The end of the Middle East

14 03 2017

I have to say, I am seriously chuffed that Nafeez Ahmed is calling it, as I have been for years now…. In a lengthy but well worth reading article in the Middle East Eye, Nafeez explains the convoluted reasons why we have the current turmoil in Iraq, Yemen, and Syria. He doesn’t mention Egypt – yet – but to be fair, the article’s focus in on Mosul and the implications of the disaster unfolding there……

It never ceases to amaze me how Egypt has managed to stay off the news radar. Maybe the populace is too starved to revolt again….

After oil, rice and medicines, sugar has run out in Egypt, as the country has announced a devaluation of 48% of its currency. In Egypt, about 68 million of the total 92 million people receive food subsidized by the State through small consumer stores run by the Ministry of supply and internal trade. After shortages of oil, rice and milk, and even medicines, now sugar scarcity has hit the country. Nearly three quarters of the population completely rely on the government stores for their basic needs.

Egypt produces 2 million tons of sugar a year but has to import 3 million to face domestic demand. However imports have become too expensive.  The country is expected to receive a loan of 12 billion dollars (11 billion euros) from the International monetary Fund (IMF) to tackle its food scarcity. The price for sugar in supermarkets and black markets are skyrocketing as well, with a kilogram costing around 15 pounds. If available, one could get sugar from subsidized government stores for 0.50 euros per kilo.

Nafeez goes into great and interesting detail re the dismaying shenanigans going on in nafeezIraq and Syria at the moment. I’ll leave it to you to go through what he wrote on the Middle East Eye site on those issues, but what struck me as relevant to what this blog is about is how well they correlate with my own thoughts here…..:

Among my findings is that IS was born in the crucible of a long-term process of ecological crisis. Iraq and Syria are both experiencing worsening water scarcity. A string of scientific studies has shown that a decade-long drought cycle in Syria, dramatically intensified by climate change, caused hundreds and thousands of mostly Sunni farmers in the south to lose their livelihoods as crops failed. They moved into the coastal cities, and the capital, dominated by Assad’s Alawite clan. 

Meanwhile, Syrian state revenues were in terminal decline because the country’s conventional oil production peaked in 1996. Net oil exports gradually declined, and with them so did the clout of the Syrian treasury. In the years before the 2011 uprising, Assad slashed domestic subsidies for food and fuel.

While Iraqi oil production has much better prospects, since 2001 production levels have consistently remained well below even the lower-range projections of the industry, mostly because of geopolitical and economic complications. This weakened economic growth, and consequently, weakened the state’s capacity to meet the needs of ordinary Iraqis.

Drought conditions in both Iraq and Syria became entrenched, exacerbating agricultural failures and eroding the living standards of farmers. Sectarian tensions simmered. Globally, a series of climate disasters in major food basket regions drove global price spikes. The combination made life economically intolerable for large swathes of the Iraqi and Syrian populations.

Outside powers – the US, Russia, the Gulf states, Turkey and Iran – all saw the escalating Syrian crisis as a potential opportunity for themselves. As the ensuing Syrian uprising erupted into a full-blown clash between the Assad regime and the people, the interference of these powers radicalised the conflict, hijacked Sunni and Shia groups on the ground, and accelerated the de-facto collapse of Syria as we once knew it.  

AND…..

Meanwhile, across the porous border in Iraq, drought conditions were also worsening. As I write in Failing States, Collapsing Systems, there has been a surprising correlation between the rapid territorial expansion of IS, and the exacerbation of local drought conditions. And these conditions of deepening water scarcity are projected to intensify in coming years and decades.

An Iraqi man walks past a canoe siting on dry, cracked earth in the Chibayish marshes near the southern Iraqi city of Nasiriyah in 2015 (AFP)

The discernable pattern here forms the basis of my model: biophysical processes generate interconnected environmental, energy, economic and food crises – what I call earth system disruption (ESD). ESD, in turn, undermines the capacity of regional states like Iraq and Syria to deliver basic goods and services to their populations. I call this human system destabilisation (HSD).

As states like Iraq and Syria begin to fail as HSD accelerates, those responding – whether they be the Iraqi and Syrian governments, outside powers, militant groups or civil society actors – don’t understand that the breakdowns happening at the levels of state and infrastructure are being driven by deeper systemic ESD processes. Instead, the focus is always on the symptom: and therefore the reaction almost always fails entirely to even begin to address earth system sisruption.

So Bashar al-Assad, rather than recognising the uprising against his regime as a signifier of a deeper systemic shift – symptomatic of a point-of-no-return driven by bigger environmental and energy crises – chose to crackdown on his narrow conception of the problem: angry people.

Even more importantly, Nafeez also agrees with my predictions regarding Saudi Arabia…

The Gulf states are next in line. Collectively, the major oil producers might have far less oil than they claim on their books. Oil analysts at Lux Research estimate that OPEC oil reserves may have been overstated by as much as 70 percent. The upshot is that major producers like Saudi Arabia could begin facing serious challenges in sustaining the high levels of production they are used to within the next decade.

Another clear example of exaggeration is in natural gas reserves. Griffiths argues that “resource abundance is not equivalent to an abundance of exploitable energy”.

While the region holds substantial amounts of natural gas, underinvestment due to subsidies, unattractive investment terms, and “challenging extraction conditions” have meant that Middle East producers are “not only unable to monetise their reserves for export, but more fundamentally unable to utilise their reserves to meet domestic energy demands”. 

Starting to sound familiar..? We are doing the exact same thing here in Australia…. It’s becoming ever more clear that Limits to Growth equates to scraping the bottom of the barrel, and the scraping sounds are getting louder by the day.

And oil depletion is only one dimension of the ESD processes at stake. The other is the environmental consequence of exploiting oil.

Over the next three decades, even if climate change is stabilised at an average rise of 2 degrees Celsius, the Max Planck Institute forecasts that the Middle East and North Africa will still face prolonged heatwaves and dust storms that could render much of the region “uninhabitable”. These processes could destroy much of the region’s agricultural potential.

Nafeez finishes with a somewhat hopeful few paragraphs.

Broken models

While some of these climate processes are locked in, their impacts on human systems are not. The old order in the Middle East is, unmistakably, breaking down. It will never return.

But it is not – yet – too late for East and West to see what is actually happening and act now to transition into the inevitable future after fossil fuels.

The battle for Mosul cannot defeat the insurgency, because it is part of a process of human system destabilisation. That process offers no fundamental way of addressing the processes of earth system disruption chipping away at the ground beneath our feet.

The only way to respond meaningfully is to begin to see the crisis for what it is, to look beyond the dynamics of the symptoms of the crisis – the sectarianism, the insurgency, the fighting – and to address the deeper issues. That requires thinking about the world differently, reorienting our mental models of security and prosperity in a way that captures the way human societies are embedded in environmental systems – and responding accordingly.

At that point, perhaps, we might realise that we’re fighting the wrong war, and that as a result, no one is capable of winning.

The way the current crop of morons in charge is behaving, I feel far less hopeful that someone will see the light. There aren’t even worthwhile alternatives to vote for at the moment…  If anything, they are all getting worse at ‘leading the world’ (I of course use the term loosely..), not better. Nor is the media helping, focusing on politics rather than the biophysical issues discussed here.

 





And the oil rout continues unabated..

26 02 2017

Paul Gilding, whose work I generally admire, has published a new item on his blog after quite some time off. “It’s time to make the call – fossil fuels are finished. The rest is detail.” Sounds good, until you read the ‘detail’. Paul is still convinced that it’s renewable energy that will sink the fossil fuel industry. He writes…..:

The detail is interesting and important, as I expand on below. But unless we recognise the central proposition: that the fossil fuel age is coming to an end, and within 15 to 30 years – not 50 to 100 – we risk making serious and damaging mistakes in climate and economic policy, in investment strategy and in geopolitics and defence.

Except the fossil fuel age may be coming to an end within five years.. not 15 to 30.

The new emerging energy system of renewables and storage is a “technology” business, more akin to information and communications technology, where prices keep falling, quality keeps rising, change is rapid and market disruption is normal and constant. There is a familiar process that unfolds in markets with technology driven disruptions. I expand on that here in a 2012 piece I wrote in a contribution to Jorgen Randers book “2052 – A Global Forecast” (arguing the inevitability of the point we have now arrived at).

This shift to a “technology” has many implications for energy but the most profound one is very simple. As a technology, more demand for renewables means lower prices and higher quality constantly evolving for a long time to come. The resources they compete with – coal, oil and gas – follow a different pattern. If demand kept increasing, prices would go up because the newer reserves cost more to develop, such as deep sea oil. They may get cheaper through market shifts, as they have recently, but they can’t keep getting cheaper and they can never get any better.

In that context, consider this. Renewables are today on the verge of being price competitive with fossil fuels – and already are in many situations. So in 10 years, maybe just 5, it is a no-brainer that renewables will be significantly cheaper than fossil fuels in most places and will then just keep getting cheaper. And better.

With which economy Paul….? Come the next oil crisis, the economy will simply grind to a halt. Paul is also keen on electric cars….

Within a decade, electric cars will be more reliable, cheaper to own and more fun to drive than oil driven cars. Then it will just be a matter of turning over the fleet. Oil companies will then have their Kodak moment. Coal will already be largely gone, replaced by renewables.

When the economy crashes, no one will have any money to buy electric cars. It’s that simple….. Peak Debt is only just starting to make its presence felt…:

The carnage continues in the U.S. major oil industry as they sink further and further in the RED.  The top three U.S. oil companies, whose profits were once the envy of the energy sector, are now forced to borrow money to pay dividends or capital expenditures.  The financial situation at ExxonMobil, Chevron and ConocoPhillips has become so dreadful, their total long-term debt surged 25% in just the past year.

Unfortunately, the majority of financial analysts at CNBC, Bloomberg or Fox Business have no clue just how bad the situation will become for the United States as its energy sector continues to disintegrate.  While the Federal Government could step in and bail out BIG OIL with printed money, they cannot print barrels of oil.

Watch closely as the Thermodynamic Oil Collapse will start to pick up speed over the next five years.

According to the most recently released financial reports, the top three U.S. oil companies combined net income was the worst ever.  The results can be seen in the chart below:

Can the news on the collapse of the oil industry worsen…..? You bet……

According to James Burgess,

A total of 351,410 jobs have been slashed by oil and gas production companies worldwide, with the oilfield services sector bearing much of this burden, according to a new report released this week.

The report, based on statistical analysis by Houston-based Graves & Co., puts the number of jobs lost in the oilfield services sector at 152,015 now—or 43.2 percent of the global total since oil prices began to slump in mid-2014.

And then there are the bankruptcies……

A report published earlier this month by Haynes and Boone found that ninety gas and oil producers in the United States (US) and Canada have filed for bankruptcy from 3 January, 2015 to 1 August, 2016.

Approximately US$66.5 billion in aggregate debt has been declared in dozens of bankruptcy cases including Chapter 7, Chapter 11 and Chapter 15, based on the analysis from the international corporate law firm.

Texas leads the number of bankruptcy filings with 44 during the time period measured by Haynes and Boone, and also has the largest number of debt declared in courts with around US$29.5 billion.

Forty-two energy companies filed bankruptcy in 2015 and declared approximately US$17.85 billion in defaulted debt. The costliest bankruptcy filing last year occurred in September when Samson Resources filed for Chapter 11 protection with an accumulated debt of roughly US$4.2 billion.

Then we have Saudi Arabia’s decision to cut production to manipulate the price of oil upwards. So far, it appears to have reached a ceiling of $58 a barrel, a 16 to 36 percent increase over the plateau it had been on for months last year. But this has also come at a cost.

The world hasn’t really caught on yet, but OPEC is in serious trouble.  Last year, OPEC’s net oil export revenues collapsed.  How bad?  Well, how about 65% since the oil price peaked in 2012.  To offset falling oil prices and revenues, OPEC nations have resorted to liquidating some of their foreign exchange reserves.

The largest OPEC oil producer and exporter, Saudi Arabia, has seen its Foreign Currency reserves plummet over the past two years… and the liquidation continues.  For example, Saudi Arabia’s foreign exchange reserves declined another $2 billion in December 2016 (source: Trading Economics).

Now, why would Saudi Arabia need to liquidate another $2 billion of its foreign exchange reserves after the price of a barrel of Brent crude jumped to $53.3 in December, up from $44.7 in November??  That was a 13% surge in the price of Brent crude in one month.  Which means, even at $53 a barrel, Saudi Arabia is still hemorrhaging.

Before I get into how bad things are becoming in Saudi Arabia, let’s take a look at the collapse of OPEC net oil export revenues:

The mighty OPEC oil producers enjoyed a healthy $951 billion in net oil export revenues in 2012.  However, this continued to decline along with the rapidly falling oil price and reached a low of $334 billion in 2016.  As I mentioned before, this was a 65% collapse in OPEC oil revenues in just four years.

Last time OPEC’s net oil export revenues were this low was in 2004.  Then, OPEC oil revenues were $370 billion at an average Brent crude price of $38.3.  Compare that to $334 billion in oil revenues in 2016 at an average Brent crude price of $43.5 a barrel…….

This huge decline in OPEC oil revenues gutted these countries foreign exchange reserves.  Which means, the falling EROI- Energy Returned On Investment is taking a toll on the OPEC oil exporting countries bottom line.  A perfect example of this is taking place in Saudi Arabia.

Saudi Arabia was building its foreign exchange reserves for years until the price of oil collapsed, starting in 2014.  At its peak, Saudi Arabia held $797 billion in foreign currency reserves:

(note: figures shown in SAR- Saudi Arabia Riyal currency)

In just two and a half years, Saudi Arabia’s currency reserves have declined a staggering 27%, or roughly $258 billion (U.S. Dollars) to $538 billion currently.  Even more surprising, Saudi Arabia’s foreign currency reserves continue to collapse as the oil price rose towards the end of 2016:

The BLUE BARS represent Saudi Arabia’s foreign exchange reserves and the prices on the top show the average monthly Brent crude price.  In January 2016, Brent crude oil was $30.7 a barrel.  However, as the oil price continued to increase (yes, some months it declined a bit), Saudi’s currency reserves continued to fall.

This problem is getting bad enough that for the first time ever, the Saudi government has, shock horror,  started taxing its people….

Tax-free living will soon be a thing of the past for Saudis after its cabinet on Monday approved an IMF-backed value-added tax to be imposed across the Gulf following an oil slump.

A 5% levy will apply to certain goods following an agreement with the six-member Gulf Cooperation Council in June last year.

Residents of the energy-rich region had long enjoyed a tax-free and heavily subsidised existence but the collapse in crude prices since 2014 sparked cutbacks and a search for new revenue.

How long before Saudi Arabia becomes the next Syria is anyone’s guess, but I do not see any economic scenario conducive to Paul Gilding’s “Great Disruption”. The great disruption will not be the energy take over by renewables, it will be the end of freely available energy slaves supplied by fossil fuels. I believe Paul has moved to Tasmania, in fact not very far from here….. I hope he’s started digging his garden.





Nafeez Ahmed: Our Systems Are Failing

20 02 2017

IF you are not familiar with Chris Martenson’s immensely valuable work, then start here….

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nafeezThe most fascinating thing for me is how so much of what we take for granted becomes questionable as a result of the breakdown we’re seeing. When we begin questioning the exponential growth model then we begin questioning the value system driving our material production/consumption. It’s not that it hasn’t produced amazing knowledge of our environment and our place in the universe. It’s not that there haven’t been a huge amount of amazing technological developments, like the internet which has enabled people to be interconnected in ways that they never were able to before. In a way has paved the way for us to be able to think globally in a way that centuries ago would have never happened.

It’s not that everything about this paradigm is bad. It’s just that it has very clearly outlasted its usefulness and is now fundamentally responsible for escalating the biophysical rupture that we see happening and manifesting in so many different ways. What that tells me is that we have to grow up as a species. It’s an evolutionary moment.

When we apply systems theory to this, when we apply our knowledge of complex adaptive systems and the history of evolution, it does seem to me that it is absolutely clear really that we’re at an unprecedented moment. For the first time in human history, we are standing at a point where we need to basically undergo fundamental systemic adaptation. Exactly what that looks like we’re still trying to work out. But what is very clear is what it doesn’t look like. It doesn’t look like seeing each other as separate material entities that just fend for themselves and produce and consume to an endless degree. It looks quite different.

The ideas and the values and the ethos of that different approach has been percolating in different civilizations in different ways. There’s evidence from indigenous civilizations, from tribal societies, and even from projects that are now being seeded here and now in our current context where people are trying different things. I think we are at a moment where we’re rewriting that story and making a new story of what it means to be human.

It’s particularly important because when people look at this with fresh eyes, it’s very easy to be overwhelmed by a sense of powerlessness. That’s being reflected now with the rise of Trump and everything else. There is this sense of things getting worse. And I think in many ways it is going to get worse before it gets better. All of this is symptomatic of the crisis that is at play.

A question we all need to be able to ask ourselves is To what extent can I make myself useful going forward, building and planting seeds for what comes after this moment?

https://www.peakprosperity.com/podcast/107221/nafeez-ahmed-our-systems-failing?utm_source=dlvr.it&utm

 





Post Neo-Liberalism… what next?

9 02 2017

The articles coming out in what I consider mainstream media lately – the Conversation in this case – has me astounded……

While this piece is interesting, there is no mention whatever of Limits to Growth……

If Streeck is correct, then we need to anticipate what a post-capitalist world may look like. He thinks it will be terrible. He fears the emergence of a neocorporatist state and close crony-like collaboration between big capital, union leaders, government and the military as the consequence of the next major global financial crisis.

Jobs will disappear, Streeck believes. Capital will be intensely concentrated in very few hands. The privileged rich will retreat into security enclaves dripping with every luxury imaginable.

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It is unfashionable, or just embarrassing, to suggest the taken-for-granted late-modern economic order – neoliberal capitalism – may be in a terminal decline. At least that’s the case in what former Australian prime minister Tony Abbott likes to call the “Anglosphere”.

What was once known as the Chicago school of economics – the neoclassical celebration of the “free market” and “small government” – still closes the minds of economic policymakers in the US and its satellite economies (although perhaps less so in contemporary Canada).

But, in Europe, there has always been a deep distrust of the Anglo-American celebration of “possessive individualism” and its repudiation of community and society. Remember Margaret Thatcher’s contempt for the idea of “society”?

So, it is unsurprising that neoliberalism’s advocates dismiss recent European analyses of local, regional and global economies as the nostalgia of “old Europe”, even as neoliberalism’s failures stack up unrelentingly.

The consequences of these failures are largely unseen or avoided by policymakers in the US and their camp followers in the UK and Australia. They are in denial of the fact that not only has neoliberalism failed to meet its claimed goals, but it has worked devastatingly to undermine the very foundations of late-modern capitalism.

The result is that the whole shambolic structure is tottering on the edge of an economic abyss.

What the consequences might be

Two outstanding European scholars who are well aware of the consequences of the neoliberal catastrophe are French economist Thomas Piketty and German economist Wolfgang Streeck.

Piketty’s 2013 book, Capital in the Twenty-First Century, charts the dangers of socioeconomic inequality in capitalism’s history. He demonstrates how this inequality can be – and has been over time – fundamentally destructive of sustained economic growth.

Most compellingly, Piketty documented in meticulous detail how contemporary neoliberal policies have constructed the worst forms of socioeconomic inequalities in history. His analysis has been underlined by the recent Oxfam report that showed a mere eight multi-billionaires own the equivalent amount of capital of half of the global population.

Despite Piketty’s scrupulous scholarship, Western neoliberal economies continue merrily down the road to nowhere. The foundations of that road were laid by the egregiously ideological policies of Thatcher and Ronald Reagan – and slavishly followed by Australian politicians on all sides ever since.

Streeck’s equally detailed scholarship has demonstrated how destructive of capitalism itself neoliberal policymaking has been. His latest book, How Will Capitalism End?, demonstrates how this neoliberal capitalism triumphed over its opponents (especially communism) by devouring its critics and opponents, obviating all possible alternatives to its predatory ways.

If Streeck is correct, then we need to anticipate what a post-capitalist world may look like. He thinks it will be terrible. He fears the emergence of a neocorporatist state and close crony-like collaboration between big capital, union leaders, government and the military as the consequence of the next major global financial crisis.

Jobs will disappear, Streeck believes. Capital will be intensely concentrated in very few hands. The privileged rich will retreat into security enclaves dripping with every luxury imaginable.

Meanwhile, the masses will be cast adrift in a polluted and miserable world where life – as Hobbes put it – will be solitary, poor, nasty, brutish and short.

What comes next is up to us

The extraordinary thing is how little is known or understood of the work of thinkers like Piketty and Streeck in Australia today.

There have been very fine local scholars, precursors of the Europeans, who have warned about the hollow promises of “economic rationalism” in Australia.

But, like the Europeans, their wisdom has been sidelined, even as inequality has been deepening exponentially and its populist consequences have begun to poison our politics, tearing down the last shreds of our ramshackle democracy.

The time is ripe for some creative imagining of a new post-neoliberal world that will repair neoliberalism’s vast and catastrophic failures while laying the groundwork for an Australia that can play a leading role in the making of a cosmopolitan and co-operative world.

Three immediate steps can be taken to start on this great journey.

First, we need to see the revival of what American scholar Richard Falk called “globalisation from below”. This is the enlivening of international civil society to balance the power of the self-serving elites (multinational managers and their political and military puppets) now in power.

Second, we need to come up with new forms of democratic governance that reject the fiction that the current politics of representative government constitute the highest form of democracy. There is nothing about representative government that is democratic. All it amounts to is what Vilfredo Pareto described as “the circulation of elites” who have become remote from – and haughtily contemptuous of – the people they rule.

Third, we need to see states intervening comprehensively in the so-called “free market”. Apart from re-regulating economic activity, this means positioning public enterprises in strategic parts of the economy, to compete with the private sector, not on their terms but exclusively in the interests of all citizens.

As Piketty and Streeck are pointing out to us, the post-neoliberal era has started to self-destruct. Either a post-capitalist, grimly neo-fascist world awaits us, or one shaped by a new and highly creative version of communitarian democracy. It’s time for some great imagining.





Forget 1984…. 2020 is the apocalypse year

26 01 2017

The crescendo of news pointing to 2020 as the date to watch is growing apace…. it won’t be the year collapse happens, because collapse is a process, not an event; but it will definitely be the year this process starts to become obvious. To people other than followers of this blog at least…!

RIYADH, Saudi ArabiaAccording to the International Monetary Fund, Saudi Arabia’s economy is in danger of collapse as oil prices grow increasingly unstable.

The warning appeared in the “Regional Economic Outlook” for the Middle East and Central Asia published on Oct. 15, an annual report published by IMF economists. Adam Leyland, writing on Oct. 23 for The Independent, explained the grim prognosis for Saudi’s economy, which is almost completely dependent on fossil fuels:

“[T]he IMF said that the kingdom will suffer a negative 21.6 per cent ‘General Government Overall Fiscal Balance’ in 2015 and a 19.4 per cent negative balance in 2016, a massive increase from only -3.4 per cent in 2014.

Saudi Arabia currently has $654.5 billion in foreign reserves, but the cash is disappearing quickly.

The Saudi Arabian Monetary Agency has withdrawn $70 billion in funds managed by overseas financial institutions, and has lost almost $73 billion since oil prices slumped, according to Al-Jazeera. Saudi Arabia generates 90 per cent of its income from oil.”

AND……..

Tax-free living will soon be a thing of the past for Saudis after its cabinet on Monday approved an IMF-backed value-added tax to be imposed across the Gulf following an oil slump.

A 5% levy will apply to certain goods following an agreement with the six-member Gulf Cooperation Council in June last year.

Residents of the energy-rich region had long enjoyed a tax-free and heavily subsidised existence but the collapse in crude prices since 2014 sparked cutbacks and a search for new revenue.

Author Dr Nafeez Ahmed, a Visiting Fellow at Anglia Ruskin University’s Global Sustainability Institute, is making even more waves today, saying………:

“Syria and Yemen demonstrate how climate and energy crises work together to undermine state power and fuel terrorism. 

“Climate-induced droughts ravage agriculture, swell the ranks of the unemployed and destroy livelihoods.  Domestic oil depletion undercuts state revenues, weakening the capacity to sustain domestic subsidies for fuel and food.  As the state is unable to cope with the needs of an increasingly impoverished population, this leads to civil unrest and possibly radicalisation and terrorism. 

“These underlying processes are not isolated to Syria and Yemen.  Without a change of course, the danger is that eventually they will occur inside the US and Europe.”

Failing States, Collapsing Systems: BioPhysical Triggers of Political Violence, authored by Dr Nafeez Ahmed, published by Springer Briefs in Energy includes the following key points…:
  • Global net energy decline is the underlying cause of the decline in the rate of global economic growth.  In the short term, slow or absent growth in Europe and the US is complicit in voter discontent and the success of anti-establishment politicians. 
  • Europe is now a post-peak oil society, with its domestic oil production declining every year since 1999 by 6%.  Shale oil and gas is unlikely to offset this decline. 
  • Europe’s main sources of oil imports are in decline. Former Soviet Union producers, their production already in the negative, are likely to terminate exports by 2030.  Russia’s oil production is plateauing and likely to decline after 2030 at the latest. 
  • In the US, conventional oil has already peaked and is in sharp decline.  The shortfall is being made up by unconventional sources such as tight oil and shale gas, which are likely to peak by 2025. California will continue to experience extensive drought over the coming decades, permanently damaging US agriculture.
  • Between 2020 and 2035, the US and Mexico could experience unprecedented military tensions as the latter rapidly runs down its conventional oil reserves, which peaked in 2006. By 2020, its exports will revert to zero, decimating Mexican state revenues and potentially provoking state failure shortly thereafter.
  • After 2025, Iraq is unlikely to survive as a single state.  The country is experiencing worsening water scarcity, fueling an ongoing agricultural crisis, while its oil production is plateauing due to a combination of mounting costs of production and geopolitical factors.
  • Saudi Arabia will face a ‘perfect storm’ of energy, food and economic shocks most likely before 2030, and certainly within the next 20 years.
  • Egypt will begin to experience further outbreaks of civil unrest leading to escalating state failure after 2021.  Egypt will likely become a fully failed state after 2037.
  • India’s hopes to become a major economic player will falter due to looming food, water and energy crises.  India’s maximum potential domestic renewable energy capacity is insufficient to meet projected demand growth.
  • China’s total oil production is likely to peak in 2020.  Its rate of economic growth is expected to fall continuously in coming decades, while climate change will damage its domestic agriculture, forcing it to rely increasingly on expensive imports by 2022.

I wish Julian Simon could read this….. it seems all our limits to growth chickens are coming home to roost, and very soon now.





The implications of collapsing ERoEI

25 01 2017

Judging by the relatively low level of interest the past few articles published here regarding the collapse of fossil fuel ERoEI (along with PV’s) have attracted, I can only conclude that most people just don’t get it……. How can I possibly fix this……?

When I first started ‘campaigning’ on the issue of Peak Oil way back in 2000 or so, 2020 seemed like a veoileroeiry long way away. I still thought at the time that renewables would ‘save us’, or at the very least that energy efficiency would be taken up on a massive scale. None of those things happened.

Way back then, I gave many public powerpoint presentations, foolishly thinking that, presented with the facts, (NOT alternative facts like we have today…) people would wake up to themselves. I even foolishly believed that the Australian Greens would take this up as a major issue, because after all the ‘solutions’ to Peak Oil also happen to be the ‘solutions’ for Climate Change. Now you know why I have turned into such a cynic.

In that presentation, there was one important slide, shown above. It is indelible in my memory.

I’ve now come across a very similar chart, except this one has dates on it….. and 2020 no longer seems very far away at all….

COLLAPSING ERoEI IN ONE CHART

peakeroei

I have selected three years; 2017, in red; 2020 in black; 2025 in green.

Each year has two lines. One for how much energy is being extracted, and the lower one of the same colour shows the net energy available from that extraction. The ‘missing’ energy, lost to crashing ERoEI, is the difference between the two lines of the same colour….  Already, in 2017, we probably only have the amount of energy that was available mid 1980.

By 2020 (which I happen to believe will be crunch time), net energy available is roughly equal to what we had in ~1975.

By 2025, we will be down to 1950 levels………

It doesn’t matter whether I’m out by 1, 2, 5, or even 10 years (which I very much doubt). The point is, the global economy will have shrunk dramatically by then. It simply cannot grow without energy, more and more of it every year in fact. Without growth, the entire money system will have collapsed, and it’s anyone’s guess how many banks will be left standing. Or governments for that matter, the electorate has recently proven itself to be very very fickle……

Why this isn’t mainstream news beggars belief….

Good luck.





Fossil fuels in deep trouble…..

19 08 2016

Recently, a handful of Germany’s top scientists argued that “controlled implosion of fossil industries and explosive renewables development” might be able to deliver on the targets in the Paris agreement on climate change.

Even if we accept this notion at face value, and ignoring that many other factors might also be in play, the recent course of events does not offer much hope that “controlled” is the correct word to apply to the predicaments currently battering the energy sector. And while the renewable energy sector might be continuing to make progress, it is clearly not “exploding” as fast as some might wish……. Could it be, by any chance, that the ongoing collapse of the fossil fuel industries will happen at a much faster pace than the wishful explosive transition to ‘solutions’?

Let’s start with coal. The future for this bankruptcy-riddled industry dramatically worsened in July 2016. It increasingly looks as though the Chinese government’s recent retreat from coal is biting hard, and that Chinese coal peak coal production occurred in 2014. Prof Nick Stern, among others, including Chinese collaborators, argued that we are witnessing “a turning point in the climate change battle”. The latest Chinese announcement is a ban on the development of coal projects, until 2018. The staggering air pollution driving this change is proving difficult to beat… and the same is true of India.  NASA data showed toxic air choking huge areas of the Indian subcontinent, most of which the obvious result of fossil fuel combustion. In the face of all this, even Deutsche Bank has stopped financing the coal mining sector.

Investment continues to wane from fossil fuels as a result of divestment campaigns. Swedish pension fund AP4 made the biggest divestment move of any institution to date. The $35billion scheme will decarbonise its $14.7billion global equity portfolio by 2020, switching to passive investment tracking low carbon benchmarks.

Furthermore, the oil and gas industry’s hopes for a return to high oil prices have yet to occur, and as a result its already teetering state is deteriorating. A study of 365 oil and gas megaprojects by Ernst and Young shows 64% with cost overruns, and 73% behind schedule. This dismal record is combining with low oil prices to create a mortal squeeze on profitability.

US drillers have hit an all time high with junk bond defaults: $28.8 billion so far this year, according to Fitch Ratings. With $500 billion+ outstanding,  more bankruptcies can be expected. Some of these companies are even trying to buy time by paying debt interest with more debt. Desperate times require desperate actions I guess…….

Global oil breakeven costs have fallen by $19 to a current average of $51 since the oil price began falling in 2014. Trouble is, the oil price is still hovering around $40 and most of the industry’s targets are totally uneconomic.

“Oil giants find there’s nowhere to hide from doomsday market”, read a Bloomberg headline. “The industry cannot survive on current oil prices,” veteran analyst Fadel Gheit declared. The bankruptcy count so far this year stands at more than 80 companies.

So will the oil price rise, and offer some relief…? Not according to analysts. Morgan Stanley expects oil to fall to $35. (The price is around $40 as I write). The main concern is excessive production of petrol/gasoline by refineries (= less crude imported). As always, some of course disagree. Core Laboratories point to the net worldwide annual crude oil production decline rate of ~3.3%, and expect US production to continue dropping, which they hope will bring tighter supply, and rising prices.

Even if the oil price does indeed rise again, problems are not going away…… The industry faces a huge shortage of workers. 350,000 have apparently been laid off since the oil price began falling in 2014. 60% of the fracking workforce has been laid off, 70% of fracking equipment has been idled. It will be nigh impossible to turn the taps back on, as even some of the industry’s own bosses now point out. And if the price rises back above $90, the global economy will tank……