Solving secondary problems first

10 08 2018

Can you run a self-driving car on a desert island?

Of course not: There are no roads; and there is no fuel for the car.

Why do I mention this?  Because the received narrative around climate change and so-called “peak oil demand” is that new technologies like electric self-driving cars are going to ride to our rescue in the near future.  This is a nice fantasy; but I would draw your attention to the fact that while we still have roads, along with much of our infrastructure they are falling apart through neglect.  Without the enabling infrastructure, the proposed new technologies are going nowhere.

Energy, meanwhile, is a far greater problem.  Globally (remember most of the food we eat and the goods we buy are imported) 86 percent of our energy comes from fossil fuels – down just one percent from 1995.  Renewable energy accounts for nearly 10 percent; but most of this is from hydroelectric dams and wood burning.  The modern renewables – solar, wind, geothermal, wave, tidal, and ocean energy – that so many people imagine are going to save the day account for just 1.5 percent of the energy we use.

Modern renewables are a kind of Schrodinger’s energy because they are simultaneously replacements for (some of) the fossil fuel that we are currently using and the additional energy to power all of the new technologies that are going to save the day.  And rather like the benighted feline in Schrodinger’s experiment, so long as nobody actually looks at the evidence, they can continue to fulfil both roles.

Given the potentially catastrophic consequences of not having sufficient energy to continue growing our economy, it is psychologically discomforting even to ask why energy costs are spiralling upward around the world, and why formerly energy independent countries are resorting to difficult, expensive and environmentally toxic fuel sources like hydraulically fractured shale or strip mined bitumen sands.  This, perhaps, explains why so many people focus their attention on solving second order problems – something psychologists refer to as a “displacement activity.”

An example of this appeared in today’s news in the shape of an Australian attempt to revive hydrogen-powered cars.  In theory, hydrogen (which only exists in compounds in nature) is superior to (far less abundant) lithium ion batteries as a store of energy to power electric vehicles.  Crucially, unlike battery-powered electric vehicles, hydrogen cell electric vehicles do not need to be recharged, but can be refuelled in roughly the same time as it takes to refuel a petroleum vehicle.  And, of course, hydrogen vehicles do not require tax payers and energy consumers to foot the bill for the upgrade of the electricity grid needed for battery-powered cars.

hydrogen car

The drawback with hydrogen is that it is difficult to store.  Because hydrogen is the smallest atom, it can gradually corrode and seep out of any container; especially if it is compressed into liquid form.  It is this problem that the Australian researchers appear to have solved.  Using a new technology, they have been able to store hydrogen as ammonia, and then convert it back to hydrogen to fuel their cars.  As Lexy Hamilton-Smith at ABC News reports:

“For the past decade, researchers have worked on producing ultra-high purity hydrogen using a unique membrane technology.

“The membrane breakthrough will allow hydrogen to be safely transported and used as a mass production energy source.”

Unlike batteries, which have only succeeded imperfectly at replacing lightweight vehicles, hydrogen is already used around the world to power much heavier vehicles:

“Hydrogen powered vehicles, including buses, trucks, trains, forklifts as well as passenger cars are being manufactured by leading automotive companies and deployed worldwide as part of their efforts to decarbonise the transport sector.”

Step back for a moment and you will see that this is, indeed, a displacement activity.  Insofar as humans are currently imagining a far more electrified world, then there is a competition to be won on the best form of energy storage.  And there are good reasons for believing that hydrogen is a more versatile battery than lithium ion (which also has a tendency to burst into flames if not stored properly).  However, this competition is predicated on the highly unlikely possibility of our having a large volume of excess energy in future.

Currently, almost all of the hydrogen we use is obtained by chemically separating it out of natural gas.  Using electrolysis to separate hydrogen out of water is simply too expensive by comparison.  But gas reserves are shrinking (which is why fracking is being promoted) and are already required for agriculture, chemicals, for heating and cooking, and for generating much of the electricity that used to come from coal.  Given the Herculean efforts that were required to install the modern renewables that generate just 1.5 percent of our energy, the idea that these are about to deliver enough excess capacity to allow the production of hydrogen from water is fanciful at best.

And that’s the problem.  Until we can secure a growing energy supply both hydrogen and lithium ion cars are going to end up on a global desert island.  One where there is insufficient power and unrepaired infrastructure.  To make matters worse, climate change dictates that the additional power we need in future cannot come from the fuels that currently provide us with 86 percent of our energy.  And, of course, whatever we end up substituting for fossil fuels will have to provide sufficiently cheap energy that the population doesn’t rise up and produce something a great deal worse than Brexit or Donald Trump.

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Earth Battery

2 07 2018

I don’t know how this podcast ever flew under the radar, but it’s ‘must listen to’ material….. two of my favourite peakniks, Chris Martenson and Tom Murphy, discuss our predicaments in the clearest possible way.

The standout for me was Tom calling our fossil fuels sources a gigantic solar battery in which millions of years of solar energy was stored, only to be virtually short circuited to be discharged in what is the blink of an eyelid in geological terms……

 





Is this a sign of collapse gathering pace…?

15 05 2018

The articles coming from the consciousness of sheep are getting more and more interesting… after reading this one, I could not help but think that while Australia’s energy dilemmas are different to the UK’s, the following quote really struck a cord with me…:

Underlying all of this is a fundamental truth that few are prepared to contemplate: with the end of the last supplies of cheap fossil fuels, there is no affordable energy mix for the foreseeable future.  No combinations of gas, nuclear and renewables can be developed and deployed at the same time as prices are held at levels that are only just affordable to millions of British households.  Nor is there any option of returning to cheap gas from depleted North Sea deposits; still less reopening coal deposits put out of reach by the Thatcher government.

We are ‘lucky’ to have more coal and gas than we know what to do with, until that is it becomes so obvious we can’t keep burning these climate destroying fuels, we just stop. Hopefully before it’s too late.  But consider this……  if the UK economy collapses, what effect would it have on ours? Oil is creeping up, and our electricity rates are the subject of much moaning all over the country. An economic shock is coming, as sure as the sun rises in the East…..

Centrica may not care

Sometimes a story is repeated so often that its veracity is never challenged.  One such is the myth that British households are in thrall to a wicked energy cartel that puts excessive profits above common decency.  So much so, indeed, that the government and the opposition parties have all signed up to some form of energy cap designed to keep energy prices affordable.

The grain of truth in this story is that, aided by a craven regulator, the “big six” – British Gas, EDF Energy, E.ON, Npower, Scottish Power, and SSE – have on many occasions operated a cartel to hold prices up.  How else can we explain, for example, recent British Gas price increases in the face of a collapse in their customer base?

“British Gas owner Centrica lost 110,000 energy supply accounts in the first four months of the year.  That is roughly equivalent to 70,000 customers as many households buy their gas and electricity from British Gas, so will have two accounts.

“Last year, the company lost 1.3 million energy accounts…

“In April, British Gas announced a 5.5% increase in both gas and electricity bills, which comes into effect at the end of this month.  It blamed the rising wholesale cost of energy and the cost of meeting emissions targets and introducing smart meters.

“Other big energy firms have also announced price increases this year, including Npower, EDF and Scottish Power.”

This is surely evidence of a cartel being operated behind the back of the regulator… or is it?

There is an alternative explanation for the recent behaviour of the soon to be Big Four that should send a shiver through the UK economy.  Toward the end of last year, Jillian Ambrose at the Telegraph reported that:

“Britain’s second-largest energy supplier is eyeing the exit as the Government’s crackdown on energy bills threatens profits.

“SSE, formerly known as Scottish and Southern Energy, may turn its back on supplying gas and power to almost 8m British homes ­after years of political threats against the six largest energy companies comes to a head.

“City sources say the FTSE 100 energy giant is quietly discussing early plans to sell off its customer accounts, or even spin the business off as a separate listed company in order to focus on networks and renewable energy and avoid the Government’s looming energy price cap.”

Some months earlier I took the time to examine Centrica’s (British Gas’ parent company) annual accounts.  The results are not pretty:

“While Centrica profits were down (but still high) the division of British Gas that supplies electricity to UK consumers (businesses and households) actually made a loss of £61.1 million last year – in the household market, the loss was even bigger at £71.9 million.  That is, business electricity consumers are subsidising household electricity to some extent, while Centrica itself is subsidising its UK electricity business out of the profits from its other divisions.  Despite this, of course, electricity consumers are facing increasing bills even as they scale back their consumption.  This is exacerbated by the government decision to load the cost of renewables, new gas and new nuclear onto customers’ bills; effectively creating in all but name an even more regressive tax than VAT.”

Centrica’s response at the start of this year was to axe 4,000 jobs; having previously ceased maintaining the strategically essential Rough natural gas storage facility in the North Sea.  SSE in the meantime has announced a merger with N-Power in an attempt to rationalise both company’s retail energy business.  Unfortunately, no business to date has managed the trick of cutting its way to greatness… particularly in an economic climate in which ever fewer consumers can afford the service.

Centrica’s route out of an increasingly unprofitable domestic energy supply sector will be to focus on its much larger international energy business.  Britain’s remaining retail energy suppliers – all of which are foreign owned – may not enjoy this option.  For example, EDF’s wholesale energy investments are tied up in an increasingly risky and very-likely loss-making nuclear power sector.  Nor is there much to be gained from investment in renewable energy technologies that depend upon uncertain government subsidies that have become politically toxic among ordinary voters.

Underlying all of this is a fundamental truth that few are prepared to contemplate: with the end of the last supplies of cheap fossil fuels, there is no affordable energy mix for the foreseeable future.  No combinations of gas, nuclear and renewables can be developed and deployed at the same time as prices are held at levels that are only just affordable to millions of British households.  Nor is there any option of returning to cheap gas from depleted North Sea deposits; still less reopening coal deposits put out of reach by the Thatcher government.

For the moment, the UK government is content to fill Britain’s energy gap with imports.  However, as global energy supplies begin to tighten once more, pricing and profitability issues are likely to rise up the political agenda again.  Faced with an increasing struggle to remain profitable, and in the face of a government determined to add the cost of green energy onto domestic bills while legislating to prevent those bills from rising, companies like Centrica may simply choose to walk away.  After all, one of the blessings of being a private corporation (as opposed to a public utility) is that nobody can stop you from closing when you run out of money.





The Price of Oil

10 02 2018

Another excellent article by Dave Pollard over at How to Save the World…..  my only criticism of this article is that he’s not factoring in collapsing ERoEI will have on the production side…..


The clueless gamblers that speculate on stock and commodity prices have been having a field day recently. Desperately chasing profits, like high-rollers who keep increasing their casino bets every time they lose, they have wiped billions out of share and pension values in a lemming-like panic about whether and when the colossally overpriced stock market is going to crash. And they have also pushed the price of oil up to near $70/bbl for the first time in several years. These speculators, who contribute nothing of any value to our economy, are some of the most destructive individuals on the planet, destabilizing markets on which many depend for their lives and livelihoods. (They also wreak havoc on land, real estate, food, and currency prices.) And many of them make millions in commissions and bonuses just rolling the dice for their employers and clients and praying that their lucky bets (mostly on prices rising perpetually) will continue.

A couple of years ago I wrote an article about the price of oil, explaining that the issue we’re going to face in the 21st century isn’t one of energy running out, but of affordableenergy running out. Just as, during great depressions and famines, masses of food is left rotting in the ground because no one can afford to buy it (or even retrieve it and give it away), having oil in the ground that costs $80/bbl to get to market (especially if governments run out of money for subsidies, or, god forbid, decide that oil companies should start to pay the huge external costs of their activities) is not especially useful when you can only afford, in an economy ruined by overexploitation, environmental degradation, excessive debt, inequality and waste, $30/bbl for it.

Before I go further, if you’re one of the many who have been persuaded that “peak oil is over” and that renewables and new technology will soon save us from energy collapse, you might as well not read this article. Instead, I’d suggest you read this, or this, or this, or any of the many other articles written by people who understand the laws of thermodynamics and how the economy actually works.

This time I thought I’d start with a review of oil prices in the past. The chart above plots the course of oil prices (in inflation-adjusted dollars) back to 1946. Green lines show supply curves; red lines demand curves, and the dots at intersections are annual average oil prices for those years. Follow the dots:

  1. 1946-72. Oil prices were remarkably stable at about $25/bbl (in current dollars) during this entire period. The world became dependent on OPEC. Virtually all global growth in real terms since 1946 is attributable to increasing use of oil. Almost none of it is ascribable to new technology (other than energy extraction technology) or “efficiencies” or “innovation” or “economies of scale”. That’s it. If you’re a believer in GDP or that growth is essential to the economy you might want to keep that in mind (and if you are invested in stocks or land or any other industrial resource, you’d better believe, because their “value” is all computed in terms of future growth in exchange value, production and profits). Between 1946 and 1972 the OPEC nations were in bed with the western corporatists (as they still are today, supporting them politically and militarily), fixing the price of oil at that price to ensure the economy could continue to grow, as required, endlessly.
  2. 1973-80. OPEC fights back, realizing that although they can make money at $25/bbl because of the size and ease of tapping their reserves, they have already pumped out more than half of it, and they have only a few decades’ worth left and nothing to support their economy when it runs out. So they constrain production, driving the price up to $60/bbl (1975) and then $110/bbl (1980). At that price they can set money aside for when their oil runs out, and avoid the massive humanitarian crises that the end of oil spells for them. But for the western corporatists, this is disastrous: their economies are in a shambles, with double-digit inflation ruining profits, and line-ups at the pumps.
  3. 1981-85. The western corporatists “convince” OPEC to turn the pumps back on, persuading them that there is a happy medium price for oil (more than the $25-30/bbl that makes exploration for new sources uneconomic, but less than the $75/bbl threshold beyond which the global economy cannot pay for it and hence cannot survive. By 1985, OPEC has increased supply so that, despite the new demand from expanding Asian countries, the price has settled back in the perfect $50-60/bbl range. Remember here that the amount of production and consumption of oil is so close (there’s no place to put much excess once it’s pumped, and there’s no margin for error if there’s a serious shortage) that any changes in production, intentional or not, have a huge impact on price.
  4. 1986-2002. At $60/bbl, there’s an incentive to put more into the market than you can sustainably continue to produce, and also an incentive to find new sources — and remember, a small increase in supply has a big impact on lowering price. From the late 1980s to 2002, the lingering effects of the early-1980s crash kept demand from increasing as it had been, and a number of (heavily subsidized, environmentally catastrophically damaging) new sources of “dirty” and “tight” (harder to extract) oil were found. As a consequence, prices tumbled back to the $30/bbl level. OPEC was not happy, but some of their own short-term-thinking members were opening the taps to try to bolster their struggling economies, and the new sources meant OPEC as a whole had less oligopoly power over supplies and hence prices.
  5. 2003-08. The low prices were unsustainable to many producers, especially those with higher production costs that ceased or curtailed exploring, and that, combined with increasing demand from third-world countries, began pushing prices up again, to $60/bbl in 2005 and $90/bbl in 2008. You remember 2008, the bubble year, right? Over-exuberance had enabled speculators to push the price of everything up to ridiculous levels, and oil was not spared. The crash of 2008 also weakened demand, as many people could not afford to pay for anything, including fuel. But everyone knew the $90/bbl couldn’t last, just as they knew it in 1980.
  6. 2009-17. Banking on continuing high oil prices, speculators jumped into fracking and other high-risk, costly (and heavily-subsidized) smaller-scale oil ventures. For the first time, people who can’t think further ahead than the next quarter’s profit report were saying that there was more than enough oil, and that peak oil was dead. More reasoned experts argued that the danger to our planet from climate change caused by burning oil now exceeded the danger of running out of it (we may well experience both in the years to come). But many of the new ventures depended on sustained high oil prices, and as supply rose, price inevitably dropped. This was exacerbated by a chronic global recession that (despite what you might read in the Wall Street press) has left 90% of the population with massively higher debts and less disposable income than they had back in the 1980s. That recession curtailed demand and added to the price slump that saw oil drop from $90/bbl in 2008 to $60/bbl in 2015 and then back to a near-ruinous (for producers) $40/bbl in 2016-17. Many of the new operators declared bankruptcy, but in the mean-time they (and the ongoing recession for all but the super-rich) had created a short-term oil glut. More people came to believe that oil would be abundant forever, at reasonable prices. Many OPEC countries’ governments, already struggling with unruly political movements, and a permanently unemployed youth workforce, were getting antsy.
  7. 2018. Surprise, surprise, the oil price has risen again, to as high as $70/bbl, though it seems to be hovering mostly around the ‘ideal’ (for producers and consumers) $60/bbl level. The problem is, that’s not quite as ideal as it used to be. The cost of bringing new oil to market has risen from very low-levels (near $15/bbl in the mid-20th-century OPEC countries, to $45/bbl for much “tight” oil extraction). So a very volatile $50-60/bbl price doesn’t provide much margin for producers in an economy that demands significantly increasing profits every year. And it’s expensive for consumers, who start to reduce consumption and turn to alternative sources of energy (where available) when prices move into that $50-60/bbl range.

So what does this mean for the future? The second chart, below, describes what I think we’ll see by the middle of this century. Here we go:

  1. 2018-2025: Just a guess, but there doesn’t seem to be any compelling short-term trend in supply or demand one way or another, so I’m guessing that we’ll have a few years of relative stability, with prices ranging from $40-80/bbl depending on producer actions, politics, climate change proclivities, carbon taxes and regulations, and the strange whims and misconceptions of speculators (damn I’d like to see a huge speculation tax on every do-nothing transaction gamblers put through).
  2. 2025-2050: In the medium term, all bets are off. I can see, as conventional sources of oil get depleted and new ones cost more and more, the cost of getting oil to market rising enough that any price under $70/bbl won’t be worth the risk. And I can see, as the real economy (not the economy-of-the-elite the NYT and WSJ reports on) continues to struggle and inequality widens to become a political and even military issue in many parts of the world, the affordable ceiling price for oil dropping to $40/bbl. So that means there is no “happy medium” that works for both producers and consumers — any price is either too low for producers (keeping/driving them out of the market) or too high for consumers (leading to hoarding, involuntary reductions in use (ie repo’d cars and foreclosed homes) — or both. So I see prices whipsawing between $30/bbl or less (when the economy is in especially bad shape) and $100/bbl or more during speculative frenzies, rationing (in black markets), severe shortages and short-lived “is the long depression over yet?” economic recoveries.
  3. 2050-2100: This is the period in which I’ve forecast economic and/or energy collapse and the onset of chronic serious climate change trends and events. I don’t think the US dollar will survive this, so it’s hard to set a price on anything in that currency. I do see it as a long era of scavenging, re-use, rationing, nationalization (until national governments collapse and leave energy management to struggling local communities), hoarding, black markets, and yes, even conservation at last.

Not a very rosy picture, but those who’ve studied the economy and have been following oil prices for a while tend to support much of this hypothesis. Ultimately, it’s the economy, (not so) stupid. The economy is the tail that wags the energy dog, but ultimately the global industrial economy is founded entirely on the preposterous and untenable requirement that growth must continue forever, and the only thing that has provided sustained growth for the past couple of centuries has been cheap hydrocarbons.

And I understand oil doesn’t keep very well.





Delusions of Grandeur in Building a Low-Carbon Future

31 01 2018

With many thanks from Ugo Bardi who first published this on Cassandra’s Legacy…… 

Some excerpts from Carey King’s excellent paper titled “Delusion of Grandeur in building a low-carbon future” (2016). By all means worth reading: it identifies the delusionary approach of some policy proposals. Image Credit: K. Cantner, AGI.

…. the outcomes of economic models used to inform policymakers and policies like the Paris Agreement are fundamentally flawed to the point of being completely delusional. It isn’t the specific economic assumptions related to the “low-carbon” transition that are the problem, but structural flaws in the economic models themselves.

There is a very real trade-off between the rate at which we address climate change and the amount of economic growth we can expect during the transition to a low-carbon economy, but most economic models insufficiently address this trade-off, and thus are incapable of assessing the transition. If we ignore this trade-off, or worse, we rely on models that are built on faulty premises, then we risk politicians and citizens revolting against the energy transition midway into it when the substantial growth and prosperity they’ve been told to expect will accompany the low-carbon transition don’t materialize. It is important to note that citizens are also told that doubling-down on fossil energy also only provides growth and prosperity. But this is a major point of this article: mainstream economic models can’t tell the difference. There are foreseeable feedbacks of a fast transition to a low-carbon economy that increase the risk of major recessions.

The AR5 indicates that if the world invests enough to reduce greenhouse gas emissions over time — such that total annual greenhouse gas emissions are practically zero by 2100 — to stay within the 450 ppm and 2-degree-Celsius target, then the modeled decline in the size of the economy relative to business-as-usual scenarios is typically less than 10 percent. In other words, instead of the economy in 2100 being 300 to 800 percent larger than in 2010 without any mitigation, it is only 270 to 720 percent larger with full mitigation. Meanwhile, there is no reported possibility of a smaller future economy. Apparently, we’ll be much richer in the future no matter if we mitigate greenhouse gas emissions or not.

This result is delusional and doesn’t pass the smell test.

Another flawed piece of the framework in the IAMs is that they assume that factors in the economy during and after a low-carbon transition will remain at or return to the statistically positive trends of the last several decades — the trend of growth, the trend of high employment levels, the trend of technological innovation. Those positive trends change over time, however, so it is faulty to assume they’ll continue at historic levels independent of the need for rapid changes in the energy system. They also assume that energy costs will not significantly increase over the long term. Further, they extrapolate trends in growth, employment and technology from the past and current carbon-based economy to apply to a future decarbonized economy in ways that represent guesswork at best, and ideology at worst.

Perhaps most importantly, IAMs do not consider the substantial negative feedback between high energy costs and overall economic growth. Negative feedback means that when one factor increases (energy prices, for example), another factor consequently decreases. Many of us know from practical experience that if gasoline costs too much — like when it was near $4 per gallon in 2008 — it may eat into our budget to such an extent that we can’t pay all our bills or can’t pursue hobbies. On a personal level, then, we see that increased gas prices cause decreased discretionary spending — a negative feedback. This idea can be extended to the entire economy’s budget and income.
….. the models currently answer a question that is barely useful: “If the economy grows this much, what types of energy investments can we make, and at what rate?” The models should address the question we really need to answer: “If we make these energy investments at this rate, what happens to the economy?”

There is a fundamental conflict between achieving low- or zero-carbon energy systems and growing an economy. Both the scale and rate of change during a low-carbon transition matter. So, let’s create macroeconomic models that can plausibly replicate historical trends of the most important energy and economic variables in times of high energy investment, recession and growth, so that we have confidence that we can ask relevant and informative questions about how low-carbon investments impact economic growth. Let’s stop deluding ourselves by using models that assume answers we want to see.

Read the complete paper (open access) at this link





The Bumpy Road Down, Part 4: Trends in Collapse

27 01 2018

IrvMillsIrv Mills has just published part 4 of his Bumpy Road Down series of articles…..

This time I’m going to look at some of the changes that will happen along the bumpy road down and the forces and trends that will lead to them. If you followed what I was saying in my last post, you’ll have realized that the bumpy road will be a matter of repeatedly getting slapped down as a result of going into overshoot—exceeding our limits, crashing, then recovering, only to get slapped again as we go into overshoot yet again.

Along the way, where people have a choice, they will choose to do a range of different things (some beneficial, others not so much), according to their circumstances and inclinations. Inertia is also an important factor—people resist change. And politicians are adept at “kicking the can down the road”—patching together the current system to keep it working for little while longer and letting the guy who gets elected next worry about the consequences.

Because the world will become a smaller place for most of us, we’ll feel less influence from other areas and in turn have less influence over them. There will be a lot more “dissensus”—people doing their own thing and letting other people do theirs. I expect this will lead to quite a variety of approaches, some that fail and some that do work to some extent. In the short run, of course, “working” means recovering from whatever disaster we are currently trying to cope with. But in the long run, the real challenge is learning to live within our limits and accept “just enough” rather than always striving for more. Trying a lot of different approaches to this will make it more likely that we find some that are successful.

Anyways—changes, forces and trend…and how they will work on the bumpy road down.

I’ve included the stepped or oscillating decline diagram from my last post here to make it easier to visualize what I’m talking about.

ENERGY DECLINE

Because I’m a “Peak Oil guy” and because energy is at the heart of the financial problems we’re facing, I’ll talk about energy first. As I said in a recent post:

“Despite all the optimistic talk about renewable energy, we are still dependent on fossil fuels for the great majority of our energy needs, and those needs are largely ones that cannot be met by anything other than fossil duels, especially oil. While it is true that fossil fuels are far from running out, the amount of surplus energy they deliver (the EROEI—energy returned on energy invested) has declined to the point where it no longer supports robust economic growth. Indeed, since the 1990s, real economic growth has largely stopped. What limited growth we are seeing is based on debt, rather than an abundance of surplus energy.”

It is my analysis that there is zero chance of implementing any alternative to fossil fuels remotely capable of sustaining “business as usual” in the remaining few years before a major economic crash happens and changes everything. So the first trend I’ll point to is a continued reliance on fossil fuels. Fuels of ever decreasing EROEI, which will increase the stress on the global economy and continue contribute to climate change and ocean acidification.

Those who are mainly concerned about the environmental effects of continuing to burn fossil fuels would have us stop using those fuels, whatever the cost. But it is clear to me that the cost of such a move would be a global economic depression different only in the details from the one I’ve been predicting. Lack of energy, excess of debt, environmental disaster—take your pick….

It has been interesting to watch the governments of Canada and the US take two different approaches to this over the last couple of years.

The American approach has been based on denial. Denial of climate change on the one hand, and denial of the fossil fuel depletion situation on the other. “Drill baby, drill!” is expected to solve the energy problem without causing an environmental problem. I don’t believe that either expectation will be borne out over the next few years.

Our Canadian government under Prime Minister Justin Trudeau has made quite a bit of political hay by acknowledging the reality of climate change and championing the Paris Climate Agreement in the international arena. Here at home, though, it is clear that Trudeau understands the role of oil in our economy and he has been quick to quietly reassure the oil companies that they have nothing to fear, approving two major pipeline projects to keep oil flowing from Alberta to the Pacific coast and, eventually, to Chinese markets.

Yes, Ottawa has set a starting price of $10 a tonne on carbon dioxide emissions in 2018, increasing to $50 a tonne by 2022. This is to be implemented by provincial governments who have until the end of the year to submit their own carbon pricing plans before a national price is imposed on those that don’t meet the federal standard. It will be interesting to see how this goes and if the federal government sticks to its plan. Canada is one of the most highly indebted nations in the world and I wouldn’t be surprised if our economy was one of the first to falter.

At any rate, sometime in the next few years the economy is going to fall apart (point “c” in the diagram). As I’ve said, this may well be initiated by volatility in oil prices as the current oil surplus situation comes to an end. This will lead to financial chaos that soon spreads to the rest of the economy.

On the face of it this isn’t too different from the traditional Peak Oil scenario—the collapse of industrial civilization caused by oil shortages and sharply rising oil prices. But as you might guess by now, this isn’t exactly what I think will happen.

In fact, I think that we’ll see an economic depression where the demand for oil drops more quickly than the natural decline rate of our oil supplies and the price falls even further than it did in the last few years. We won’t be using nearly so much oil as at present, so we will once again accumulate a surplus, and we’ll even leave some reserves of oil in the ground, at least initially. This will help drive a recovery after the depression bottoms out (point “e” in the diagram). Please note that I am talking about the remaining relatively high EROEI conventional oil here. Unconventional sources just don’t produce enough surplus energy to fuel a recovery.

But the demand for oil will be a lot less than it is today and this will have a very negative effect on oil companies. Some governments will subsidize the oil industry even more than they have traditionally, just to keep to it going in the face of low prices. Other governments will outright nationalize their oil industries to ensure oil keeps getting pumped out of the ground, even if it isn’t very profitable to do so. Bankruptcy of critical industries in general is going to be a problem during and after the crash. More on that in my next post.

During the upcoming crash and depression fossil fuel use may well decline enough to significantly reduce our releases of CO2 into the atmosphere—not enough perhaps to stop climate change, but enough to slow it down. As we continue down the bumpy road, though, our use of fossil fuels and the release of CO2 from burning them will taper off to essentially nothing, allowing the ecosphere to finally begin a slow recovery from the abuses of the industrial age.

The other trend involving fossil fuels, as we go further down the bumpy road, will be their declining availability as we gradually use them up. Eventually our energy consumption will be determined by local availability of renewable energy that can be accessed using a relatively low level of technology. Things like biomass (mainly firewood), falling water, wind, passive solar, maybe even tidal and wave energy. Since these sources vary in quantity from one locality to another, the level of energy use will vary as well. Where these sources are intermittent, the users will simply have to adapt to that intermittency.

No doubt some of my readers will be wondering why I don’t think high tech renewables like solar cells and large wind turbines will save the day. The list of reasons is a long one—difficulty raising capital in a contracting economy, low EROEI, intermittency of supply and difficulty of operating, maintaining and regularly replacing such equipment once fossil fuels are gone—to mention just a few.

Large scale storage of power to deal with intermittency will in the long run prove unfeasible. Certainly batteries aren’t going to do it. There are a few locations where pumped storage of water can be set up at a relatively low cost, but not enough to make a big difference. And on top of all that, I very much doubt that large electrical grids are feasible in the long run (and I spent half my life maintaining on one such grid).

THE FIRE INDUSTRIES

The next trend I can see is in the FIRE (financial, insurance and real estate) sector of the economy. During the growth phase of our economy over that last couple of centuries the FIRE industries embodied a wide range of organizational technologies that facilitated business, trade and growth. Unfortunately, because they were set up to support growth, they were unable to cope with the end of real growth late in the twentieth century. They have supported debt based growth for the last couple of decades as the only alternative that they could deal with. This led to the unprecedented amount of debt that we see in the world today. Much of this debt is quite risky and will likely lead to a wave of bankruptcies and defaults—the very crash I’ve been talking about.

The FIRE industries will be at the heart of that crash and will suffer horribly. Many, perhaps the majority, of the companies in that sector won’t survive. In today’s world they wield a great deal of political power. During the global financial crisis (GFC) in 2007-8 that power was enough to see them through largely unscathed. This is unlikely to be the case in the upcoming crash, creating a desperate need for their services and an opportunity to fill that need which will be another factor in the recovery after the crash bottoms out. But of course there is more than one way it can be done.

In the 3rd4th5th6th and 7th posts in my ” Collapse Step by Step” series, I dealt with the political realities of our modern world, which limit what can be done by democratic governments. I identified a political spectrum defined by those limits. At the left end of this spectrum we have Social Democratic societies, which still practice capitalism, but where those in power are concerned with the welfare of everyone within the society. At the right end we have Right Wing Capitalist societies where the ruling elite is concerned only with accumulating more wealth and power for itself.

Since the FIRE industries are crucial to the accumulation and distribution of wealth in our societies, the way they are rebuilt following the crash will be largely determined by the political goals of those doing the rebuilding.

At the left end of the spectrum there is much that can be done to regulate the FIRE industries and stop their excesses from leading immediately to further crises.

At the right end of the political spectrum the elite is so closely tied to the FIRE industries and so little concerned with the welfare of the general populace, that those industries will likely be rebuilt on a plan very similar to their current organization. A policy of “exterminism” is likely to be followed, where prosperity for the elite and an ever shrinking middle class is seen as the only goal and the poor are a burden to be abandoned or outright exterminated.(Thanks for Peter Frase, author of Four Futures—Life After Captialism for the term “exterminism”.)

In the case of either of these extremes, or anywhere along the spectrum between them, there are some common things I can see happening.

The whole FIRE sector depends on trust. In the last few decades (since the 1970s) we have switched from currencies based on precious metals to “fiat money” which is based on nothing but trust in the governments issuing it. This was done to accommodate growth fueled by abundant surplus energy and then to facilitate issuing ever more debt as the surplus energy supply declined. I don’t advocate going back to precious metals—what we need is a monetary system that can accommodate degrowth, of which a great deal lies in our future. Unfortunately we don’t yet know what such a system might look like.

It is clear, though, that the coming crash is going to shake our trust in the FIRE industries to its very roots. Since central banks will have been central to the monetary problems leading to the crash, they may well be set up as scapegoats for that crash and their relative lack of success in coping with it. People will be very suspicious after watching the FIRE industries fall apart during the crash and their lack of trust will force those industries to take some different approaches.

I think governments will take over the functions of central banks and stop charging themselves interest on the money they print. Yes, I know that printing money has often led to runaway inflation, but the conditions during the crash and its aftermath will be so profoundly deflationary that inflation will not likely be a problem.

The creation of debt will be viewed much less favourably and credit will be much harder to get. And of course this will make the crash and following depression that much worse. In response to this many areas will create local banks and currencies to provide the services that local businesses need to get moving again.

During the last couple of decades there has been a move to loosen regulations in the FIRE industries, to let single large entities become involved in investment banking, business and personal banking, insurance and real estate. Most such entities began as experts in one of those areas, but one has to question their expertise in the new areas they moved into. In any case they became “too big to fail” and their failure threatened the stability the whole FIRE sector. Following the GFC there was only minor tightening of regulations to discourage this sort of thing, but after the upcoming crash I suspect many governments, especially toward the left end of the political spectrum, will institute a major re-regulation of the FIRE industries and a splitting up of the few “too big to fail” companies who didn’t actually fail.

It is all very well to talk about business and even governments failing when their debt load becomes too great. But there is also a lot of personal debt that is, at this point, unlikely ever to get paid back. What does it mean, in this context, for a person to fail? What I carry as debt is an asset for someone else—probably the share holders of a bank. They are understandably reluctant to watch their assets evaporate, and I have to admit that there is a moral hazard involved in just letting people walk away from their debts. That feeling was so strong in the past that those who couldn’t pay their debts ended up in debtors’ prisons. Such punishment was eventually seen as futile and the practice was abandoned and personal bankruptcies were allowed.

One suspects that in the depression following the coming crash it will be necessary to declare a jubilee, forgiving large classes of personal debt. What might become of all the suddenly destitute people depends on where their country lies on the political spectrum. I wouldn’t rule out debtors prisons or work camps, the sort of modern slavery that is already gaining a foothold in the prison system of the United States.

If we were willing to give up growth as the sole purpose of our economic system, there are many changes that could be made to the FIRE industries that would allow them to provide the services needed by businesses and individuals without stimulating the unchecked growth that leads to collapse. I think we are unlikely to see this happen after the upcoming crash—we will be desperate for recovery and that will still mean growth at destructive levels.

I think the crash following that recovery will involve the food supply and still unchecked population growth and sadly a lot of people won’t make it through (more on this in my next post). Following that, it’s even possible that in some areas people may reach the conclusion that growth is the problem and quit sticking their heads up to get slapped down again. They’ll have to find a more sustainable way to live, but with it will come a less bumpy road forward.

AUTHORITARIANISM

In the aftermath of the next crash, I think we’ll see an increase in authoritarianism in an attempt to optimize the systems that failed during the crash—to make them work again and work more effectively. Free market laissez faire economics will be seen to have failed by many people. Others will hang tight, claiming that if they just keep doing yet again the same thing that failed before, it will finally work.

As is always the case with this sort of optimization, it will create a less resilient system, much more susceptible to subsequent crashes. And after those crashes governments will be reduced to such a small scale affair that authoritarianism won’t be so much of an issue.

Fortunately, beyond authoritarianism, there are some other trends that will lead to increased resilience and sustainability. We’ll take a look at those in my next post.





Post-work: the radical idea of a world without jobs

23 01 2018

As you may know if you read this blog often enough, I am completely anti jobs and growth. So many jobs are ‘bullshit jobs’ these days, and so much automation is coming on board – like Amazon opening a store with almost no staff as one prime example – that the future of work is hardly well defined, especially as we head into a low energy future. Just this week, I was pointed to a book and an article on these issues that I thought I’d shara and comment on, and as always, your comments are more than welcome…..

Utopia for Realists : and how we can get there - Rutger BregmanThe book I was pointed to is one Geoff Lawton is currently reading, or so he tells me…..  it’s called “Utopia for Realists”. It certainly looks interesting to me, and I might just buy it, even if the Guardian gives it a caning

This is a book with one compelling proposition for which you can forgive the rest. It is utopian visions that have driven humanity forwards. It was the hope we could fly, conquer disease, motorise transport, build communities of the faithful, discover virgin land or live in permanent peace that has propelled men and women to take the risks and obsess about the new that, while not creating the utopia of which they dreamed, has at least got us some of the way. Celebrate the grip that utopia has on our imagination. It is the author of progress.

But if this is the book’s big insight, much of the rest fluctuates from the genuinely challenging to politically correct tosh. My biggest beef is the idea that increasingly grips liberal thinkers desperate for anything radical – the concept of a universal income for all. Financially, behaviourally and organisationally bonkers, this idea is gaining traction on the bien pensant left. The proposition is that because a rogue capitalism is going to automate away most of our jobs, human wellbeing can only be assured by everyone receiving a universal basic income.

I don’t know what this book critic thinks people with no jobs will spend to keep the economy going……  maybe he’ll find out when he loses his job, as journalism is one of the trades under serious threat this century.

Apart from the fact that human needs are infinite, so that today’s predictions of the end of work will prove as awry as those of previous centuries, a universal basic income is no more likely to succeed than communism.

That’s where he really lost me…….  using that word infinite. On a finite planet. Whose tosh are we reading now ?

Fortunately, there are some realist journos at the Guardian, like Andy Beckett, who are able to produce much more interesting and open views……

Work is the master of the modern world. For most people, it is impossible to imagine society without it. It dominates and pervades everyday life – especially in Britain and the US – [the rest of the world don’t count it seems…] more completely than at any time in recent history. An obsession with employability runs through education. Even severely disabled welfare claimants are required to be work-seekers. Corporate superstars show off their epic work schedules. “Hard-working families” are idealised by politicians. Friends pitch each other business ideas. Tech companies persuade their employees that round-the-clock work is play. Gig economy companies claim that round-the-clock work is freedom. Workers commute further, strike less, retire later. Digital technology lets work invade leisure.

As a source of subsistence, let alone prosperity, work is now insufficient for whole social classes. In the UK, almost two-thirds of those in poverty – around 8 million people – are in working households. In the US, the average wage has stagnated for half a century.

As a source of social mobility and self-worth, work increasingly fails even the most educated people – supposedly the system’s winners. In 2017, half of recent UK graduates were officially classified as “working in a non-graduate role”. In the US, “belief in work is crumbling among people in their 20s and 30s”, says Benjamin Hunnicutt, a leading historian of work. “They are not looking to their job for satisfaction or social advancement.” (You can sense this every time a graduate with a faraway look makes you a latte.)

The young French wwoofer working with me at the moment tells me that most of his peers are fast becoming totally cynical of the work ethic, and, interestingly, also seem to be very much aware of the possibilities and consequences of collapse…. I have to say, this has been the case with most of the French wwoofers who’ve been here over the past couple of years, unlike the American ones who have no idea..!  He even tells me there is a growing movement of young people in France leaving cities and going back to the land….

As a source of sustainable consumer booms and mass home-ownership – for much of the 20th century, the main successes of mainstream western economic policy – work is discredited daily by our ongoing debt and housing crises. For many people, not just the very wealthy, work has become less important financially than inheriting money or owning a home.

Whether you look at a screen all day, or sell other underpaid people goods they can’t afford, more and more work feels pointless or even socially damaging – what the American anthropologist David Graeber called “bullshit jobs” in a famous 2013 article. Among others, Graeber condemned “private equity CEOs, lobbyists, PR researchers … telemarketers, bailiffs”, and the “ancillary industries (dog-washers, all-night pizza delivery) that only exist because everyone is spending so much of their time working”.

Precisely…….  could not agree more. Of course, the collapse of the ERoEI of our energy sources – ALL of them – does not get a mention when he writes “The argument seemed subjective and crude, but economic data increasingly supports it. The growth of productivity, or the value of what is produced per hour worked, is slowing across the rich world – despite the constant measurement of employee performance and intensification of work routines that makes more and more jobs barely tolerable.” Of course, like most people, he may not be aware, let alone know of, the energy cliff…… human

I have to say, this bit was rather interesting…

In Britain in 1974, Edward Heath’s Conservative government, faced with a chronic energy shortage caused by an international oil crisis and a miners’ strike, imposed a national three-day working week. For the two months it lasted, people’s non-work lives expanded. Golf courses were busier, and fishing-tackle shops reported large sales increases. Audiences trebled for late-night BBC radio DJs such as John Peel. Some men did more housework: the Colchester Evening Gazette interviewed a young married printer who had taken over the hoovering. Even the Daily Mail loosened up, with one columnist suggesting that parents “experiment more in their sex lives while the children are doing a five-day week at school”.

The economic consequences were mixed. Most people’s earnings fell. Working days became longer. Yet a national survey of companies for the government by the management consultants Inbucon-AIC found that productivity improved by about 5%: a huge increase by Britain’s usual sluggish standards. “Thinking was stimulated” inside Whitehall and some companies, the consultants noted, “on the possibility of arranging a permanent four-day week.”

Of course…… nothing came of it as the North Sea oil was discovered and exploited, everyone back to work, we have a planet to pillage. But it certainly makes you think about what will happen when the oil crisis finally becomes permanent. This article, which I consider a gem and well worth the read, ends with..:

Creating a more benign post-work world will be more difficult now than it would have been in the 70s. In today’s lower-wage economy, suggesting people do less work for less pay is a hard sell. As with free-market capitalism in general, the worse work gets, the harder it is to imagine actually escaping it, so enormous are the steps required.

But for those who think work will just carry on as it is, there is a warning from history. On 1 May 1979, one of the greatest champions of the modern work culture, Margaret Thatcher, made her final campaign speech before being elected prime minister. She reflected on the nature of change in politics and society. “The heresies of one period,” she said, always become “the orthodoxies of the next”. The end of work as we know it will seem unthinkable – until it has happened.

All I can say is that the orthodoxies of the next era will be full of surprises, that’s for sure.