Tasmania’s electricity woes revisited

13 02 2016

It all seems to be going from bad to worse……  Basslink may not be fixed in ages due to poor weather and visibility at the bottom of the sea. The biggest electricity consumer in Tasmania, an aluminium smelter of course, is going to reduce its consumption by 10%, which means that as it uses 25% of the whole state’s consumption (aluminium is soooo sustainable!), this will only reduce total consumption by a mere 2.5%.  I guess you have to start somewhere.

The Government is urging households and small businesses to be ‘prudent’ about their electricity use.  Domestic electricity use accounts for 40% of Tasmania’s energy demand.  Just imagine how much power could be saved if the whole place ran as efficiently as we did in Queensland?

Hydro Tasmania has more than doubled the number of diesel generators on order to 200 because Basslink may not be able to fix the undersea power cable to Victoria by the target date of March 19.  The cable has been offline since December 20, forcing Hydro Tasmania to rely further on already low water storages to meet the Tassie’s energy demands; I’m also told it doesn’t really start raining here until April or May… so how low will the dams go?

I heard talk on the radio of putting a second Basslink cable across the strait, at a cost of one billion dollars.  Would it not be a whole lot cheaper to reinstate a decent feed-in tariff and get Tasmanians to install more PVs on their roofs?

Tasmania’s Energy Minister Matthew Groom is, according to the media, under pressure “to resolve a hold-up on a planned wind farm in the state’s north-west.”  And… West Coast Wind has approval to build a 33-turbine farm near Queenstown but has not been able to secure agreement from Hydro Tasmania to buy the power it generates.

taswindfarm

According to Hydro Tasmania, an existing wind farm at Musselroe is generating enough energy to supply the needs of up to 50,000 homes; equivalent to the residential power needs of Burnie and Devonport combined. With Tasmania blessed with loads of wind in the roaring forties in the North West, it seems that these wind farms work very well here….. and it must surely be better than burning Victoria’s brown coal.

What sort of morons run this state?  And exactly how is it that Hydro Tasmania is more interested in profits than supplying power to their customers, no matter where it comes from?  Another classic example of why doing things for money instead of doing them because they are essential….. and the shit hasn’t even hit the fan quite yet, though I find it hard to not think the economic death spiral has arrived.

One billion dollars would go a very long way to instigate an energy efficiency program to lower consumption everywhere.  I’ve proven how much things can be improved efficiency wise.

I hope my batteries don’t take too much longer to arrive….





Insightful thoughts from Sacramento

13 02 2016

Many moons ago, when I was cutting my teeth on Peak Oil issues, and later economic and resource ones too, I ‘met’ this most insightful chap with real life experiences of ‘the simple life’ online through the Yahoo group called EnergyResources…. I haven’t been there for some years I just realised as I looked up a URL for you, and I have no idea whether Arthur still posts there.  I guess I reached a point where I learned what I had to know, and got on with my life to deal with the future.  The rest, as they say……………….

Arthur and I have reunited on FaceBook, the internet sure makes the world a small place. Anyhow, let me introduce you to Arthur Noll.  The below is a slightly edited for clarity version of something he posted on FB, it’s not really meant to be an essay, but it’s interesting reading all the same.  Enjoy……..

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Arthur Noll

Arthur Noll

I understand that dealing with collapse isn’t easy, and I see what is needed is a blend of new understanding and old ways of living – older than most want to think of doing.

I feel we need to have scientific expectations of the future, to start. People often think they do – scientists often think they do. But in reality I see a lot of expectations as based on imaginary things being found. That isn’t being scientific. That is dreaming. People think that because dream like things have been found in the past, this will happen again. But again, this is not scientific thinking. There is no cause and effect relationship between what was found in the past and what might be found in the future. People are having expectations that are based on a correlation of events, not a cause and effect situation. Scientists endlessly warn about confusing correlation with causation, but I’m afraid a lot of them have fallen into this trap. Expectations based on correlation, is basically superstition. And what we expect to happen in the future, should obviously have a major impact on what choices we make in the present.

Along with this, I have no respect for expectations based on mysticism. If people insist on holding to either of these expectations, superstition or mysticism, I think they are likely to find their expectations were based on nothing real, and this will be a disaster for them.

My second observation is that human beings live by teamwork and die without it. Everyone has the naked body to test their independence from social groups. If someone finds they can live independently of a group, they have no need to read further. If you can’t, I think we might want to talk about things. Social groups can work together with more or less efficiency. I’d say that surviving the results of expectations based on dreaming, is going to require the highest amount of efficiency that can be mustered. But if we consider how most large societies today are organized, with money market systems, I see huge problems with this. The basic premise of this is everyone acting as an individual player with the amount of money they can get. That automatically gives a mind set of competition, rather than cooperation. People do cooperate to make money, but people are loosely tied together with this. People can win market competition by ignoring conservation, and by paying employees less than the competition. This combination produces a race to the bottom to use up resources, dreaming that the bottom will never be reached, and strangling each other economically in the process. This looks like a ridiculous system.

Instead of this, I think people need to acknowledge they live by teamwork, give up expectations based on superstition or mysticism, give up measuring value with money markets, and use scientific measure throughout. We all have a food energy budget, for example. You must make a “profit”, of food energy returned compared to the food energy you burn. Getting that energy profit is the difference between starving, working to death, or working hand to mouth, or having enough to rest, explore, and reproduce. And along with this, though, you want a favorable food energy profit to be sustainable. It can be easy to have a good food energy profit with unsustainable resource use. That is what we have been doing.

A lot more can be said about all this, but these are the basic things I think we need to be serious about.

Lack of knowledge in the population is a problem. However, I think it goes deeper than that. I don’t think most older people know how to do what I’m talking about, any better than young people, though they may have better basic skills at some things. The question is whether food preserved is sustainable, where does the material for the candle come from, and how is garden soil kept fertile, and how are cows or other animals fed and managed?  
The European model for how this was done in the past, in the US, looks like a disaster to me. People did things as individual families in a monetary system and it was inefficient and very destructive. For example, working separately like this, the ideal was that everyone planted their own garden and field crops and managed their own cow. There was zero thought of controlling their own population or fitting in with the ecology around them. Wild animals that were a problem to this system, were wiped out with commercial hunting and trapping. They had metal tools, gunpowder and guns, and steel traps. They sometimes gave domestic animals free range, and fenced crops, but with wild animals extirpated they would tend to switch to fencing their domestic animals instead of their crops. With metal tools, domestic animal power, and abundant trees or rocks, they made a lot of fence. Overall, they could, and did, apply a lot more energy to the landscape than natives without these things – but this was highly destructive.
Natives couldn’t apply so much energy, so what they did was use the energy they had, a lot more efficiently. They had communal crops and guarded them in shifts. When they became herders, they did similar things with the animals. This guarding didn’t require extirpating troublesome animals. As individual families, Europeans couldn’t keep a 24 hour guard on crops or animals. Their reaction to deer, elk, woodland bison, etc, was to kill them off for money. Their reaction to wolves and cougars and bears killing their livestock, was to kill them off. Their reaction to keeping annual crop land fertile, was to use manure from their animals. That this depleted the soil of pasture and hay fields, was ignored as it happened slowly, but in places like New England where fertility was low to begin with, farms were often simply abandoned and people moved west to find more land to ruin.

But natives weren’t considering their own population, either, nor did they have long term concerns about what slash and burn farming might be doing to soil over the long run. Their population growth with farming led them to fight with each other before Europeans came. In favorable climates and rich soil, like the Mississippi River Valley, they created a destructive civilization that collapsed, and did the same in Central and South America. I don’t have romantic ideas about what native people have been like.

Human beings look pretty much the same to me everywhere. Technology and domestic plants and animals allowing greater energy use on the environment, to take more from it to keep more children alive, has been very attractive, and to take from the environment greater amounts of energy to make more powerful weapons to fight more effectively with neighboring groups trying to also grow their population, has been a common pattern, and long term considerations of where this will end up, have been disregarded everywhere on the planet. If we stayed at the energy level of hunting and gathering, and fighting with stone age technology occasionally, this might have gone on as long as wolves and lions have done similar things. But we have gotten into arms races to take more from the environment and arms races to fight better with each other, and this threatens to exterminate us.





This is the big one……

11 02 2016

This article from The Great Recession Blog just arrived in my news feed, straight from Nicole Foss no less…… written by David Haggith, it’s an amazing read, and you better hang onto your seat, we’re in for a pretty wild ride.

 

 

DavidHaggith-269x300

David Haggith

Only a couple of weeks ago, I said we were entering the jaws of the Epocalypse. Now we are sliding rapidly down the great beast’s throat toward its cavernous belly. The biggest economic collapse the world has ever seen is consuming everything — all commodities, all industries, all national economies, all monetary systems, and eventually all peace and stability. This is the mother of all recessions.

That’s a big statement to swallow, especially when many don’t see the beast because we’re already inside of it. You need to look down from 100,000 feet up in order to observe the scale of this monster that is rising up out of the sea and to see how rapidly it is enveloping the globe and how the world’s collapse into its throat is accelerating. The belly of this leviathan is a swirling black hole, composed of all the word’s debts, that is large enough to swallow every economy on earth.

Mexican retail billionaire Hugo Salinas Price has looked long into the stomach of this mammoth, and this is what he has seen:

 

[Global] debt [as a percentage of GDP] peaked in August of 2014. I’ve been watching this for 20 years, and I have never seen anything like it. It was always growing, and now something has changed. A big change of this sort is an enormous event. I think it portends a new trend, and that trend will be to get out of debt. Deleverage and pay down debt. That is, of course, a contraction. Contraction means depression. The world is going into a depression. It’s going to get very nasty. (USAWatchdog)

 

So, let’s step back and look at the big picture in order to see how immense this thing is: (One thing that you’ll notice is common in the statements of many sources below is comparisons to 2008, when we first entered the Great Recession. You hear that comparison every day now, which says many people feel that, after piling on trillions of dollars and trillions of euros and trillions of ___ in debt to save ourselves, we are right back where we started … but exhausted from the effort.)

 


Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy


 

Toxic debt flush heard round the world

 

As Hugo Salinas Price warns, toxic debt may have hit a ceiling where it has stopped going up because individuals, industries, and now nations have reached real debt limits they cannot support. According to the New York Times, toxic loans around the world are weighing heavily on global growth:

 

Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of large economies for years to come. The problem is the giant, stagnant pool of loans that companies and people around the world are struggling to pay back. Bad debts have been a drag on economic activity ever since the financial crisis of 2008, but in recent months, the threat posed by an overhang of bad loans appears to be rising.

 

The Times lists China as leading the world for personal and industrial bad debt at $5 trillion, which in terms of its economy is half of China’s GDP. As a result of hitting this ceiling, Chinese banks reeled in lending in the last month of 2015.

And this is just bad debt. It does not include debts that are being properly paid or China’s national debts. These are the loans already failing. Likewise with the global debt problem The Times is writing about. Bad loans in Europe, for example, total about $1 trillion. Again, that’s just the loans that are already falling into the abyss.

Many national debts are more than the entire annual GDP of the nation, including the enormous US national debt, which will reach $20,000,000,000,000 by the time the next president takes office. (You can’t even see wide enough to focus on that many zeroes at the same time. The “2” gets lost in your peripheral vision.) And many places like Greece and Brazil and Puerto Rico are defaulting on their debts.

The United State’s debt alone is only payable so long as interest rates stay near zero; but rates are now rising, and the number of financiers has greatly retreated. The only thing to save the US from its toppling debt problem in the short term may be that people all over the world run to the shelter of US bonds when everything else is caving into the black hole.

 


Between Debt and the Devil: Money, Credit, and Fixing Global Finance. One of Financial Times Best Economics Books of 2015. “A devastating critique of the banking system. Most credit is not needed for economic growth — but it drives real estate booms and busts and leads to financial crisis and depression.”


 

Bulls become bears

 

The first sign that this global change is now consuming the US is in how many of the market’s permabulls are becoming neobears and which sizable institutions are making the switch quickly. Citi has been bullish over the years, but now they have stepped out of the back half of the bull suit and put on a toothy bear suit, expecting oil to drop to the mid-twenties and geopolitical change that “is maybe unprecedented for the last decades”:

 

The global economy seems trapped in a “death spiral” that could lead to further weakness in oil prices, recession and a serious equity bear market, Citi … strategists have warned…. “The stakes are high, perhaps higher than they have ever been in the post-World War II era.”(Yahoo)

 

Here’s a 100,000-foot-high look at the US stock market that is now swirling down the throat of the beast: Last year, the number of stock dividend reductions surpassed 2008. In fact, 2015’s number of cuts — now that the year is barely past — was 35% higher than the number of cuts going into the Great Recession. That gives you some sense of the scale of corporate pain that is just starting to be felt. Companies cut dividends when they have less profit to share with their owners. Bloomberg referred to it as “equity investors … suffered death by 394 cuts.”

Another high-view snapshot of corporate collapse can be see everywhere in US retail: Walmart, Macy’s, J.C. Penny’s, K-Mart, The Gap and many smaller retailers have all announced a large number of store closures and layoffs to come.

US Corporate earnings across all industries are on track for their third quarter in a row of year-on-year declines. That is an ominous signal because back-to-back periods of decline for just two quarters are always followed by a decline of, at least, 20% (a bear market) in the S&P 500.

 

This weakness in overall corporate earnings growth could bode badly for the broader stock market, as it represents the actual impact of geopolitical concerns, the slowdown in China, the weakness in oil prices and productivity, said Karyn Cavanaugh, senior market strategiest at Voya Investment Management. “Earnings discount all the noise…. It’s the best unbiased view of what’s going on in the global economy.” (MarketWatch)

 

As earnings fall, the much watched price-earnings ratio gets more top-heavy, putting pressure on stocks to fall. Thus, on Friday:

 

The willingness of U.S. stock investors to abide price-earnings ratios stretching into three and four digits all but ended Friday as the Nasdaq Composite Index fell to its lowest since October 2014. The … tumble in American equities turned into a full-blown selloff in stocks with the highest valuation. The Nasdaq Internet Index sank 5.2 percent, as Facebook Inc. lost 5.8 percent. (NewsMax)

 

The most significant part of this picture is that tech stocks have finally started making the big drop with the few that have been holding the stock market’s average up being the ones now taking the biggest plunge. Facebook, Amazon, Apple, and Microsoft are all falling fast. LinkedIn is getting “destroyed.” The time at the top is over, which leaves the market with zero levitation. Therefore, it’s no surprise that we saw another major sell-off on Monday.

Said USA Today, Bye, Bye Internet Bubble 2.0,” calling this “the worst start of a year for technology stocks since the Great Recession.

 

Collapse of the petrodollar opening sink holes everywhere

 

It’s no secret that Russia has outlawed trading oil in dollars among its satellite nations and that China and Russia trade in yuan now, not dollars, but Iran is the latest to stick it to the US, announcing that it will no longer trade oil in US dollars either but will sell its oil only for euros. So, we have the gargantyuan and the petroeuro, taking major bites out of the petrodollar now. China and Russia have also been divesting from US treasuries for some time and investing in gold, something I started point out here a few years ago.

All of this means that the US dollar is rapidly ceasing to be the trade currency of the world, and that prized status is the only thing that has made the US national debt manageable over the years, as the high demand for trade dollars guarantees low interest on the most colossal debt in the world because national treasuries and businesses sop up US bonds as a safe way to store trade dollars. The Federal Reserve has become the buyer of last resort for US debt; but it has maxed out.

The move away from the petrodollar is momentous. Losing its status as the reserve currency of the world will take a massive bite out of US superpower status, and that, of course, is exactly what Russia, China and Iran are counting on. With so many countries now trading oil exclusively in non-dollar currencies, one has to wonder how much longer overstretched Saudi Arabia can hold out as an oil supplier that trades oil only in dollars. Most likely they will feel a lot of economic pressure to start trading in other currencies, especially now that US support of Saudi Arabia appears to have weakened.

Iran’s announcement may be why the dollar dropped drastically in value last week. The high value of the dollar makes oil very expensive to other nations, who have to convert their low-valued currency to dollars to buy oil. This is surely another reason the price of oil has been falling, though almost no one talks about it … almost as if the economic geniuses of the world can’t figure this simple relationship out. As nations compete to lower the value of their currency with zero interest policies and quantitative easing, they are burying the petrodollar.

In nations with currencies priced very low compared to the dollar, oil is like an American export — too expensive for people in that nation to afford, causing demand to fall off and, thus, further increasing the problem of oversupply and lowering the price of oil. This creates another big reason for many nations to want to stop trading oil in dollars.

I’ve been reporting on this site for a few years now on this global campaign to kill the petrodollar, and that campaign is finally nearing maturity. For the US, it will mark a horrible transformation in the world, as it will hugely erode US superpower status because it will become much more difficult to finance a massive military machine.

 

The banks that are too-big-to-fail are falling FAST!

 

Deutsch Bank‘s derivative bonds (the kind that caused the Great Recession) are pealing away. The top-tier bonds of Germany’s largest bank have lost about 20% since the start of the year. Investors are fleeing as tumbling profits cause them to doubt the issuer’s ability to support the coupon payments on the bonds. InvestmentWatch reports that “Deutsche Bank is shaking to its foundations” and asks “is a new banking crisis around the corner?” DB stock has fallen off its high last July by 50%.

By how much is Deutsch Bank too big to fall? DB’s exposure to derivatives is over 55-trillion euros. That’s five times more than the GDP of the entire Eurozone or three times the amount of debt the United States has accumulated since it was founded. Its CEO says publicly he’d rather be somewhere else. Looking up at a leaning tower like that, I imagine so.

As DB bleeds red ink from its throat, its cries to the European Central Bank are burbled in blood. DB has warned the central bank that zero-interest-rate policies and quantitative easing are now killing bank stocks, but that didn’t stop giddy ECB president, Murio Draghi, from announcing a lot more easing to come … as much as it takes. As much as it takes to what? Kill all of Europe’s banks now that stimulus is working in reverse with negative interest making new money in reserves expensive to hang on to?

Is the ECB waging war on it major banks, or is it just too dumb to realize that QE is far beyond the high point on the bell curve of diminishing returns to where it is now killing stock values while doing nothing to boost the economy? (Hence, the move to negative interest rates to go to the ultimate extreme of easing because you have to push the accelerator through the floor when returns are diminishing that fast). As ZeroHedge has said, we are now entering a “monetary twilight zone”where …

 

Europe’s largest bank is openly defying central bank policy and demanding an end to easy money. Alas, since tighter monetary policy assures just as much if not more pain, one can’t help but wonder just how the central banks get themselves out of this particular trap they set up for themselves.

 

Credit Suisse reported a loss of 6.4 billion Swiss francs for the fourth quarter of 2015, suffering from its exposure to leveraged loans and bad acquisitions.

 

DoubleLine Capital’s Jeffrey Gundlach said it’s “frightening” to see major financial stocks trading at prices below their financial crisis levels…. “Do you know that Credit Suisse, which is a powerhouse bank, their stock price is lower than it was in the depths of the financial crisis in 2009?” (NewMax)

 

Credit Suisse has announced it will cut 4,000 jobs after posting its first quarterly loss since 2008. The Stoxx Europe 600 Banks Index has also posted its longest string of weekly losses since 2008, having posted six straight weeks of decline. The European Central Bank’s calculus says banks in Europe should be benefiting from QE, but it’s clearly lost all of its mojo or is now  actually more detrimental than good like a megadose of potent medicine. Negative interest rates are particularly taking a toll because banks have to pay interest on their reserves, instead of making interest.

Banks have rapidly become so troubled that NewsMax ran the following headline “Bank Selloffs Replacing Oil Rout as Stock Market Pressure Point.”  In other words, bank stocks are not just falling; they are falling at a rate that is causing fear contagion to other stocks. It’s not easy these days to beat out oil as a cause of further sell-offs in the stock market.

How quickly we moved from a world of commodity collapse to what now appears to be morphing into a banking collapse like we saw in 2008. Financial stocks overall have lost $350 billion just since 2016 began. Volatility in bank shares has spiked to levels not seen since … well, once again, 2008.

Consider how big the derivatives market is — that new investment vehicle that turned into such a pernicious demon in 2007 and 2008 because they are so complicated almost no one understands what they are buying and because they mix a little toxic debt throughout, like reducing the cancer in one part of the body by spreading its cells evenly everywhere. Instead of learning from the first crash into the Great Recession, we have run full speed into expanding this market. Estimates of the value of derivatives in the market range half a quadrillion dollars to one-and-a-half quadrillion dollars (depending on what you count and whether you go by how much was invested into them or their face value). Either way, that’s a behemoth number of derivatives floating around the world, many of them carrying their own little attachment of metastasizing toxins! (That’s, at least, a thousand trillions! More than ten times the entire GDP of the world.)

Still think 2016 isn’t the Year of the Epocalypse? Well, if you do, the rest of the ride will convince you soon enough. If I were the Fed, I’d be really, really worried that my star-spangled recovery plan was starting to look more like Mothra in flames.

 

The oil spillover

 

But don’t think oil is loosing its shine as a market killer. Another bearish prediction by Citi, now that it has change suits, is to expect “Oilmegeddon.” (Hmm, sounds like something that would be found in an epocalypse to me.)

 

“It seems reasonable to assume that another year of extreme moves in U.S. dollar (higher) and oil/commodity prices (lower) would likely continue to drive this negative feedback loop and make it very difficult for policy makers in emerging markets and developing markets to fight disinflationary forces and intercept downside risks,” the analysts add. “Corporate profits and equity markets would also likely suffer further downside risk in this scenario of Oilmageddon….We should all fear Oilmageddon,” Citi concludes. “Global recession, as we define it, would leave nowhere to hide in equities. Cash wins.” (NewsMax)

 

In the first months of the crash in oil prices, most analysts felt that the only companies that would be seriously hurt would be marginal fracking companies — the speculative little guys jumping into the oil shale. Now that fourth-quarter results are coming in from the world’s largest refineries, we find that isn’t true:

 

British Petroleum kicked off the European oil and gas reporting season with an ugly set of fourth-quarter results. The company reported a sharp drop in earnings for the fourth quarter. It’s own measure of underlying profit dropped 91%.… All of this is a recipe for two things — more cost cutting and more job cuts… What’s worrying for investors is that the first quarter, so far, doesn’t look much better. (MarketWatch)

 

That’s massive. BP has already announced the elimination of 7,000 jobs. Chevron and Shell also saw profit declines. Royal Dutch Shell has announced it will be making 10,000 job cuts.

If that’s how bad things got during the fourth quarter of 2015, imagine how bad they will get this quarter now that oil prices have gone down a lot more. Hence, the talk of “Oilmageddon.”

As if the industry wasn’t already burning up, President Obama is trying to impose a $10 carbon tax on each barrel of oil. At today’s oil prices, that is a 30% tax. At tomorrow’s prices, it may be a 50% tax! One has to wonder how far out of touch economically, a president can get in order to propose a hefty tax like that at a time like this.

Naturally, oil magnate T. Boone Pickens calls it “the dumbest idea ever.” While I have a general hatred for gigantic oil companies, especially since gasoline prices in my area have not dropped much, I have to agree that a $10/barrel carbon tax could cinch the noose around the neck of an already strangle industry.

Maybe that’s the plan. While the tax would hit the end user more, no tax helps an industry thrive.

 

The Epocalypse swallows everything whole

 

The reason the Epocalypse is going to be a far worse bloodbath than the first plunge into the Great Recession is that all of the central banks of the world have, by their own admission now, “exhausted their ammunition” to fight back against another recession. Back at the start of the Fed’s Goliath recovery plan, I posited that we would be falling back into the abyss right at the time when all central banks had exhausted their strength and when all nations had maxed their debt.

Here we are.

Many central banks are already doing negative interest; yet, their economies are still sinking. It appears that more negative interest could actually sink them faster by eroding their banks with internal ulcers. It will certainly require going cashless in order for those banks to start handing the negative interest down to their customers. They have to absorb the cost of negative interest if they cannot loan out their funds fast enough. That’s why some banks are now pleading with their government’s for a cashless solution … so they can prevent their customers from switching to the cash-under-the-mattress exit plan.

The world faces a tsunami of epochal defaults. William White, former economist for the International Bank of Settlements, says,

 

Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief…. It was always dangerous to rely on central banks to sort out a solvency problem … It is a recipe for disorder, and now we are hitting the limit… It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something. (The Telegraph)

 

We have finally reached that time in our decades of astronomical debt-based economic expansion where it is time to pay the piper. We traveled blithely along many decades on currency cushions filled with hot air. In an article titled, “Debt, defaults, and devaluations: why this market crash is like nothing we’ve seen before,” The Telegraph says,

 

A pernicious cycle of collapsing commodities, corporate defaults, and currency wars loom over the global economy. Can anything stop it from unravelling…? Commodity prices have crashed by two thirds since their peaks in 2014…. China, the emerging world, and financial markets – are all brewing to create a perfect storm in a global economy that has barely come to terms with the Great Recession…. “We are in a very unusual situation where market sentiment is of a different nature to anything we’ve seen before.”

 

Yes, this is the big one. The times we now face are the reason I started writing this blog four+ years ago. The Federal Reserve’s Goliath recovery plan was cloned all over the world for seven years, and for seven years all nations have done nothing to rethink their debt-based economic structures that are now cracking and groaning and falling into … the Epocalypse.





Fossil Carbon Safety Margin

11 02 2016

dr_susan_krumdieckA follower of DTM pointed out to me that one of my favourite sources of information, Susan Krumdieck, is now blogging……. here is her first effort on this new site, well worth the read.

by Dr. Susan P. Krumdieck, Professor in Mechanical Engineering, University of Canterbury

To me, as an engineer and a person with a family, the language of climate change action – for example setting “targets” for emissions – seems to be dangerously at odds with the science.

It seems obvious that the engineers of the world have a lot of work to do in changing everything that uses fossil fuel to use much less to no fossil fuel. However, this discussion is not really taking place.

The science is clear, so I wanted to look at how we might use the language of engineering to understand the way forward. The latest IPCC Fifth Assessment Report gives conclusive modelling and science observation that profoundly affects every person on the planet. However, the general population doesn’t seem to understand the message.
Everybody knows that it is not wise to exceed a safety limit, but we also know that we can probably get away with it. If the curve up ahead has a sign that says 65 km/hr, then I know it would be safe to take it at that speed. I also know I will “likely” make it through the curve if I do 70 or even 80 km/hr. Unsplash_Speed Sign

If I do speed through the curve, however, the risk of losing control, drifting into the wrong lane or not being able to manoeuvre to avoid any unexpected obstacles is higher. A failure limit in this situation would be the speed in the curve where a crash occurs. This could be 70 km/hr if there is any water or loose gravel on the road or if my tires don’t have good tread. There is also a speed, say 130 km/hr, at which it is likely that a person will crash going around the curve. In the best car on the best day with the best road conditions, there is a speed, say 250 km/hr, beyond which it is not physically possible for a car to stay in contact with the road and there will be a crash.

As a mechanical engineer, I can’t predict exactly at what speed a crash will occur. There are a lot of other factors. I also can’t predict exactly what will happen in the crash – whether it will involve rolling or hitting a tree or a fire – and I can’t predict whether you will live or what kind of injuries you will have. But – I can definitely recommend that you should not take that curve at more than 65 km/hr; this is the safety limit. I would call 130 km/hr the failure limit. I would call 250 km/hr suicide.

Now, let’s translate the climate science of atmospheric carbon dioxide (CO2) loading into terms of a safety limit. Dr James Hansen, former director of the US NASA Goddard Institute for Space Studies, explained to the Bush administration that 350 parts per million (ppm) was the safe limit for atmospheric CO2 concentration. If the accumulation of CO2 in the atmosphere got to this level, there would definitely be climate change.  Going over this level would be likely to cause warming that could do more than just change the weather; it could melt polar and glacial ice, acidify the oceans, cause changes in ocean currents, and change the climate in unpredictable ways. There would, however, be certainty that more frequent and more extreme storm events would occur. This safety limit of 350 ppm atmospheric CO2 has been exceeded. Current atmospheric CO2 concentration is over 400 ppm, and evidence is mounting of unprecedented warming and ocean acidification.

Limiting the thermal imbalance, or warming, to less than 2oC above the 1860-1880 decadal average would require cumulative CO2 emissions to be kept below a certain level. CO2 emissions are caused primarily by burning solid and liquid fossil fuels; other major sources include industrial production and deforestation. The cumulative carbon loading limit likely to result in 2oC global warming is 1000 gigatonnes of carbon (GtC) (with a probability of greater than 66%) burned since the 1860’s. Accounting for forcings from additional greenhouse gases lowers the failure limit to 790 GtC.

As of 2011, over 500 GtC of fossil fuel had been extracted and burned. Just like with our driving speed analogy, the exact risks and the exact failure mechanisms can’t be predicted. But, we are now beyond the safe level for fossil fuel use, and we are pushing toward a failure limit.  I hope this is clear. If today we stopped extracting and burning fossil carbon, we would still be above the safety limit for having no risk of climate changes, and we would watch over the next 100 years to see how the climate settled into a new warmer equilibrium. If we were to extract and burn another 300 GtC in fossil fuel, then the energy balance on the planet would likely result in a temperature rise of over 5oC and the changes to the climate would be catastrophic.

According to the International Energy Agency, in 2012, global CO2 emissions from all sources totalled about 31.5 GtCO2 per year. I will do the analysis using this number, but be aware that the 2015 emissions are expected to top 40 GtCO2. Note that emissions are discussed in terms of CO2 emitted, but production is in terms of the carbon in the fuel. Burning of one GtC of fossil fuel produces 3.7 GtCO2.  If we did not increase our consumption of fossil fuels any further above the current 11 GtC/yr, we would have less than 30 years until we have burned the amount of fossil carbon that is likely to cause catastrophic climate change. If all nations of the world actually had achieved reductions called for in the Kyoto Protocol of reducing emissions to 1990 levels (14 GtCO2) or lower, then at 3.8 GtC/yr of fuel production it would take 80 years to go past the failure limit. Which is more acceptable: exceeding the climate failure limit in about 30 years by limiting growth, or exceeding the failure limit in 80 years by dramatic reduction of fossil fuel production?

The only intellectually acceptable answer is neither. It is not acceptable to exceed the failure limit.

This is the point where we usually start arguing over the numbers. Should the failure limit be 800 GtC, or 1000 GtC?  What should we count in current emissions rates? We also start questioning what the catastrophes would be. Would the sea level rise be 2 m or 17 m? This is like arguing about taking a 65 km/hr curve at 130 or 200 km/hr, and whether the car would skid into a tree or roll into a ditch. Once you have exceeded a safety limit, and you are pushing into the range of increasingly likely failure, it is really not the time to be arguing about the details.  It is TIME TO SLOW DOWN!

For reference, the amount of proven reserves (oil, gas and coal) that the energy companies plan to extract and bring to the market is more than 2800 GtC. This figure does not include the Arctic oil that Shell and other oil companies are scouting for at the moment. The best engineering terms I can find to describe the extraction and burning of these reserves are: unthinkable, irresponsible, negligent, reprehensible, criminal, and suicidal.

How can I explain to my future granddaughter that we had to preserve our economy so we accepted policy which would breach the climate failure limit in 20-30 years? Why does 30 years seem like a long time in the future? Why has this rather clear bit of science not caused radical change?

In the next part of my blog, I will turn to the personal interaction with the data to see if it sheds any light.





It’s all happening. Still.

10 02 2016

While working on those entangled branches for the past few days, I listen to podcasts on the ute radio that I’ve downloaded over the past 12 to 18 months.  It suddenly hit me that the three people whose work I follow and respect the most are women’s. I can’t help wondering why this is.  Could women be actually cleverer than men?  Are they most able to think into the future?

Susan Krumdieck is the engineer with more degrees than a thermometer plus a PhD, Nicole Foss whom I think can match Susan’s pedigree but has additional expertise in economic matters, and Gail Tverberg, the actuary with the uncanny ability to analyse what’s going on and explain it in a way most people should understand…… the only male standout for me is Chris Martenson, though I think his website is too much about how to stay rich in the collapse rather than how to survive it….

A couple of days ago, not one but two really good articles landed in my news feed commenting on how the collapse of the price of oil is going to cause mayhem this year, and is a clear sign of diminishing returns.  One was by Gail, the other quoted her….

Nicole has written a long article which was published in three parts over at the Automatic earth, I highly recommend it.  Nicole’s article being almost book length, I will leave it to you to follow the link and read it yourself.  Gail’s article, for me, begins with…:

the effects of not having enough energy flows may spread more widely than the individual plant or animal that weakens and dies. If the reason a plant dies is because the plant is part of a forest that over time has grown so dense that the plants in the understory cannot get enough light, then there may be a bigger problem. The dying plant material may accumulate to the point of encouraging forest fires. Such a forest fire may burn a fairly wide area of the forest. Thus, the indirect result may be to put to an end a portion of the forest ecosystem itself.

How should we expect an economy to behave over time? The pattern of energy dissipated over the life cycle of a dissipative system will vary, depending on the particular system. In the examples I gave, the pattern seems to somewhat follow what Ugo Bardi calls a Seneca Cliff.

Figure 1. Seneca Cliff by Ugo Bardi

The Seneca Cliff pattern is so-named because long ago, Lucius Seneca wrote:

It would be some consolation for the feebleness of our selves and our works if all things should perish as slowly as they come into being; but as it is, increases are of sluggish growth, but the way to ruin is rapid.

This is doubly interesting, for me at least, because it appears that oil, and energy production generally, may be acting just like the above cliff….

Figure 6 shows that the FSU’s consumption of energy products started falling precipitously in 1991, the year of the collapse–very much a Seneca Cliff type of decline.

Figure 5. Former Soviet Union energy consumption by source, based on BP Statistical Review of World Energy Data 2015.

Gail explains how so many believe the wrong views of how the economy works..

The Standard Wrong Belief about the Physics of Energy and the Economy

There is a standard wrong belief about the physics of energy and the economy; it is the belief we can somehow train the economy to get along without much energy.

In this wrong view, the only physics that is truly relevant is the thermodynamics of oil fields and other types of energy deposits. All of these fields deplete if exploited over time. Furthermore, we know that there are a finite number of these fields. Thus, based on the Second Law of Thermodynamics, the amount of free energy we will have available in the future will tend to be less than today. This tendency will especially be true after the date when “peak oil” production is reached.

According to this wrong view of energy and the economy, all we need to do is design an economy that uses less energy. We can supposedly do this by increasing efficiency, and by changing the nature of the economy to use a greater proportion of services. If we also add renewables (even if they are expensive) the economy should be able to get along fine with very much less energy.

These wrong views are amazingly widespread. They seem to underlie the widespread hope that the world can reduce its fossil fuel use by 80% between now and 2050 without badly disturbing the economy. The book 2052: A Forecast for the Next 40 Years by Jorgen Randers seems to reflect these views. Even the “Stabilized World Model” presented in the 1972 book The Limits to Growth by Meadows et al. seems to be based on naive assumptions about how much reduction in energy consumption is possible without causing the economy to collapse.

It’s exactly what George Monbiot either can’t understand, or refuses to see….

So there must be another story.

A monster called ‘diminishing returns’

There is, and it’s a rather grim energy fairy tale. This one shows how the world’s economy depends on the quality of energy burned, and not the amount of money spent. When economies spend cheap oil, GDP rises; when they switch to costly and unconventional stuff, growth comes to a screeching halt.

In this unfolding story, cheap credit played a big role. It allowed an industry to carelessly borrow trillions to chase ultra-expensive and risky resources such as bitumen and shale oil.

An energy industry laden with toxic debt is now earning less money than what it costs to shovel bitumen or frack shale. And this kind of debt is not going to end well for financial markets. Or for ordinary people.

But the darkest character in this fairy tale is the monster called diminishing returns.

On a diet of cheap oil, the world financial system grew on energy surpluses like a wildfire dines on trees in a forest.

But no more. The cheap stuff is gone, and companies are now frantically fracking North Dakota at a cost of $60 a barrel or mining northern Alberta’s heavy bitumen at costs as high as $80 a barrel. With oil at $30 a barrel, many companies are, as respected Houston analyst Art Berman recently put it, “losing their asses.”

Diminishing returns explain why. Imagine a 20-year-old vehicle that now costs more money to maintain than it does to drive. Every time the owner pours more cash and energy into the clunker, the benefits and rewards keep shrinking. An old car can be a treadmill into poverty.

In a 2014 paper for the Philosophical Transactions of the Royal Society, David Murphy, an energy expert at St. Lawrence University, chronicles what diminishing returns really mean in energy terms.

For every barrel of energy invested in global oil production, 17 are now extracted and turned into wealth. (Nearly 100 years ago, one barrel of investment yielded 100 barrels more, a cornucopia that built the global economy.)

But the industry must now drill deeper and deeper into ugly reservoirs and then fracture them apart to capture molecules of gas or oil. As a consequence, U.S. oil production yields only 11 barrels for every barrel invested, and that number is fast declining. Ultra-heavy bitumen and other unconventional hydrocarbons capture returns of less than 10 and in many cases as low as three.

Energy resources that deliver such paltry returns are civilization shrinkers. They cannibalize other resources and offer no energy surplus.

Enjoy your homework…… I’ve got things to do to escape this predicament!





Cleaning up the mess

10 02 2016

I’m slowly working out who I can rely on, and who I can’t….. the neighbour who agisted his 30 heads of cattle on our land last year, in exchange for moving all my felled logs, has let me down.  Too busy he says….. Luckily, friendly neighbour on the other side of the fence has come to the rescue, again. As I said to him recently, there are two things I’m really enjoying about living here; the great dam, and the even greater neighbours!

20160208_105120

Cutting and moving by hand to the big pile behind the ute

After years of lucking out with neighbours with whom we had nothing in common (with the exception of Dean and Tinie in Cooran who, unfortunately were not over the fence neighbours), we have truly struck gold with Matt and Cor.  More friendly locals will surface in later posts, you’ll just have to wait to find out about just how good this little community is turning out to be.

The felling of thirty odd trees was the easy bit, notwithstanding getting one hung up, and one squashing my new Stihl saw through my own stupidity…. but I think I have now finished my lumberjack apprenticeship, I’ve made most of the mistakes to learn from, and managed to do it without hurting myself, a real bonus!

The hard part is cleaning up the mess, and those macrocarpas are very good at mess.

20160209_155108

The power of fossil fuels

Their branches are long and spindly, and very prone to tangling up in a big way.  This turned to our advantage when Matt pulled the crowns away, as the debris on the ground decided to get tangled with them, and dragging huge amounts of this stuff literally swept the ground clean.  There’s still small stuff to clean up, but I’m having today off after working my butt off yesterday, eventually hitting my chronic fatigue wall…… and paying the price today.

20160209_171431

So glad to remove those crowns dangling in the dam

There are just two more cypresses to fell now, they are just too tall….  It’s unfortunate that the line of trees heads off to the South East from the house site, because that’s where the morning Winter sun rises, and I’m not putting up with the shading problems the likes of which we had to endure in Cooran.  I’m planning to replace them all with something less tall and more appropriate. All suggestions gladly accepted!

Yesterday’s exercise proves my old saying yet again – with fossil fuels you can do anything.  Just dragging one large crown alone easily saved me half a day’s worth of labour.

Tomorrow, the chap who will mill the logs into building material should show up to have a look…. fingers crossed he doesn’t let me down too!





It’s the nett energy George…..

7 02 2016

George-Monbiot-L

George Monbiot

George Monbiot has written another piece on the current oil situation, but whilst I agree mostly with what he says, he still doesn’t ‘get it’………

Oil, the industry that threatens us with destruction, is being bailed out with public money

By George Monbiot, published in the Guardian 3rd February 2016

Those of us who predicted, during the first years of this century, an imminent peak in global oil supplies could not have been more wrong. People like the energy consultant Daniel Yergin, with whom I disputed the topic, appear to have been right: growth, he said, would continue for many years, unless governments intervened.

Oil appeared to peak in the United States in 1970, after which production fell for 40 years. That, we assumed, was the end of the story. But through fracking and horizontal drilling, production last year returned to the level it reached in 1969. Twelve years ago, the Texas oil tycoon T. Boone Pickens announced that “never again will we pump more than 82 million barrels”. By the end of 2015, daily world production reached 97 million.

Following one of those links, I have to admit, surprised me…..  I had no idea the US’ oil production had almost reached its 1970 peak….. I may have confused how much they were extracting with what they were consuming. And, that chart is already out of date, the extraction rate is now in freefall…

usoilprod

What everyone who comments on this fails to say is that whilst the numbers of barrels tabled in their spreadsheets might well be there, and they may be following the money, absolutely nobody is following the nett number of Megajoules.  A barrel of oil from the last dot on the above chart may well contain less than a quarter of the nett energy content of one from a dot at the toe of the curve.

George then adds….:

Saudi Arabia has opened its taps, to try to destroy the competition and sustain its market share: a strategy that some peak oil advocates once argued was impossible.

Methinks he should visit Gail Tverberg’s site for proper analysis….

saudiexport

Saudi Arabia has been pumping flat out for years, with no discernible market flooding power.  It may in fact be trying very hard to meet its own fast growing domestic demand which is having an obvious impact on how much it is exporting, which is discernably less than it was way back in 1980……. so how can you blame them for flooding the market?

George continues with…..:

Instead of a collapse in the supply of oil, we confront the opposite crisis: we’re drowning in the stuff. The reasons for the price crash – an astonishing slide from $115 a barrel to $30 over the past 20 months – are complex: among them are weaker demand in China and a strong dollar. But an analysis by the World Bank finds that changes in supply have been a much greater factor than changes in demand.

Whilst Gail Tverberg says…..:

Some people talk about peak energy (or oil) supply. They expect high prices and more demand than supply. Other people talk about energy demand hitting a peak many years from now, perhaps when most of us have electric cars.

Neither of these views is correct. The real situation is that we right now seem to be reaching peak energy demand through low commodity prices. I see evidence of this in the historical energy data recently updated by BP (BP Statistical Review of World Energy 2015).

Growth in world energy consumption is clearly slowing. In fact, growth in energy consumption was only 0.9% in 2014. This is far below the 2.3% growth we would expect, based on recent past patterns. In fact, energy consumption in 2012 and 2013 also grew at lower than the expected 2.3% growth rate (2012 – 1.4%; 2013 – 1.8%).

Figure 1- Resource consumption by part of the world. Canada etc. grouping also includes Norway, Australia, and South Africa. Based on BP Statistical Review of World Energy 2015 data.

Recently, I wrote that economic growth eventually runs into limits. The symptoms we should expect are similar to the patterns we have been seeing recently (Why We Have an Oversupply of Almost Everything (Oil, labor, capital, etc.)). It seems to me that the patterns in BP’s new data are also of the kind that we would expect to be seeing, if we are hitting limits that are causing low commodity prices.

Of course, people like George who want to keep growth going, only using wind and nuclear power, don’t understand we are hitting limits.

When oil hit $147 at the time of the GFC, it literally bankrupted the economy. Having hit peak conventional oil, trillions of dollars had to be invested (read, borrowed…) to capitalise on the much higher hanging and less energetic fruit. Which made us get less with more, when we should be doing the exact opposite, doing more with less…..

George then has a big whinge about fossil subsidies at the expense of renewables.  The way I see it however, is that as all renewables are manufactured with fossil fuels, as they get cheaper, the costs of making the renewables also goes down, so that to some extent, any fossil subsidy is a hidden renewables subsidy…..  Furthermore, without further subsidies, oil and coal companies will go bust to which George says….:

A falling oil price drags down the price of gas, exposing coal mining companies to the risk of bankruptcy: good riddance to them.

Which, George, unfortunately also means good riddance to renewables….  He then ends with…….:

So they lock us into the 20th Century, into industrial decline and air pollution, stranded assets and – through climate change – systemic collapse. Governments of this country cannot resist the future forever. Eventually they will succumb to the inexorable logic, and recognise that most of the vast accretions of fossil plant life in the Earth’s crust must be left where they are. And those massive expenditures of public money will prove to be worthless.

Crises expose corruption: that is one of the basic lessons of politics. The oil price crisis finds politicians with their free-market trousers round their ankles. When your friends are in trouble, the rigours imposed religiously upon the poor and public services suddenly turn out to be negotiable. Throw money at them, trash their competitors, rig the outcome: those who deserve the least receive the most.

At last……  George recognises systemic collapse, for all the wrong reasons unfortunately. It may look like corruption to him, but it sure as hell looks like limits to growth to me.








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