramped up in big style globally, because we don't have enough reserves of Uranium. All other technologies don't deliver the massive amounts of power you would need to substitute fossil fuels...

Battery energy density will likely improve as we go along. Also, the fact that there are ICE cars that are efficient is very good - this makes it less urgent to ramp EVs. Also, I'd guess families with two cars could have one EV and one EREV (hybrid) for different purposes. Families with a single car could either have an EREV for all purposes, or have an EV and then hire an EREV or an ICE for long trips.

Germans have been going slow since they have chosen inefficient tech. They could have (should have) been coal-free in the early 90-ies just like the French, if they had chosen to persue nuclear as well.

Actually, nuclear can be ramped quite well even with once-through cycles. Uranium is abundant. But sure, really long term we'd need at least a part of the fleet to be fuel-producing breeders.

mkkby -
I think it is fair to say I have read most of Gail's work here over the years, and most of the replies to it also. I think, insofar as it will affect her message, that the flaws you may be referring to will, for the most part, amount to no more than opinion. I doubted her views re the future initially, but have come to believe her viewpoints are, for the majority of people, essentially correct, timing uncertain. Prove me wrong. Likely we will both be gone before you can. You are welcome to try though, I've not lost the ability to be swayed by a good argument.

An addendum while I'm thinking of it -
Details here and there may or may not come to pass,eg "Eventually, as costs become too high, some roads will need to be changed back to gravel, or no longer be maintained." - I live with dirt roads here in backwoods Maine, my opinion is that paved roads are cheaper for society to maintain until volume of traffic becomes extremely low, and that a decision to revert to a dirt road is essentially abandonment. Note the paving stones under the streets of our older cities, or the Roman roads, or recently excavated paved Mayan roads or even a few paved ancient Greek paths.
Central message unaffected.
That said I think that some cities will maintain their ability to attract sufficient resources and continue manufacturing and trade. To what degree I don't know. It depends on maintaining access to affordable electricity, rail, water & waste management, deep water ports etc.
Other cities will wither.

"I'll just say, you have no more skill in predicting the future than anyone else -- which is to say, zero. "

heh, so all people have zero skill in predicting the future?

Well, I know one guy who can duck a shoe when it's thrown at his head, and he's an idiot. Therefore there must be a way for some people to predict some of the future with some accuracy some of the time, provided they have good information input and can form an intelligent model from it. It can probably be proven statistically, where you test native models for accuracy within different contexts - so Warren Buffet scores higher in predicting the price of pork bellies than I, but I can tell how my wife's mood will be this evening more accurately than he. In this way a predictive power could probably be factually established. O'course there's the well informed but outmoded predictive models that seem to make your case - the economists who were caught completely unaware by the housing bust, but we pro-clairvoyants can say that their perfect model of economics didn't include an input for certain streams of real data, while others whose did reported it coming a mile away. But you're saying it's all just luck of the draw eh? Well, I admire your humility! :)

I strongly disagree.It doesn't take a genius to understand the situation as Gail has so capably described it;and while she may not be a genius, she is obviously a LOT smarter than the average person, and a highly capable independent thinker.

I will agree that the future cannot be predicted in great detail, or that time future lines can be predicted in detail.

But speaking as a reasonably well educated person, in both the sciences and the humanities, I can say that the generalized predictions made by people who understand the basic sciences well stand up pretty well, especially in the cases where the scientist has a good real world grasp of "human nature".

Now some might for example point out the "failure" of Malthusian predictions of nature to take care of population pressures as being a valid counterargument, but he was born too early to foresee the industrial revolution.His predictions have been borne out again and again, on the local and regional level.

And guess what?

They will be borne out world wide in a few more decades when we run short of easily obtainable and affordable fossil fuels and minerals such as rock phosphate, not to mention clean water.

I have a friend visiting relatives in Arizona at this minute.He tells me that he can easily walk across the Colorado at the point where the old Yuma ferry was located in the early days;it seems that the river was a mile wide at that point back then.

Some of us are capable thinkers,including many cornucopians, and I believe in the mind stretching qualities of science fiction, fantasy, and television programs such as Star Trek.

But such stretching of the mind is useless or worse than useless unless it it counterbalanced by a strong basic knowledge of the physical sciences.Barring a breakthrough in fusion power, or some other similar near miracle, there is simply no way we can continue bau too much longer-this conclusion is inescapable if ones applies basic arithmetic to the basic relevant facts as Gail has done, and done superbly well.

Depletion is inescapable, although the exact time frames when various non renewables run desperately short are debatable.

Renewables themselve are not concievably scalable enough to save our mangy hides.

The eroei of solar panels might be theoretically important, but it matters not a hoot in practical terms for the next few decades.

Perhaps it is worth a few more electrons to explain why in simpler than usual terms by example.

I'm an old guy now, with considerable experience in several various branches of technical knowledge , due to my rolling stone life style and eclectic interests.

But I have only the foggiest idea of how the vast majority of industrial /chemical / medical processes work, or else no idea at all.I haven't more than a fuzzy general idea of the processes involved in manufacturing the fertilizers and pesticides buy every year for instance.

If I had plenty of help and a few months or maybe years to do it, I could probably figure out how to smelt some crude cast iron starting with what I know already-assuming I could get hold of the ore, limestone, etc, assuming I could find somebody who knows how to build a crude blast furnace-assuming HE could find somebody who knows how to make the fire brick and molds-assuming THAT GUY can find somebody who knows how to manufacture or mine the necessary materials.assuming again that somebody is still mining the materials, and they can be delivered-assuming again that the electricity is on, and that the industrial supply store is open and well stocked-ultimately we must assume that the whole kit and caboodle of bau is up and running just to produce some nearly useless poor quality cast iron, including the educational system, the police, the courts, the defense of trade against pirates, etc.

I have old (and elderly) friend who is only very poorly educated in the formal sense, but he is very bright, and an excellent all around mechanic, capable of earning his living in almost any sort of technical industrial setting.He also drives trucks sometimes, and when I discussed these matters with him, he thought about it for only a minute.

His response was simple and direct, and directly to the point.He said first that most of the old knowledge and skills common to his youth are lost already, and cannot be regained within any realistic time frame.

The orchards that his grandfather and mine maintained, with next to nothing in terms of chemical inputs are gone-replaced with modern orchards that will produce next to nothing without constant chemical inputs of fertilizer and pesticides.

There aren't any draft animals to work the fields, and if there were, there is no housing available for the town folks to live near the fields, and no hope of teaching them to farm by the old methods.

So he describes the situation like this:suppose you are driving a loaded truck up a long steep hill in say seventh gear (out of from anywhere to nine to fifteen gears in most heavy trucks). Everything is fine so long as you don't have to stop.

But if you DO STOP , for ANY reason, you will find that you cannot get started again without the use of the first second third fourth .... gears.

The skills, knowledge, and industrial base built on them-the first thru fourth gears, so to speak, that in times passed supported us no longer exist on any scale relevant to supporting billions of people, with the exception of perhaps the peasantry in places like rural Asia and Africa-places where Malthus has been proven to be right again and again.

To think that renewable s can be scaled up and put into place quickly enough to displace fast depleting fossil fuels is whistling in the dark.We are like the yeast in the classic freshman biology experiment-as our population is doubling,while our environmental heritage is being halved.When the crunch hits, those of us living the techno/industrial lifestyle are gonna be sol.

Of course there is some slight chance that there will be breakthroughs in the biological and materials sciences that will enable us to dodge the bullet.But the odds are very much against them coming in sufficient numbers and in timely enough fashion to save our bacon.

Add in the impossible to keep financial promises that have been made to the boomers, etc, and it is simply the next thing to insane to think we are going to come through the next half century intact.Of course none of this is apt to affect me very much, as I expect to be safely composted before tshtf.

Gail is actually breaking the news as gently as she knows how.

Gail, you really need to tone down the doomsday predictions.

There may be plenty of reasons, but what makes *YOU* qualified mkkby to make the claims you have as to why?

Do you -mkkby- have insight into why Gail's wrong? VS just handwaving 'others have spoken'?

Gail was one of the voices saying economics not physical reality would dictate peak effects and got that call right. Why should any of us listen to mkkby?

(and mkkby - you might benefit from understanding who's bringing the doom talk here. It is the DOE. Gail gave suggestions to make the doom of the DOE a bit more tolerable.)

"you have no more skill in predicting the future than anyone else -- which is to say, zero"

Much better than zero

Any solution that does not address over population is a non-solution.

Yes, we can improve the efficiency. We will just use more energy, faster.

Yes, we can frack all day long. We will just drain more of the other necessary resources.

The reality that we need to accept is that our problems are not just about energy. Earth cannot support 7 billion people with our primitive level of technology for too much longer at anywhere near the level of comfort many of us are accustomed to.

Without a global plan we will see less rich people and more poor. Those that gain will come at the expense of those that lose.

How about the leaders in the G20 sitting down together and trying to come up with a solution to the following question - how many people can Earth support without fossil fuels at the level of a middle class person from the West.

This "reaching equilibrium" will happen. We can do it the hard way (global plan) or the really hard way (war, starvation, disease, etc.).

Too many people are unable to speak about the obvious for fear of losing their income and stability. Thus, expect a fall before the real issues are addressed. This is how humanity learns.

In the meantime, perhaps we can throw the "control population" issue a bone, once in a while.

Indeed. But it is such an 'untouchable' subject. And we have actually been moving BACKWARDS on this topic.

A significant segment of the GOP has gone from being an anti-abortion party to and anti-birth control party. Presidential nominee Santorum spoke openly of the evils of birth control. Defunding Planned Parenthood has become an issue that the GOP is rallying around. Zero Federal funding can be used for abortion, so this is just anti-birth control.

I don't understand it. The right logically supported Title X funding as a way to help poor people avoid pregnancies that would enlarge the welfare rolls. The title X funding was championed by George HW Bush and signed by Richard M. Nixon. But those guys are now viewed as crazy hippie-socialists now.

Even supposedly moderate Romney has said he supports a 'Personhood' amendment which would effective ban all sorts of birth control such as the pill and the IUD which often operate by preventing an egg from attaching to the uterus. Of course we know he'll flip-flop on that ;-)

Yes, all leadership based on religion will want growth for a very important reason - there is power in numbers. If the rational, intelligent sector of the population is working to reduce their population levels to more sustainable levels, the religious leadership will be more than happy to shore up their numbers for more power and control.

The social instructions given by 1000 year + religious books were written when humans were a mouse in a huge corn field. Now humans are an elephant in a tiny china shop. Why didn't the famous religious books address this obvious point (exponential growth in a finite system leads to problems eventually)? Well, I think the answer should be self evident to most people.

I can't tell if you are being sarcastic or not. But I think the famous book does address this point. The whole apocalypse, Book of Revelations and so on.

A book of ancient superstitions does not address modern resource limitation problems.

Population is definitely an issue, but it is awfully hard to fix. I think the world would need to drop the number of children to less than 1 child per family to get the population down far enough, fast enough, but people wouldn't stand for this. Children bring great joy to families, and are a way of carrying on the family "name" and heritage. They also provide the parents security in their old age, especially if governmental systems are doing badly.

OK, here on the Oil Drum almost everyone feels the DoE should do more to help with the difficult energy situation. However they have tried a lot and it has not gone well for them.

Solyndra is now the Obama administration's biggest scandal. $520+ million loan to a company that is now bankrupt.

But they also gave some support to:
-Evergreen solar . . . that went bankrupt
-Ener1 . . . that got delisted from Nasdaq and is hangingon by a thread
-Beacon power . . . that went bankrupt
-A123 that has seen its stock collapse

These attempts at helping the energy situation are turning out to be political footballs that will likely reduce future government programs in energy.

What exactly should they and can they do considering today's political and fiscal realities? I'm asking this as someone that supports such efforts but is pained by the apparent failures.

Here are some suggestions of mine:
-More programs that provide indirect support for companies by providing incentives to consumers. Things like the tax-credit for battery-powered cars.
-Changes in the Federal procurement process that supports energy efficiency in all government assets (LED lighting & insulation in governmentbuildings, hybrids & PHEVs for government vehicles, etc.)
-Continued tax-breaks for energy generated by wind & sun
-Opening up ANWR in exchange for per-barrel royalty tied to market prices that is used to pay for alt-energy programs

Here are some suggestions of mine:

Change the 179 rules so that renewable energy collection devices are able to be written down.

Re your suggestions - you need to study the energy statistics!

Battery powered cars are pointless, since they will take decades to come to market, and probably will never be very useful due to limited range. In terms of consumption, they offer no advantage over normal cars if they use electricity generated from fossil fuels. On the other hand, you could just switch all cars to very economic models which can get 70mpg, and instantly start making a huge impact.

lighting is negligible in the big picture. sure, it helps, but what we need to reduce is consumption for transportation and space heating.

"new" energy generation (wind, solar) will also take decades to be relevant (i.e. to reach a market share of 10 or 30%). we can reduce consumption instantly, and that's where we need to start.

ANWR: if we had any fossil fuel reserves in my country, the best thing i could think of would be to leave them in place until TSHTF for real, you will be glad to have them then!

Thanks for the input but it seems more complaining than useful suggestions. What car gets 70mpg? I guess some diesels do but diesel also costs more per gallon, so a lot of people are mislead by diesel.

Battery cars don't take decades to come to market. They are on the market now. And statistically speaking, limited range is pretty much fine since it covers 90+% of daily driving. Just use an ICE/hybrid/PHEV when you need to go further. The problem with battery cars remains the high price but that should come down a little with mass manufacturing scale. But even an inflated price, they will make sense as the price of gas goes up. I really think people won't complain about the limited range so much when gas starts costing $7/gallon.

Space heating is a good point. I think new homes need to be built more efficient. But natural gas will provide space heat for the near-term future.

Your position on ANWR is what mine has been for many years. But the problem is that ANWR is now a rallying cry that prevents other measures from being taken. People won't admit that we have a problem until we are fully tapped out. So drill it up and dispel the 'ANWR will save us' meme.

Regarding your idea on ANWR (and other 'off limits) areas:

Yes, it is far past time to call their bluffs and call out their ignorance and/or lies, and implement a crash, expensive, hugely-publicized campaign, run by the bully pulpit of the Presidency, to pay oil companies bug subsidies to thoroughly drill ANWR, NPRA, and all the OCS areas they want...

...if we get substantial finds of oil and NG, great...if we don't, fines.

Either way, we will have taken the oil/NG explorations in U.S./Canadian (why not include Mexican) -owned areas to their limits, and from then on we can have even the most ignorant U.S. citizens understand that there is no more 'undiscovered country' wrt oil and NG and that we need to focus on what to do next.

This is sooooo simple, the only reason I see not to do it is that certain factions would not want to lose their 'off limits resources' talking point s to win political points. The counter factions are too dense or timid to push this noodle and call the other folks out.

It is contrived political theater.

The VW polo bluemotion gets 70 mpg. Yes, it's a Diesel. Other small cars can get close to 60mpg, even gasoline. So I'm absolutely not "only complaining": Electric cars offer zero advantage over these small cars in terms of fuel economy / CO2 production if they are run on coal-generated electricity (which would be the case in large parts of the world, including the US). They offer the huge disadvantage of new expensive technology, and very limited range.
Gasoline costs 7$/gallon in most parts of Europe, and customers/testers are certainly complaining about the limited range of the electric cars.

The problem with electric cars is that they are part of the "false fire brigade" - they seem to do some good, but they don't really, at least not the way they are built today (as 1:1 replacements of 1.5 ton vehicles).
Battery vehicles will take DECADES to take a meaningful market share - just wait and see. It's always been like this with new technologies, apart of perhaps some apple products. We need an iCar :-)

I don't see a possibility of leaving reserves in the ground "until we really need them". The problem is that we need our current systems to extract, transport, and process the oil. Bypassed oil will likely never be extracted, because it will be too expensive and time consuming to build new pipelines and other infrastructure for just the bypassed oil. We also need to keep enough trained oil people working, to be able to extract difficult oil resources.

For example, any oil from ANWR could be used to help keep the TAPS oil pipeline operating. Without enough oil, major upgrades (installing heating, for example) are likely to be needed to keep the pipeline operating. Heading Out has written about this issue. Oil from ANWR would likely not be enough to support a new pipeline by itself.

Talk about somekind of suicidal passion ...

Frankly the first thing you should do is to stop building and buying stuff like that :

As well as stuff like that :

And by the time ANWR oil is needed, bringing it back with tankers will most probably be possible most of the year anyway ...

Actually, that seems like quite a dense neighborhood. The houses are almost standing on top of each other and no gardens. But the roads seems extremely wide - why? (I'm comparing to what I'm used to in Sweden.)

Yes, the width of roads in residential areas in the US is most of the time quite amazing, due to some regulations I think (fire department and the like), add to that the big driveways and most of the ground is paved...
About density, think these houses are quite big, and with the roads width, density most probably quite low (in terms of FAR, floor area ratio, as well as people per square mile or km).

Meanwhile, the car segment with the highest sale growth in the US is still the "mid size SUV" :

That is something with a consumption of around 17mpg city, 24 highway :

That's fairly high density by American standards and it seems to have pedestrian-friendly features like a rectangular street pattern, diagonal roads, and walkways between cul-de-sacs that you don't normally find in American suburbs. The following is probably more typical:

Try walking between any two widely-spaced points on that street pattern without cutting through people's yards, and you will find it takes you about three times as long as walking in a straight line.

A lot of American local governments mandate ridiculously wide roads for new developments. The usual justification is that they want to allow for two fire engines to pass each other side by side, which is great if you want to hold fire engine races. They fail to recognize that far more people are killed by cars speeding on these over-wide roads than are killed by fires.

The first picture is more typical of cities in the US southwest, such as Phoenix, Tucson or Las Vegas. They're easily that packed together, if not more so. Of course, they won't be populated for a whole lot longer. Just use Google earth and it's a scary sight!

Yes...I chuckled when a poster recently said that people have to move from cold Northern states...because I thought about the potential issues with water in the SouthWest...and California...Texas...and then thought about how much people would enjoy the great U.S. South w/o air conditioning...and we are heading towards 400M people by ~ 2050 or a few years sooner...

Back in the UK there was an issue with parents' cars narrowing the access for fire engines at a local school. The fire rep was interviewed about the issue 'No, problem, our engine is big enough, we'll just drive straight through'.


I don't think that "picking winners" works, so I am not convinced that any grant program is helpful. If the government demands to be reimbursed before other lenders (as I understand was the case with Solyndra), it may even drive other lenders away.

One of the things that is likely to bring the economy down in the long run is increased complexity. With lower energy supplies ahead, we really should be aiming for decreased complexity over time. So subsidizing approaches that make grid balancing more and more difficult (and requiring increased complexity over time) seems very iffy to me. It seems to me that we need to be figuring out how we can do processes with little/no energy, except for direct solar energy and local materials.

I don't think that "picking winners" works

The 'picking of winners' works fine for the people picked to be 'the winner'.

For each action of government, there is a winner. It just may not be citizens is all.

The first thing to realize is that change always involves massive failure. There were hundreds of automobile companies that have failed. There were dozens of aircraft makers and farm equipment manufacturers that failed. There were hundreds of computer companies that failed. There were hundreds of internet companies that failed. It seems that the only way to find the right way to do something is to test most of the wrong ways first. Eventually out of all these failures a few figure out how to do things right and change happens.

That being said the government is probably among the least qualified to pick the few winners that will emerge. What the government can do is punish evil doers. I believe that massive carbon tax is the simplest way to encourage all of the schemes that would encourage both the conservation of fossil fuels and new sources of non fossil fuel energy. Of course nobody listens to me, and they probably won't listen to you either.

Yes, clearly the way to go : not trying to define the solutions, just favorizing any solution that truly make sense.
And to avoid these taxes hitting the poor much compared to the rich, a big part of their revenus can be but in direct redistribution equal share per capita, as proposed by James Hansen for instance in (2) below :
But as you said, most probably won't happen ..

Islam is the most significant flaw in the attempts seeking pat answers to making it through the Oil Interregnum unscathed. Western powers are reinforcing military presence in Bahrain and Diego Garcia, not to mention the massive US Embassy in Iraq! And, Gail, you stick to your work- get the information out there, so it can be discussed in this courteous forum.

The other end of the spectrum is blithely going on as though energy for transport, agriculture, etc. has no limit. At least we can agree, on TOD, there are limits to conventional oil. That is a starting point to carry into examination of crucial elements of economic methodologies, particularly the transport modes chosen in this thing we call "Civilization". Western countries have given China a leg up in manufacturing and R&D capability (they know how to hack into it) and now we are kept afloat in part with Chinese capital coming back our way. But this will end soon.

We have too little time, but need to get cracking ASAP on certain physical hardware; elements to assure victuals production/distribution, and basic manufacturing (shoes & underwear?) to carry us through a period of global commerce meltdown.

Or, if Alfred E. Neumann is right, let's do these needful things to create jobs! China is in the largest rail capacity/reach expansion on the planet. They are doing this AFTER apparently taking the lead in the race to be the masters of world car production and new car ownership numbers. China expands the truck fleet at record pace as well; so what gives with the railway engineering at a record pace?

China reads Sun Tzu, and is playing the next inning already, and a few more after that... Chinese strategic planners required the world's largest oil reserves, now the world's largest strategic tank farm oil storage- Chinese as well as American military planners know even without the Israel factor, the 1300 year old Islamic Shia/Sunni feud is going to erupt into a regional war sooner or later. Oil flow will be severely impacted, terminals, pipelines refineries & fields sabotaged. Some tankers enroute could be targeted.

Military think tanks of all developed countries know that the pieces are in place for another Arab attack to eradicate Israel, probably Syria/Egypt and Iran (if not crippled first). This will be the most horrific conflict yet, probably hurting Israel very badly. But Damascus will be no more. If Egypt unwisely gets into the fray, they shall not recover for decades, owing to destruction of their showpiece Aswan Dam. Israel has warned of a long list of consequences for attacking Tel Aviv, and they should be taken seriously. The West lacks the nerve & skill to muzzle Iran or Pakistan, so the sad march goes on. Israel is a fact & cornerstone of western civilization, predating Islam by over two thousand years. And so the stage is set.

Where does this bring the Peak Oil discussion? Aftermath of a large Middle East conflict shall most certainly require US Federal Executive Emergency Orders for motor fuel rationing, and probably mean suspension of all foreclosure proceedings. Gold and Silver coins & bullion shall be called in to shore up the Federal Currency. Federal control over transport systems: truck fleets, public transport systems, airlines, railways, and troops along pipelines, water works, electric distribution facilities. Wage & price controls. Local police forces and state national guard units share infrastructure guard duty. Army/Guard reformed logistics units will park the trucks and C-17's and get to work on rebuilding dormant rail branch lines.

This is not a new discussion in strategic circles. America has these very emergency actions already on paper (crafted during the Nixon administration), needing only executive signature. The closure of Straits of Hormuz, Suez, and Bab El Mandeb waterways will irrevocably change the Peak Oil discussion. -End of Globalization running on oil- All the king's horses and all the king's men will not be able to put Humpty Dumpty together again. "Fortress America", not globalization, will be the subject of Thomas Friedman's next best seller.

Back to to you, Gail-

Islam is the most significant flaw in the attempts seeking pat answers to making it through the Oil Interregnum unscathed.

Why would Islam be a problem?

the 1300 year old Islamic Shia/Sunni feud is going to erupt into a regional war sooner or later.

Just like protestantism and catholisism, I guess.

most horrific conflict yet, probably hurting Israel very badly. But Damascus will be no more. If Egypt unwisely gets into the fray, they shall not recover for decades, owing to destruction of their showpiece Aswan Dam.

Seems to be a terror balance here and it has worked for quite some time. Why would the newly liberated Egyptians like to lose all in a war instead of building a good economy for themselves?

Aftermath of a large Middle East conflict shall most certainly require US Federal Executive Emergency Orders for motor fuel rationing, and probably mean suspension of all foreclosure proceedings. Gold and Silver coins & bullion shall be called in to shore up the Federal Currency. Federal control over transport systems: truck fleets, public transport systems, airlines, railways, and troops along pipelines, water works, electric distribution facilities. Wage & price controls. [...] America has these very emergency actions already on paper (crafted during the Nixon administration), needing only executive signature.

So, you're convinced that a conflict will be met with economic stupidity by the government? Can I read those papers somewhere, with confirmation that they reflect current thinking? You may be right, but I would be surprised if the American administration haven't learned anything at all since the Great Depression.

While all religions are superstition based, Islam codified actions into law that make reason and emergent action very difficult.
Just look at Islams record of modern scientific progress, and using my own euro centric bias of free speech and democratic institution, they don't exist in the Islamic world (Turkey and Indonesia come the close, but one couldn't read a book by Dawkins, or mention the Albanian Genocide).

We can get postmodern on this, and say the reference is cultural, but higher Co2 doesn't care about your references.

"If the indicated temperature change is lower and if fossil fuel use is declining rapidly regardless of what happens, the need for climate change mitigations would appear to be lessened."

Not really. Much of the climate forcing is already in the pipeline and it was just reported that the all time high in emissions was greater that the worst case scenario of the last IPCC report.

Climate change is not something in the future it is something that is happening now. Even if emissions were to stop today the emissions already in place would continue to wreck havoc to crops, ecosystems and infrastructure. Given that we are currently taking no action, minimizing the threat is most unhelpful.

Meanwhile the current top Empire is the US one and not an Islamic one (which is totally unable to unite anyway), US Empire with around half the military spending of the whole planet.

As to the fact that most or a lot of oil reserves are under "islamic grounds", you can consider this a geological/historical coincidence, and also realize the level of western in general and US in particular interventions that has been going on in the area since the fall of the Ottoman Empire.

For instance the oil being shared amongst the "7 sisters" prior to WWII in the area, or the Mossadegh story, US/KSA implicit agreement and "friendship" (and Reagan having the Saudis increase their prod in 85 to push USSR down), the fact that the first oil shock being an "agressive move" from OPEC is a total myth (higher oil prices/lower OPEC prod was completely in line with western majors interests), as well as the embargo having had any impact (wasn't effective anyway especially from Saudis towards the US), last two points more or less to cover up US 71 peak, etc ..

Edit : sorry misplaced comment, should be below tahoevalleylines comment above

>>"Renewables" such as wind, solar PV, cellulosic ethanol, and biogas could more accurately be called "fossil fuel extenders" because they cannot exist apart from fossil fuels.<<

This is fundamentally wrong. It would be accurate to say that fossil fuels are generally used in the production of renewable equipment today, but there is no reason that renewable equipment production must continue to rely o fossil fuels as trucks can run on biofuels or electricity, etc. Even today, 31% of electricity comes from non-fossil fuel sources so I would venture to say that the amount of fossil fuels currently used to make renewable capital investments is lower than you might assume.

>>If we lose fossil fuels, we can expect to lose the use of renewables, <<

How so? Solar and wind are 20+ year assets, they will continue to operate without the need for fossil fuel inputs for decades. It is exactly this fact that makes renewables so attractive relative to fossil fuels, as they do not require ongoing fuel costs to run.

Wind and solar require oil for servicing the systems they are part of--if nothing else, the electric transmission lines, used to transmit the electricity they produce. They also are likely to need replacement parts--batteries, if the solar is off-grid, and replacement parts for the wind turbines. All of these are likely to need oil for manufacture and transport, so there is a continuing need for oil. So none of these can be expected to last much longer than oil.

While there is a theoretical possibility that current equipment could be changed to run on electricity, the cost of such replacement would be prohibitive, unless done over a 30+ year period, so that only equipment which would normally be replaced is switched over to electric.

Biofuel is by its nature limited in quantity. Most of it today is alcohol, which will not run diesel equipment.

The issue is not the cost of the fossil fuels--it is whether or not the fuel will be available at any cost. If there is a breakdown in the system--perhaps because of financial difficulties--then the so-called renewables won't work either, for very long.

All of these are likely to need oil for manufacture and transport, so there is a continuing need for oil. So none of these can be expected to last much longer than oil.

I just can't buy this!

I have been a member of this forum for a little over 4 years, if there is one thing I have learned here, its that we are not running out of oil. We are running out of the cheap easy to access oil that has allowed a few of us mostly in the western industrialized world to live in wantonly wasteful ways squandering energy at will.

This is a paradigm that will surely soon meet physical reality and end in relatively short order.

There is nothing that I have learned here that leads me to believe that we can't build a so-called renewables based civilization with the fossil fuels we still have. Will such a civilization resemble BAU in any way? Very probably not.

Will there be a massive reset of our current fraudulent financial system? I certainly hope so and the sooner the better!

However there have been several examples of at least somewhat successful civilizations throughout history that managed quite well without anything resembling our current financial system and they still managed to organize their societies and produce and successfully maintain rather impressive and complex structures...

Hanging Gardens

I fail to understand how electric transmission lines require significant amount of oil to keep in working order. You cite helicopters - they are actually used very sparingly now as robotics take over more and more of their duties. I have never seen oil as a significant cost in any transmission line project financing I have looked at. Plastics can be easily made from synthetics, manufacturing is mostly run off of electricity except for some thermal applications, which can be easily switched to electricity.

It is fair and accurate to say that oil is used in large part to manufacture and transport wind turbine parts today - but there is no reason why this must continue to be the case. If the cost of oil really is going to rise as much as you say it will, I think you will see industry and transportation rapidly adopt new technologies that do not require fossil fuels to operate. There are simply too many different substitutes for your thesis that renewable energy is doomed to decline with oil - if anything it will be the only reason we continue to have access to cheap energy after oil declines.

The big trick is the transition.

Lots of Utility repair trucks from Maine are down in Connecticut this week, helping to restore the power from one, early snowstorm. How many such trucks can you envision us switching over to Electric in the short term? It's surely possible, but in no way is it easy, quick or cheap. The hour is very, very late.. and we are more than a dollar short, too.


Commercial trucks usually have a longer life than private cars and light trucks. In the short term the big savings will come from replacing low mpg vehicles used for private commuting with a combination of PHEV and EV's, car pooling and mass transit.Other savings could come from more school children walking to school or after school sports, less frequent shopping trips, fewer driving vacations. For electric utility vehicles servicing suburban transmission these will be needed with either a national grid or just a local grid. Enough oil should be available to maintain long distance HV transmission lines in any oil decline scenario.

For the US the top priority is to set up a sizeable VOLUME BASED GAS TAX, full stop, stop talking about solutions, and btw primary short term solution is most probably much ligther less powerfull ICE cars, you will see, and you would get to any solution making sense if you were setting up meaningfull policies.
But most probably you will not, way too commited towards total economic suicide I guess.
Quite revealing that the first hubbert peak newsletter that was posted here some times ago was adressing this tax issue, and that today overall nobody is even able to talk about it.
Leave the solutions definitions to the FREE MARKET !
I thought you people believed in that, not the case anymore or what ?

And maybe also important to remember that RAW MATERIALS aren't a "product", they aren't "COMMODITIES" either, they are RAW MATERIALS.
So talking about free market regarding raw materials is ridiculous, you don't set up an oil production factory if a bank is willing to lend you the capital for it, you extract raw materials if there are some in some grounds you have access to.
The closest thing resembling free market practises around raw materials "production" is called WAR(or colonisation, or "defense agreement")
Labeling the first oil shock "OPEC agressive move", or "Arab Embargo" is a TOTAL JOKE.
First oil shock needs to be called "US OIL PRODUCTION PEAK SHOCK", that is exactly what it was.
Prior to OPEC quotas and limits on production a barril was $1 or 2.
That was NOT SUFFICIENT to start Alaska, GOM or North Sea.
Western/US majors NEEDED higher oil prices.
US Diplomacy PUSHED OPEC towards the quota policy and higher oil prices.
Moreover the so called "embargo" was never effective towards the US especially from the Saudis.
These are plain simple verifiable HISTORICAL FACTS

From the article: “What we need is oil substitutes that cost $50 barrel or less--cheap substitutes--to help counter the recessionary force of high oil prices. “ A high school child could have come up with such a sentence or others such as “we need a cheap substitute for water to help counter the shortage.”
Is that substitute unlimited or just an extension for keeping the BAU somewhat longer? And why do we want cheap barrels of oi? It will produce a larger world population, water shortage, more cars, more MacSubs, faster global warming, destroying the environment of what’s left.

From the article: “People will be giving up their cell phones, not adding them, so systems for using car pools should be simple."Call on your cell phone, and an operator will log you into a registry and send a vehicle your way”. What "givng up cell phones" has to do with Alternative Transportation? So, why giving up cell phones if they are needed?

You lost me on the cell phone thing. Not exactly agreeing or disagreeing; more just plain mystified. These days, what used to be "dial a ride" is often best summoned (best = without an eons-long wait on eternal hold) with a bunch of thumb-motions on a web-enabled phone, because, as with other businesses, no one wants to be bothered to staff anything any more. And yet it does seem plausible that if the economy keeps getting worse, fewer people will feel able to afford the expensive "plans" that underlie said web-enabled phones. (And the ones who can still afford them may still be driving, anyway.) Should that come to pass, we'll indeed be needing a less expensive and technologically intricate way of summoning such rides even if it involves a tiny bit more staffing.

Now, you might well argue, in the same spirit as others have been doing here, that it won't come to pass and Gail is being too pessimistic, but (1) that's a different argument, and (2) the expensive web-enabled-phone "plans" do strike me as the sort of frivolous luxury people might give up (or not adopt in the first place) even under circumstances falling far, far short of The End Of The World As We Know It. After all, some people do find Angry Birds to be fun, but when one gets down to brass tacks, hardly anyone actually needs 24/7 portable web connection, even on the broadest possible definition of "need", far, far removed from, say, reverting to medieval peasantry or anything of the kind.

Cell phone systems, including data, are turning out to be a more economic solution for much of the world than land-lines. My guess is that the cell phone economic advantage indicates that even with all the high-tech infrastructure, beaming low-power radio around uses less energy, materials, and labor than a spiderweb of copper wire and telephone poles. Many rural areas in developing countries have good cell coverage today, and will likely never build land line phones.

So I think cell phone communication will likely be a useful part of low-energy lifestyles for a long time. Already cell phones help co-ordinate the shared vehicles that provide basic transportation for much of the world (you could call them jitneys, or combis, or tut-tuts, or shared taxis but private operators don't just fill all the seats, but they usually try to fill every cubic inch of interior space plus hanging paying cargo off the outside, if they can).

Cell phones in transportation organization do not have to be complex web-based systems, but may only be the few bits required for a text message.

You may be right about cell phones. The less infrastructure a system can work with, the more likely we will be able to maintain it. Where we are likely to run into problems is when we are layering more and more complexity into systems, as when we are trying to make our current electric system accommodate more and more intermittent electricity, without adding storage capacity. All we need to do is figure out how we can beam electricity around without the transmission system.

a spiderweb of copper wire and telephone poles.

The Copper and poles represent a resource for 'harvest' - how many meals of cooking can you get outta a pole?

Yet another clear and to the point report from Gail, thanks for that.

Agree with most of the points, especially about :

CCS : evaluation of efficiency loss is around 30 to 40%, and this is heavy industries, capturing, transporting, pumping tons, not electronics, no major progress to expect there. The CCS story is in fact all about pushing BAU further by adding systems on top of systems to push the trash under the rug, while accelerating ressource depletion in doing so (as well as all the other pollution due to ressource extraction like for coal mining for instance), also requires spending capex to build CO2 pipelines(long exhaust pipes) towards the capture sites. It clearly doesn't make sense, if it was 2 or 3% efficiency loss maybe, but it isn't. And saying so doesn't mean at all being an AGW skeptic, top priority is to consume less fossile, full stop, and the capex for CCS would for sure be better used somewhere else.

About the priorities, not sure about "Low-Priced Oil Substitutes." what would that be ?
Fully agree on the removing subsidies point, that distort what is efficient or not, and needs to be based on some "good solution labelling" that can in fact be totally wrong in the end.

On the other hand higher volume taxes on fossile fuels should clearly be part of the policies (before rationing), as Yvan says above, especially for the US there are a lot of possible gains (and even for Europe), saw some numbers recently about rising car sales in the US with still a huge share of SUVs and trucks. This would require a clear message, but the huge advantage of volume based taxes on fossile fuels compared to subsidies is that you don't need to label the "good solutions" you just push and accelerate any possibe real solutions and needed changes. Of course then there is the question of what is done with the tax revenues, at the limit the 100% direct redistribution equal share per capita principle as proposed by James Hansen.

Of course in the end all this is about optimizing some declining consumption, so not very "enticing", while still having no idea how the economy as a whole can work without growth..
Still, the real solutions if any are clearly more in urbanism, technical transport infrastructure, local agriculture and production, than in any financial tricks to cover up the mess...

And about electricity, and it being local or not, even if we would like it to be otherwise, the fact is that usually the bigger the generators or capture devices the more efficient they are, true for coal and nuclear, also for wind (bigger windmills much more efficient than small ones), PV could be an exception here.

I would agree that selling large numbers of SUVs seems ridiculous, and taxes on gasoline and diesel might help this. We have such a huge deficit, I am sure we could find some way to spend the extra taxes.

I haven't thought about it too much, but wouldn't taxes on new cars, based on how high or low their gas milage is, fix this issue as well as a gasoline tax (especially if the taxes were quite high)? It seems like a tax on gasoline would be quite regressive--hit poor families disproportionately hard, because they spend a higher portion of their incomes on transportation costs already. A tax on new cars would hit higher income families harder, and would make the higher cost immediately apparent to new buyers.

Taxing the cars is really avoiding the problem (most ferraris sold most probably travel much less miles than your average SUV), it doesn't adress the problem at its root at all.

But I agree that taxes on gas hit poorer family relatively harder (as any consumption tax btw), however it is really the only way to push the "general infrastructure" in the right direction, then a level of redistribution (à la Hansen or not) must be put in place to limit this aspect.

Some simulations could be done with current consumption level, and also don't forget the positive effect on trade balance, as well as the fact that volume based taxes also have the effect of "smoothing" pump price variations compared to barril price variations.

But the key thing would be the associated message and the ramping up of the tax clearly announced.

When you look at what Turkey went through for instance quite amazing :

Taken from :

I was wondering if taxing the fuel doesn't send the cars to poorer countries, like Mexico, sooner than they would otherwise go there. I would presume these poorer countries don't tax fuel. So from a world point of view, the impact of the tax would be diluted.

When the USA had cash for clunkers there were more used SUVs and pickups turning up down here. Suddenly everyone was going up to the border to get a vehicle.


Not sure I understand your point.
First the level of fuel taxation is somehow more related to countries being net exporter or not than rich or not (had an extensive report on fuel taxation level amongst countries, in english but from some german institute, cannot find it back, but there are big variations, even amongst African countries for instance), but true that you also have (or had) poor countries with subsidies on fuel (was the case for china, not anymore).
About the fact the US would export its gas guzzlers to other countries, why would that be a problem, and how would that "dilute" the tax ?
Again tax on fossile fuels should be seen primarily as a change accelerator, simulating a price situation that will in any case happen, but in the meantime keeping the money inside the country, so that it can be invested (at all levels), and influence products choices, directing CAPEX spending towards less OPEX dependant products on fuel.
Clearly, and especially for the US, huge efficiency gains are available, in fact about the same "functionalities" could be had with half current consumption, so that the US would be self sufficient with current prod level.
But of course this takes times, and the tax also doesn't need to be ramped up in one shot.

Overall seems to me the issue is more the "visceral" American aversion to taxes we are seeing here...

Also about the relative rich/poor impact, these taxes are about sending a price signal on a product("commodity") that is (at least relatively) getting scarcier and more expensive. Direct redistribution à la Hansen could adress this impact difference, but can also be adressed through other means (typically revenu tax).

But I know that the word "tax" is quasi satanic or something in the US especially these days (and not only in the US btw) , but in the end it is for sure a much better instrument than subsidies on said "good solutions" alternatives (and much less complex to handle). The current "low hanging fruits" to tackle the situation are MUCH MORE in more efficient products than alternatives.

But yes, the thing is also about delivering a message saying that driving a 5litres 4 wheel drives truck or SUV to an office job isn't a God given right, and soon to be a thing of the past ...

Fossil fuels are required to make wind turbines and other devices, to transport the equipment, to make needed repairs, and to maintain the transport and electrical systems used by these fuels (such as maintaining transmission lines, running-back up power plants, and paving roads). If we lose fossil fuels, we can expect to lose the use of renewables, with a few exceptions, such as trees cut down locally, and burned for heat, and solar thermal used to heat hot water in containers on roofs.

While this statement is true it is misleading because; (1) only very small amounts of oil are used to manufacture wind turbines, some gas is needed for the resins and some coal for new steel production and cement production, and a small amount of oil for transportation. Electricity is used to recycle scrap steel, manufacture components and refine aluminium and most FF derived electricity can be replaced by nuclear and renewables.

(2)I dont think you are projecting " loosing all fossil fuels" so why look at scenarios that will only apply when all FF are no longer available.
The key issues in next 30 years is the price of replacing oil used for transport with biofuels or electricity and the time to replace existing vehicles. Even at todays oil price EV transportation is considerably less expensive using the price of wind power or PV power than todays price of gasoline.Many may not be able to afford the price of a new PHEV or EV but will be able to afford the price of a used one when sufficient become available.

Frankly I think lighter less powerfull ICE cars are as much if not more part of the solution than EV, especially for the next ten years,(no car at all being also part of the solution).
And EV making sense should also be much lighter and less powerfull than today's typical car anyway.
Don't forget that to store the energy contained in one liter of gas you need 30kg of the top batteries, and more like 100kg of average ones ...

I when push comes EV will be far different from what people expect. From my hotel room in Shenzhen China I can see hundreds of electric bicycles and tricycles. Across China there are millions. Meanwhile there only a few thousand electric automobiles in the entire world.

I see the issue more as systems breaking down, rather than of high oil price. The systems breaking down are likely to be things like long-delayed repair of electric transmission lines and unavailability of imports of essential goods, like computers and like parts needed to keep vehicles running.

We can already see how systems might break down. Revolutions in Middle Eastern oil companies (because high oil prices lead to high food prices) may take some oil exports out of the markets for long periods. Natural disruptions, like the flood in Bangkok may take capacity off-line for manufacturing, and may be difficult to repair or replace. Concern about environmental disruptions may lead to capacity being taken off-line. For example, a number of countries are asking that nuclear power plants be phased out, after the Fukushima accident, and "fracking" is being examined closely in a number of parts of the world, especially when it is being done near populated areas.

Governments are in increasingly poor financial condition. Money for essential services, such as repairs of roads and bridges, is likely to be even less available in the past. If these countries actually default on their debt, the value of their currencies is likely to drop, making it difficult for them to import basic supplies. Banks may fail in these countries, making it difficult for companies to pay their workers. Exports from these countries should theoretically be cheaper, but if there is sufficient disruption, may not be available at all. Because of the international nature of supply chains, even countries that are not in good financial condition may find it difficult to import goods they were counting on from bankrupt countries.

As oil supplies get tighter, the chance of these types of disruptions would seem to go up.

unavailability of imports of essential goods, like computers

Due to flooding in Tiawan - hard drives are in short supply. What used to be a $80 hard drive is now $300.

Some government agency, presumably the DOE, will need to make certain that rationing systems are set up so that essential industries get the fuel they need and essential workers are able to obtain transportation to work.

It'll be hard to get your other ideas to gain traction if you combine them with ideas that shows economic illiteracy. It is well known that if a supply shortage sets in, the price rises and destroys the demand of least worth. Thus the market clears optimally. Rationing means gross inefficiencies, where people not needing the good as much either wastes it (in comparison to efficient use) or sells it on the black market. It also gives lots of red tape and opportunites for corruption.

An no, Schwarzenegger being able to afford driving a Hummer regardless of price is not a good counterexample. Such activities entails less inefficiencies than the inefficiencies of rationing, and he'll buy black-market gasoline anyway.

Essential industries and essential workers will get what they need, because they will have the most money to spend. And even essential activities should be rationalized and not get a free pass. And they should be rationalized automatically and swiftly by price signals, not by millions of stale government beaurocrats that tries to plan things.

Agree that rationing generates black market and is clearly a distortion, what is your position regarding high volume based taxes though ?
These are perfectly sound economically with a policy to accelerate necessary changes and adaptations (leaving the definition of said adaptations to the market).

There was also the "tradable quotas" schema proposed in the UK, but overall if a part of the taxes revenus is redstributed the result is the same without an added market and traders, and much less complex and expensive to set up.

I like them. I favor European sized gasoline taxes and also a general carbon tax to (eventually) push coal and NG off the market.

I agree those are efficient ways of accelerating changes, and also they likely internalize external costs, which means the overall economy will be more efficient, not less.

And yes, I also agree that taxes are preferable to tradeable quotas.

Some of the essential workers work for the government, and I haven't noticed governments necessarily having enough to spend. It looks like governments may be left out in the ability to buy oil supplies, such as those needed to repair roads and bridges.

It would also be nice for farmers to have enough fuel for planting their fields, even if they are not very rich, and for truck drivers to transport the food to towns.

I agree if there is a small shortfall, the market should work. At some point, the system starts breaking down. Too many people are laid off from work. The government collects too little tax revenue, and needs to pay out too much.

Someone should at least be thinking through these issues.

Gail, another excellent article. Both Diamond and Tainter show us that we cannot ignore less-than-desirable scenarios that have (historical) actuarial foundations. The pipe dream of the EIA, along with the innate denial mechanism in humans require us to speak in frank terms.

In terms of renewable being fossil fuel extenders, they might well be. Though they also might be the bridge that allows us to shift enough people over to modest agrarian plots to avoid the most extreme collapse scenario.

In terms of Low-Priced Oil Substitutes, I don't hold out much hope for this - it's almost a yearning for a rescue of some aspect of BAU, though I can't but see it as a hope (not unlike cold fusion) that might keep some from making the necessary changes to prevent the worst scenario.

I don't hold out a lot of hope for low priced substitutes, but raising the issue may help people understand that high priced substitutes really don't solve our problem, especially if they expect high-priced substitutes to allow BAU to continue.

I agree we need to be doing some transitioning to modest agrarian plots, but I am not sure how much place renewables have in this. I don't see people using renewables much for such a transition at this point. Most renewables end up adding intermittent electricity to the grid, or extending the gasoline supply by 10% percent.

If we expect renewables to aid in this transition, it seems like we should be thinking through the situation directly--adding solar hot water for homes; developing small machines that run on alcohol for use in farming; saving corn ethanol for farm use; and building small wind turbines from local materials to pump water and do other essential tasks. But most people are so focused on BAU, they don't think about other options.

Hi Gail

Thank you for the summary.

re: "What the DOE Should be Focusing On

GAIL SAYS: We do not know precisely how soon oil and natural gas supplies will be declining, but it would seem to be worthwhile to start preparing now. It is clear we are already running into recessionary forces. Since these recessionary forces are tied in with high energy prices, they can only be expected to get worse with time, rather than better. The two major issues I see are

1. We need to keep some form of transportation system operating as long as possible.

2. We need to keep some form of electrical system operating as long as possible, probably transitioning to only local electricity."


I appreciate and like how you take manageable pieces of our society WRT impacts of peak.

At the same time, it seems to me that it might be a good idea sometime to tie the issues into a larger picture.

Because...addressing only transport or electricity delivery...does not address the overall goal: coming up with a way to re-configure ways of meeting basic human needs in light of "peak."

For example, What about growth? Is it possible to come up with a steady-state type of economy (and activity) based on electricity "renewables"? If so, how do we get there? What do we do?

In other words, keeping particular systems operating as long as possible, doesn't address what changes need to be made and how to make them - if, in fact, they are feasible at all.

It seems they are, it's just that the changes required are so drastic as to be mind-boggling.

However, that's why we're here, right? (to de-boggle).

I mean this as an "in addition" type of comment - to add on. Not to criticize this aspect of our "problematique."

The reason I keep plugging NAS involvement (which was not my own idea BTW, just one that seems esp. brilliant) is that such an immediate investigation into peak oil by the NAS allows them to bring in a holistic approach: Look at the impacts, look further than simply trying to keep transport going or whatever (not that this is not important, like I said).

The NAS can look at the economic aspect; they can establish a panel to give advice as the crises worsens. They can even come up with goals. And/or "best practices."

I wrote a post quite a while back that I didn't submit to The Oil Drum called There is No Steady State Economy Except at a Very Basic Level.

Humans have a natural tendency to wipe out other species, to cut back trees faster than they can regrow, and to deplete nutrients from the soil. All of these issues make me wonder whether it is possible for humans to ever be part of a steady state economy, even if we gave up the use of fossil fuels completely in such an economy.

Without humans, there could pretty easily be a steady state economy.

Thanks Gail

Here another-

BEIJING – China's biggest producer of rare earths is suspending production for one month in hopes of boosting slumping prices of the exotic minerals used in mobile phones and other high-tech products.

This week's move by Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech might fuel tensions with the United States and Europe. They have questioned Beijing's decision announced earlier to limit exports while it tries to develop its own manufacturers of magnets and other products made of rare earths.

In a statement through the Shanghai Stock Exchange, Baotou Steel said it wants to "balance supply and demand" after prices for rare earths fell amid uncertainty about the U.S. and European economic outlooks.
Rare earths are a group of 17 minerals used in manufacturing flat-screen TVs, mobile phones, batteries for electric cars, wind turbines and weaponry.

It's also good to know that "China has about 30 percent of global rare earth deposits but accounts for 97 percent of production." Why did other countries, having about 70 percent of global rare earths deposits, stopped mining them? The short answer to this is that "there's no such thing as pollution in China" (a non-physics statement, to be more precise). The long answer is that China lowered production costs, hence market prices, to such a level that it was more profitable to import rare earths from there than to mine for them at home. But things, it seems, start to gradually change.

About climate change - the current IPCC consensus is that 450 ppm CO2 in the atmosphere is (too) dangerous (whether one believes this is another matter, I'll just take it as a given here). At current emission rates, we will reach this CO2 level in a mere 30 years. Things would have to spiral downwards very fast in order not to reach 450ppm, in particular because CO2 emissions are rising fast due to a shift of energy use towards coal (particularly in China).
The 390 ppm we have today correspond to a ~0.7°C observed temperature rise, and another 0.7°C is "programmed" already (lag in the climate system). We already seem to be seeing many effects of the 0.7°C rise, and 1.4°C will give a lot more effects. Dismissing climate change out of hand as in the post seems very wrong to me!

Another point: powering down is not hard, it "only" requires a change of mind (ok, can be hard). New cars can achieve 3.3 l/100km (70 mpg). As long as the Ford F-150 continues to be (by far!) the best selling car in the US, we obviously aren't seeing any real efforts to save energy...

Jim Hansen thinks that a long term CO2 concentration of greater than 350 ppm is too high. If the drought in Texas really lasts until 2020 it might change some minds, at least there will be fewer Texas farmers driving F-150s.

We need to keep some form of electrical system operating as long as possible, probably transitioning to only local electricity.

Limiting our electrical system to only locally provided electricity eliminates the ability to create large 'energy balancing' areas which will be very useful to help keep the lights on as outlined in this report....Wind Power Myths Debunked

ITC holdings has an interesting project they are considering called the Green Power Express which would support creating larger energy balancing areas for renewable energy. Recent filings by MISO to FERC Order #1000 advance this concept. While this would add to the cost of electricity it would probably be less than 1 cent per kwh.

The question in my mind is whether it would really be possible to continue to maintain such a system. I think we would rather quickly discover that we really cannot maintain long-distance transmission lines, at any cost, if oil is depleting.

What is it about long distance transmission lines that you believe requires so much oil to maintain? I work as an engineer on the wires side of a large electric utility, and I'm mystified. I have transmission lines in my area that date back to 1893.

Good point and glad to hear from another power engineer on this stuff. Not to minimize their importance but, power lines are relatively simple and for the most part there are no major moving parts to a transmission line. When you think of the cost of maintaining a transmission line vs maintaining another power plant with lots of moving parts, the transmission line maintenance costs would pale by comparison. We need to give careful consideration on how to extend our electricity system as long as possible for the benefit of future generations. Having a good portfolio of renewables interconnected by a geographically disbursed and robust power grid will help this IMO.

I posted a link above about "Debunking Wind Power Myths" Let's be careful about creating power transmission line myths too.

Maintaining roads, so you are able to access wires and other transmission. Use of helicopters to reach wires where they are in remote areas. Keeping a fleet of vehicles to fix wires and posts after storms, or whenever there is a problem. Fuel for transporting replacement parts, when new ones are needed.

Someone has to have the funds to pay for repairs after storm damage. I expect these funds will be in shorter and shorter supply in years ahead.

We built lines in remote areas long before helicopters existed. How we do things today uses fuel, though really NOT a great deal in the grand scheme of things, but HOW we do things is not immutable. We use fuel and pickups and helicopters and heavy equipment because it saves labor, and in today's business climate, saves money. If the ratio of fuel cost to labor cost changes, we'll change how we do things.

Part of the reason many of those machines exist is to provide 24X7X365 power. If the end-points can be down for weeks or most of a winter - then one can wait for "proper conditions" to restore service.

Few comments here so far actually pertain to the content of the QTR. Please read the document and especially between its lines rather than rely on Gail's superficial summary, which is just a foundation for her soapbox. Given the world that DOE operates in, I thought that the document was mostly on target. The QTR will be followed in a month or two by technology summaries, which will be worth a detailed TOD post. There will certainly not be a Quadrennial Energy Review in an election year.

The QTR stresses that petroleum pricing is perilous (a proxy for supply concerns) and that we must use oil more efficiently because the US can only anticipate a diminishing share. The last statement is certainly a forewarned future shortage, whether from US$ implosion or production constraints. The QTR says that DOE will support efforts that can be scaled to a commercial demo over this decade, and efforts that transform the energy system within 20 years. OK, far slower than Hirsch urged but definitely not BAU. Nuclear is not mentioned because shale gas will prevail (oops, the economists strike). Fusion is dismissed as decades away if ever. Pragmatic conclusions from the DOE Office of Science, headed by an accomplished nuclear theorist.

I'm told that DOE scientists don't take EIA fuel projection seriously "because they are made by a few economists" who should restrict themselves to documenting past and present. Nonetheless, the QTR was obligated to use their projection to get cooperation from industry stakeholders. Realistically, how could DOE buck the IEA who still hold to 110 MBpD by 2035 "if everything goes perfectly" to paraphrase chief economist Fatih Birol? DOE scientists whom I talked to last week were also baffled by the ASPO petition delivery: "Do those people actually know what DOE does?" DOE is a tiny part of Federal government energy policy setters, as Table 9 p127 on the QTR shows.

With that, the QTR aims to enable DOE to dump irrelevant, no-scalable ongoing programs from their current portfolio and arm them to fight stupid Congressional mandates. It does so by providing metrics to steer DOE away from near-term distractions, one example being "no substitute shall emit more carbon than the gasoline equivalent", Fig. 14 p. 58. Hurray, this kills off coal- and biomass-to-liquids even with capture and sequestration. Corn ethanol just scrapes past, oh well.

They have 6 strategic goals p. IX), all commendable IMO:

  • Stationary (currently majority of their program funding)
    • deploy clean electricity (= shale gas, there is NO plan B!!!)
    • modernize the grid (= smart grid to improve telemetry and allow renewable inputs)
    • increase building and industrial efficiency (= ??, Panglossian here). Fig 22 p94 is interesting, showing only a few 10s of GW new electric power construction to be added over the next few decades despite coal-plant retirements and EV growth.
  • Transport (minority but they want to flip priorities with stationary. There is a lot more detail in the transport section, clearly reflecting their sense of urgency)
    • deploy alternative hydrocarbon fuels
    • electrify the vehicle fleet
    • increase vehicle efficiency

They back away big-time from hydrogen because it is too distant to be a scalable solution. (I'm told that DOE has repeatedly tried to dump hydrogen boondoggles, but Congress keeps shoving them back in.) DOT is funding mobile fuel cells.

They are big into EVs to escape from fuels whose prices track petroleum (Fig. 6, p20). They note that electricity is decoupled because NG inputs will always be small compared to coal.

They want the rest of the auto fleet to be completely hybridized asap, which the new CAFE standard guarantees unless DOT is compromised by loopholes. Trucks and airplanes are to be supported by a growing fraction of advanced biofuels as petroleum price rises from the tight global market.

There is much on EVs, emphasizing that Level 2 charging (240V) is ubiquitous in suburbia (dryer in garage) and 8 hrs soon 4 for a full charge as 6.6 kW chargers replace 3.3 (e.g. 2013 vs 2012 Leaf) is an adequate rate for most commuting scaled batteries. DOE will prioritize efforts to reduce 80 mi battery costs.

OK, we all realize that upcoming distractions from the accelerating financial collapse like rally-behind-the-President wag-the-dog threats to attack Iran will relegate this report to file cabinets. Perhaps the QTR will give future historians a glimpse into the minds of some smart civil servants who knew that the jig was up but nonetheless were trying to redirect their minimally funded R&D efforts toward a better outcome. DOE is peculiar in that political appointments go down 4 levels into the bureaucracy that today are often unfilled, and top appointments have often been hacks. The average lifespan of a Secretary of Energy is 18 months. Peak-oil aware Stephen Chu has been there 2 years trying to make a difference, so the QTR from his Office of Science Undersecretary Steve Koonin is likely to be his swansong.

The reason that our energy policy is unrealistic is that we are unwilling to face the reality of peak capitalism. As long as 'healthy' capital markets, which require continued growth for their proper functioning, remain our only conception of economic prosperity, people will continue to cook up optimistic scenarios which allow the possibility of such a 'healthy' future. As Gail's post implicitly assumes, our economic emphasis must shift from the competitive accumulation of consumption rights to the cooperative creation and maintenance of infrastructure which has long term utility. Such a shift in emphasis requires a wholesale restructuring of the social contract which includes dethroning the right of money to make money as the central governing principle of our society.

I know that some of you reading this post will feel a strong urge to tell me that economic cooperation will never work because of our genetically programmed desire to compete for resources. I would ask any of you who feel this urge to please lie down until it goes away. I do not claim high probability for the near (or even medium) term emergence of intelligent cooperation in the economic sphere. Nevertheless my working assumption is that the probability of such emergence in non-zero, since otherwise, the pointlessness of endlessly yakking on the Internet about a disaster we cannot prevent or ameliorate under any conceivable circumstances is completely mind boggling.

Thanks, Roger.

You are right, peak capitalism is the issue. There was a time, not too many years ago, when even in this country people tried a little harder working together. Remember when John F. Kennedy said, "Ask not what your country can do for you; ask what you can do for your country." I doubt any politician today would make a similar statement.

Gail: "Maintenance of the electric grid is petroleum dependent, "

Not only is maintenance petroleum dependent, but so are simple things like the workers getting to work. This rapidly became evident in September 2000 in the UK when an oil strike stopped fuel deliveries for about 7 days.

Worker's cars will have a tank part-full of petrol when the local petrol station runs dry. Progressively over the next few days families will find that the worker can only drive to work one more time before they have no petrol left in the tank. If no one can drive to the power station to operate and control it, then the last man out at the end of the last shift has to decide whether he leaves the plant running (and the plant then self-destructs some hours later when the inevitable something goes awry), or turns it off (so that the plant can be safely restarted later) before he locks the gate and puts the keys under a rock in the garden and drives away; for ever.

This then leads directly to a rather horrifying prospect: We have recently seen some very nice examples of what happens to nuclear power plants without mains power or running petroleum powered generators (Fukushima and the near things at some flooded and earthquake hit nukes in the USA).

Putting it plainly, when the petroleum supply in a region stops, then about a week later the electricity stops. The nuclear power plants go onto standby generators using the fuel they have on site. Then as the generators run out of fuel the reactors melt down, through and out, and the spent fuel ponds boil dry. With neither external electricity nor on-site fuel supplies the few remaining staff can only flee for their lives. And they can't tell anybody, because no power = no telecoms = no internet = no radio = no TV = no news papers.

A day after that every nuclear power plant in the region is blasting out radioactive steam and the surrounding regions become uninhabitable. Overlap the emission plumes from all 104 reactors onto a map of the USA and see where you have left to live! Consider life on Earth with all 440 reactors in the same state! NOT! consider the implications of some of the ideas floated in this thread (and DB 5 Nov maybe as well?) about schemes to equip the U.S. with ~ 500+ fission reactors by one estimate, to equipping the World with between 5,000 and 100,000 nuclear fission reactors by another estimate, in order to continue BAU, and have electricity and synthetic liquid fuels.

Add in fuel reprocessing plants, etc.

That is a lot of complexity...imaging wide-spread coastal tsunamis, or huge earthquake in the Eastern U.S., or the Yellowstone volcano blowing out, or a terrorist setting off a nuclear device, or a plague, etc. All those thousands of fission plants better have fail-safe shut-down and cooling systems to handle such disruptions to their human workforce tenders.

In the case of more fission reactors, the LFTR is quite nice as it has quite low fissile inventory, continuous reprocessing to remove fission products and the option to just let the fuel flow down into tanks that store it in a non-critical configuration, very easily passively cooled.

I would think nuclear plants would be somewhat prioritized and that the military, if no-one else, would intervene to protect them and supply them with fuel and workers. It would require a full-scale civil war or something equally disruptive to get some plants abandoned.

In the event of interrupted power transmission in the wider society, workers would shutdown the reactors and they would have backup power to cool the fuel for the critical first few days/weeks when the fuel has a high rate of residual decay/heat production. Then they would remove fuel from the core ASAP. Of course it is preferable to dry-cask any sufficiently cooled spent fuel so as to avoid it being involved in re-fissioning events and to lower cooling requirements in ponds.

Btw, the 440 commercial power reactors is not all there is. There are research reactors, medical reactors, military reactors and so on.

Thanks Gail! I could not agree more. The risk of the 'perfect storm' we are creating of nuclear power plants and spent fuel ponds which need energy in perpetuity opposed by the guaranteed decline in oil and hence network electricity supplies is fearful.

Your map of USA's nuclear power plants suggests that the populated areas of USA will not be safe places to live in 2081.

The national guard is not going to turn up with tanker loads of diesel in 2080 to power the residual heat removal pumps, nor will they be manning all the nukes in the world three shifts a day with fully trained operators. If the national guard has any duty at all it will be in sustaining civil order, and protecting a few enclaves of semi-survivable communities from the ravenous angry hordes without.

And as you observe too, the operators of nukes in less well technically developed countries will be far less inclined to stay for decades to fight their plants to cold shutdown. It will be a daunting task without external electricity or oil supplies to get all the fuel casked and stable for perpetuity before they wander off to graze their goats again on the lush slopes of the Hindu Kush.

Every nuclear power plant on the planet should have its control rods rammed home and welded in by Friday. That way we may just get this horrible genie back in the bottle before the oil runs out.

Thank you very much, Gail !
This is a gem of a post. If only some ... ehh.. many politicians had your wit ... then ... maybe..

You are welcome. Glad you liked it!

Yair... Gail, your work is much appreciated by this old bushie...I often wonder what you do in your spare time?


Gail - your insights into the dynamics of a world of increasing energy scarcity are in my view quite exceptional. From them, your critique of the QTR is particularly telling in terms of the need for simple stand-alone energy techs, not the fossil-energy dependent high tech devices which, like the '70s "tractors for Africa" project, are quite liable to end up as the quaint rusting relics of not-good-enough intentions.

Where I'd differ with you is in critiqueing the degree of concern shown by Chu & his boss for climate destabilization - in practical terms, I'm unable to see them showing any concern at all, given that they're well aware that any fossil fuel displaced by non-fossil energies will of course be bought and burned elsewhere up until the day that a global climate treaty capping global GHG outputs comes into operation - and that Bush's policy of a "brinkmanship of inaction" with China over the treaty has been pursued wholesale by Obama.

With regard to the I(G)PCC's use of standard fossil fuel reserve data you are indeed technically correct over the oil component, and I wish to God you were right to suggest that fossil reserves' overstatement negates the threat of climate destabilization. Having been campaigning on the issue since the mid-'80s, I've come across a couple of reasons that I'd respectfully suggest are worth considering as counter-arguments.

1/. There is already massive effort going into the provision of alternative, dirtier fossil fuels, including coal-seam gasification and methyl clathrates, both of which offer immense additional reserves of potential energy and GHG outputs. By contrast with them, the EROEI of tar sands diesel is a bad joke, as is the sheer technical complexity of getting a useful liquid fuel from tar sand, let alone potential supplies of power and of fuel-gas too.

2/. It seems that deep problems are given a standard understatement by society - and this holds for climate just as much as for fossil fuel affordability and for the fiat/credit/growth system on a finite planet. Two key aspects of the climate threat have been almost entirely obscured from the public, and even science has been slow on them.

The first aspect concerns the pipeline warmings, by which our present warming and climatic destabilization is timelagged off the airborne GHG pollution of the mid-'70s - due to the oceans' thermal inertia - meaning that we've a doubling of warming to come over the next 35 years from just our pollution to date. In addition, it is reported that our output of sulphate aerosols as part of fossil fuel emissions is shading around half of the warming we should receive, implying a further doubling as fossil fuel usage declines. And those two doublings of warming, and of climate destabilization, are without accounting any further GHG outputs at all.

The second aspect is that in reality, beside the GHG outputs of future fossil fuel usage, we also face at least seven distinct interactive positive feedbacks of warming - of which at least six are already accelerating, and all have the potential to dwarf current anthro-GHG outputs per year.
This is not the place to go into their individual dynamics - Skeptical Science and Climate Progress have very well referenced articles on them (that describe them far better than I could), but they include:
Forest desication and wildfire; peatlands' desication and combustion; peat-bogs' microbial decomposition under elevated CO2; permafrost melt and decomposition; increasing water vapour in a warming atmosphere; cryosphere decline and resulting albedo loss; and methyl clathrates' collapse under warming oceans over the continental shelves.
It should perhaps be noted here that methane outputs from the various natural carbon banks have 72 times the warming potential of CO2 (tonne for tonne) over a 20 year horizon, and that in terms of the interactive feedbacks' present acceleration, albedo loss alone is reported to already impose a warming equivalent to around 30% of our current anthro-CO2 outputs.

All of which implies that the potential threat of climatic destabilization from the pipeline warmings acting on the feedbacks - for at least the next 35 years - makes the potential threat due to actual fossil fuel combustion look like rather small (toxic) beer. Short of the feedbacks' intentional control by global co-operation in the form of an adjunct to a climate treaty, I've yet to find anything able to prevent their self-reinforcing warming destroying the planet's habitability. The near-term effects are primarily of cutting global food production, thereby generating impoverishment, hunger and instability that would compound those same effects from the increasing unaffordability of fossil fuels. Climatic and energy-price impacts on global food production are thus the critical metrics for monitoring our 'progress'.

As I said, I wish to God you were right about the hazard of global warming being overstated. In terms of mitigation for both PO and CD, I think Gorbachev had it right - Glasnost (Openness) and Perestroika (Restructuring) are the necessary and sufficient conditions for the orderly dismantling of an unsustainable empire.

All the best,