Tom Murphy: Growth has an Expiration Date

20 02 2017

While searching for Tom Murphy’s latest post over at do the math (and he hasn’t posted anything new in months now, after promising to write an article on Nickel Iron batteries which I assume he must be testing…) I found the following video on youtube. probably not much new for most people here, but he has a talent for explaining things very clearly, and it’s definitely worth sharing.





More gnashing of teeth

7 02 2017

The Über-Lie

By Richard Heinberg, Post Carbon Institute

heinbergNevertheless, even as political events spiral toward (perhaps intended) chaos, I wish once again, as I’ve done countless times before, to point to a lie even bigger than the ones being served up by the new administration…It is the lie that human society can continue growing its population and consumption levels indefinitely on our finite planet, and never suffer consequences.

This is an excellent article from Richard Heinberg, the writer who sent me on my current life voyage all those years ago. Hot on the heels of my attempt yesterday of explaining where global politics are heading, Richard (whom I met years ago and even had a meal with…) does a better job than I could ever possibly muster.  Enjoy……

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Our new American president is famous for spinning whoppers. Falsehoods, fabrications, distortions, deceptions—they’re all in a day’s work. The result is an increasingly adversarial relationship between the administration and the press, which may in fact be the point of the exercise: as conservative commentators Scott McKay suggests in The American Spectator, “The hacks covering Trump are as lazy as they are partisan, so feeding them . . . manufactured controversies over [the size of] inaugural crowds is a guaranteed way of keeping them occupied while things of real substance are done.”

But are some matters of real substance (such as last week’s ban on entry by residents of seven Muslim-dominated nations) themselves being used to hide even deeper and more significant shifts in power and governance? Steve “I want to bring everything crashing down” Bannon, who has proclaimed himself an enemy of Washington’s political class, is a member of a small cabal (also including Trump, Stephen Miller, Reince Priebus, and Jared Kushner) that appears to be consolidating nearly complete federal governmental power, drafting executive orders, and formulating political strategy—all without paper trail or oversight of any kind. The more outrage and confusion they create, the more effective is their smokescreen for the dismantling of governmental norms and institutions.

There’s no point downplaying the seriousness of what is up. Some commentators are describing it as a coup d’etat in progress; there is definitely the potential for blood in the streets at some point.

Nevertheless, even as political events spiral toward (perhaps intended) chaos, I wish once again, as I’ve done countless times before, to point to a lie even bigger than the ones being served up by the new administration—one that predates the new presidency, but whose deconstruction is essential for understanding the dawning Trumpocene era. I’m referring to a lie that is leading us toward not just political violence but, potentially, much worse. It is an untruth that’s both durable and bipartisan; one that the business community, nearly all professional economists, and politicians around the globe reiterate ceaselessly. It is the lie that human society can continue growing its population and consumption levels indefinitely on our finite planet, and never suffer consequences.

Yes, this lie has been debunked periodically, starting decades ago. A discussion about planetary limits erupted into prominence in the 1970s and faded, yet has never really gone away. But now those limits are becoming less and less theoretical, more and more real. I would argue that the emergence of the Trump administration is a symptom of that shift from forecast to actuality.

Consider population. There were one billion of us on Planet Earth in 1800. Now there are 7.5 billion, all needing jobs, housing, food, and clothing. From time immemorial there were natural population checks—disease and famine. Bad things. But during the last century or so we defeated those population checks. Famines became rare and lots of diseases can now be cured. Modern agriculture grows food in astounding quantities. That’s all good (for people anyway—for ecosystems, not so much). But the result is that human population has grown with unprecedented speed.

Some say this is not a problem, because the rate of population growth is slowing: that rate was two percent per year in the 1960s; now it’s one percent. Yet because one percent of 7.5 billion is more than two percent of 3 billion (which was the world population in 1960), the actual number of people we’re now adding annually is the highest ever: over eighty million—the equivalent of Tokyo, New York, Mexico City, and London added together. Much of that population growth is occurring in countries that are already having a hard time taking care of their people. The result? Failed states, political unrest, and rivers of refugees.

Per capita consumption of just about everything also grew during past decades, and political and economic systems came to depend upon economic growth to provide returns on investments, expanding tax revenues, and positive poll numbers for politicians. Nearly all of that consumption growth depended on fossil fuels to provide energy for raw materials extraction, manufacturing, and transport. But fossil fuels are finite and by now we’ve used the best of them. We are not making the transition to alternative energy sources fast enough to avert crisis (if it is even possible for alternative energy sources to maintain current levels of production and transport). At the same time, we have depleted other essential resources, including topsoil, forests, minerals, and fish. As we extract and use resources, we create pollution—including greenhouse gasses, which cause climate change.

Depletion and pollution eventually act as a brake on further economic growth even in the wealthiest nations. Then, as the engine of the economy slows, workers find their incomes leveling off and declining—a phenomenon also related to the globalization of production, which elites have pursued in order to maximize profits.

Declining wages have resulted in the upwelling of anti-immigrant and anti-globalization sentiments among a large swath of the American populace, and those sentiments have in turn served up Donald Trump. Here we are. It’s perfectly understandable that people are angry and want change. Why not vote for a vain huckster who promises to “Make America Great Again”? However, unless we deal with deeper biophysical problems (population, consumption, depletion, and pollution), as well as the policies that elites have used to forestall the effects of economic contraction for themselves (globalization, financialization, automation, a massive increase in debt, and a resulting spike in economic inequality), America certainly won’t be “great again”; instead, we’ll just proceed through the five stages of collapse helpfully identified by Dmitry Orlov.

Rather than coming to grips with our society’s fundamental biophysical contradictions, we have clung to the convenient lies that markets will always provide, and that there are plenty of resources for as many humans as we can ever possibly want to crowd onto this little planet. And if people are struggling, that must be the fault of [insert preferred boogeyman or group here]. No doubt many people will continue adhering to these lies even as the evidence around us increasingly shows that modern industrial society has already entered a trajectory of decline.

While Trump is a symptom of both the end of economic growth and of the denial of that new reality, events didn’t have to flow in his direction. Liberals could have taken up the issues of declining wages and globalization (as Bernie Sanders did) and even immigration reform. For example, Colin Hines, former head of Greenpeace’s International Economics Unit and author of Localization: A Global Manifesto, has just released a new book, Progressive Protectionism, in which he argues that “We must make the progressive case for controlling our borders, and restricting not just migration but the free movement of goods, services and capital where it threatens environment, wellbeing and social cohesion.”

But instead of well-thought out policies tackling the extremely complex issues of global trade, immigration, and living wages, we have hastily written executive orders that upend the lives of innocents. Two teams (liberal and conservative) are lined up on the national playing field, with positions on all significant issues divvied up between them. As the heat of tempers rises, our options are narrowed to choosing which team to cheer for; there is no time to question our own team’s issues. That’s just one of the downsides of increasing political polarization—which Trump is exacerbating dramatically.

Just as Team Trump covers its actions with a smokescreen of controversial falsehoods, our society hides its biggest lie of all—the lie of guaranteed, unending economic growth—behind a camouflage of political controversies. Even in relatively calm times, the über-lie was watertight: almost no one questioned it. Like all lies, it served to divert attention from an unwanted truth—the truth of our collective vulnerability to depletion, pollution, and the law of diminishing returns. Now that truth is more hidden than ever.

Our new government shows nothing but contempt for environmentalists and it plans to exit Paris climate agreement. Denial reigns! Chaos threatens! So why bother bringing up the obscured reality of limits to growth now, when immediate crises demand instant action? It’s objectively too late to restrain population and consumption growth so as to avert what ecologists of the 1970s called a “hard landing.” Now we’ve fully embarked on the age of consequences, and there are fires to put out. Yes, the times have moved on, but the truth is still the truth, and I would argue that it’s only by understanding the biophysical wellsprings of change that can we successfully adapt, and recognize whatever opportunities come our way as the pace of contraction accelerates to the point that decline can no longer successfully be hidden by the elite’s strategies.

Perhaps Donald Trump succeeded because his promises spoke to what civilizations in decline tend to want to hear. It could be argued that the pluralistic, secular, cosmopolitan, tolerant, constitutional democratic nation state is a political arrangement appropriate for a growing economy buoyed by pervasive optimism. (On a scale much smaller than contemporary America, ancient Greece and Rome during their early expansionary periods provided examples of this kind of political-social arrangement). As societies contract, people turn fearful, angry, and pessimistic—and fear, anger, and pessimism fairly dripped from Trump’s inaugural address. In periods of decline, strongmen tend to arise promising to restore past glories and to defeat domestic and foreign enemies. Repressive kleptocracies are the rule rather than the exception.

If that’s what we see developing around us and we want something different, we will have to propose economic, political, and social forms that are appropriate to the biophysical realities increasingly confronting us—and that embody or promote cultural values that we wish to promote or preserve. Look for good historic examples. Imagine new strategies. What program will speak to people’s actual needs and concerns at this moment in history? Promising a return to an economy and way of life that characterized a past moment is pointless, and it may propel demagogues to power. But there is always a range of possible responses to the reality of the present. What’s needed is a new hard-nosed sort of optimism (based on an honest acknowledgment of previously denied truths) as an alternative to the lies of divisive bullies who take advantage of the elites’ failures in order to promote their own patently greedy interests. What that actually means in concrete terms I hope to propose in more detail in future essays.





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.





What is this ‘Crisis’ of Modernity?

22 01 2017

But why is the economy failing to generate prosperity as in earlier decades?  Is it mainly down to Greenspan and Bernanke’s monetary excesses?  Certainly, the latter has contributed to our contemporary stagnation, but perhaps if we look a little deeper, we might find an additional explanation. As I noted in a Comment of 6 January 2017, the golden era of US economic expansion was the ‘50s and ‘60s – but that era had begun to unravel somewhat, already, with the economic turbulence of the 70s. However, it was not so much Reagan’s fiscal or monetary policies that rescued a deteriorating situation in that earlier moment, but rather, it was plain old good fortune. The last giant oil fields with greater than 30-to-one, ‘energy-return’ on ‘energy-cost’ of exploitation, came on line in the 1980s: Alaska’s North Slope, Britain and Norway’s North Sea fields, and Siberia. Those events allowed the USA and the West generally to extend their growth another twenty years.

This week, there has been an avalanche of articles on Limits to Growth, just not titled so……. it’s almost as though the term is getting stuck in people’s throats, and are unable to pronounce them….

acrooke

Alastair Crooke

This article by former British diplomat and MI6 ‘ranking figure’ Alastair Crooke, is an unpublished article I’ve lifted from the Automatic Earth…… as Raul Ilargi succinctly puts it…:

 

His arguments here are very close to much of what the Automatic Earth has been advocating for years [not to mention DTM’s…], both when it comes to our financial crisis and to our energy crisis. Our Primers section is full of articles on these issues written through the years. It’s a good thing other people pick up too on topics like EROEI, and understand you can’t run our modern, complex society on ‘net energy’ as low as what we get from any of our ‘new’ energy sources. It’s just not going to happen.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Alastair Crooke: We have an economic crisis – centred on the persistent elusiveness of real growth, rather than just monetised debt masquerading as ‘growth’ – and a political crisis, in which even ‘Davos man’, it seems, according to their own World Economic Forum polls, is anxious; losing his faith in ‘the system’ itself, and casting around for an explanation for what is occurring, or what exactly to do about it. Klaus Schwab, the founder of the WEF at Davos remarked  before this year’s session, “People have become very emotionalized, this silent fear of what the new world will bring, we have populists here and we want to listen …”.

Dmitry Orlov, a Russian who was taken by his parents to the US at an early age, but who has returned regularly to his birthplace, draws on the Russian experience for his book, The Five Stages of Collapse. Orlov suggests that we are not just entering a transient moment of multiple political discontents, but rather that we are already in the early stages of something rather more profound. From his perspective that fuses his American experience with that of post Cold War Russia, he argues, that the five stages would tend to play out in sequence based on the breaching of particular boundaries of consensual faith and trust that groups of human beings vest in the institutions and systems they depend on for daily life. These boundaries run from the least personal (e.g. trust in banks and governments) to the most personal (faith in your local community, neighbours, and kin). It would be hard to avoid the thought – so evident at Davos – that even the elites now accept that Orlov’s first boundary has been breached.

But what is it? What is the deeper economic root to this malaise? The general thrust of Davos was that it was prosperity spread too unfairly that is at the core of the problem. Of course, causality is seldom unitary, or so simple. And no one answer suffices. In earlier Commentaries, I have suggested that global growth is so maddeningly elusive for the elites because the debt-driven ‘growth’ model (if it deserves the name ‘growth’) simply is not working.  Not only is monetary expansion not working, it is actually aggravating the situation: Printing money simply has diluted down the stock of general purchasing power – through the creation of additional new, ‘empty’ money – with the latter being intermediated (i.e. whisked away) into the financial sector, to pump up asset values.

It is time to put away the Keynesian presumed ‘wealth effect’ of high asset prices. It belonged to an earlier era. In fact, high asset prices do trickle down. It is just that they trickle down into into higher cost of living expenditures (through return on capital dictates) for the majority of the population. A population which has seen no increase in their real incomes since 2005 – but which has witnessed higher rents, higher transport costs, higher education costs, higher medical costs; in short, higher prices for everything that has a capital overhead component. QE is eating into peoples’ discretionary income by inflating asset balloons, and is thus depressing growth – not raising it. And zero, and negative interest rates, may be keeping the huge avalanche overhang of debt on ‘life support’, but it is eviscerating savings income, and will do the same to pensions, unless concluded sharpish.

But beyond the spent force of monetary policy, we have noted that developed economies face separate, but equally formidable ‘headwinds’, of a (non-policy and secular) nature, impeding growth – from aging populations in China and the OECD, the winding down of China’s industrial revolution,  and from technical innovation turning job-destructive, rather than job creative as a whole. Connected with this is shrinking world trade.

But why is the economy failing to generate prosperity as in earlier decades?  Is it mainly down to Greenspan and Bernanke’s monetary excesses?  Certainly, the latter has contributed to our contemporary stagnation, but perhaps if we look a little deeper, we might find an additional explanation. As I noted in a Comment of 6 January 2017, the golden era of US economic expansion was the ‘50s and ‘60s – but that era had begun to unravel somewhat, already, with the economic turbulence of the 70s. However, it was not so much Reagan’s fiscal or monetary policies that rescued a deteriorating situation in that earlier moment, but rather, it was plain old good fortune. The last giant oil fields with greater than 30-to-one, ‘energy-return’ on ‘energy-cost’ of exploitation, came on line in the 1980s: Alaska’s North Slope, Britain and Norway’s North Sea fields, and Siberia. Those events allowed the USA and the West generally to extend their growth another twenty years.

And, as that bounty tapered down around the year 2000, the system wobbled again, “and the viziers of the Fed ramped up their magical operations, led by the Grand Vizier (or “Maestro”) Alan Greenspan.”  Some other key things happened though, at this point: firstly the cost of crude, which had been remarkably stable, in real terms, over many years, suddenly started its inexorable real-terms ascent.  And from 2001, in the wake of the dot.com ‘bust’, government and other debt began to soar in a sharp trajectory upwards (now reaching $20 trillion). Also, around this time the US abandoned the gold standard, and the petro-dollar was born.

 


Source: Get It. Got It. Good, by Grant Williams

Well, the Hill’s Group, who are seasoned US oil industry engineers, led by B.W. Hill, tell us – following their last two years, or so, of research – that for purely thermodynamic reasons net energy delivered to the globalised industrial world (GIW) per barrel, by the oil industry (the IOCs) is rapidly trending to zero. Note that we are talking energy-cost of exploration, extraction and transport for the energy-return at final destination. We are not speaking of dollar costs, and we are speaking in aggregate. So why should this be important at all; and what has this to do with spiraling debt creation by the western Central Banks from around 2001?

The importance? Though we sometimes forget it, for we now are so habituated to it, is that energy is the economy.  All of modernity, from industrial output and transportation, to how we live, derives from energy – and oil remains a key element to it.  What we (the globalized industrial world) experienced in that golden era until the 70s, was economic growth fueled by an unprecedented 321% increase in net energy/head.  The peak of 18GJ/head in around 1973 was actually of the order of some 40GJ/head for those who actually has access to oil at the time, which is to say, the industrialised fraction of the global population. The Hill’s Group research  can be summarized visually as below (recall that these are costs expressed in energy, rather than dollars):

 


Source: http://cassandralegacy.blogspot.it/2016/07/some-reflections-on-twilight-of-oil-age.html

[This study was also covered here on Damnthematrix starting here…]

But as Steve St Angelo in the SRSrocco Reports states, the important thing to understand from these energy return on energy cost ratios or EROI, is that a minimum ratio value for a modern society is 20:1 (i.e. the net energy surplus available for GDP growth should be twenty times its cost of extraction). For citizens of an advanced society to enjoy a prosperous living, the EROI of energy needs to be much higher, closer to the 30:1 ratio. Well, if we look at the chart below, the U.S. oil and gas industry EROI fell below 30:1 some 46 years ago (after 1970):

 


Source: https://srsroccoreport.com/the-coming-breakdown-of-u-s-global-markets-explained-what-most-analysts-missed/

“You will notice two important trends in the chart above. When the U.S. EROI ratio was higher than 30:1, prior to 1970, U.S. public debt did not increase all that much.  However, this changed after 1970, as the EROI continued to decline, public debt increased in an exponential fashion”. (St Angelo).

In short, the question begged by the Hill’s Group research is whether the reason for the explosion of government debt since 1970 is that central bankers (unconsciously), were trying to compensate for the lack of GDP stimulus deriving from the earlier net energy surplus.  In effect, they switched from flagging energy-driven growth, to the new debt-driven growth model.

From a peak net surplus of around 40 GJ  (in 1973), by 2012, the IOCs were beginning to consume more energy per barrel, in their own processes (from oil exploration to transport fuel deliveries at the petrol stations), than that which the barrel would deliver net to the globalized industrial world, in aggregate.  We are now down below 4GJ per head, and dropping fast. (The Hill’s Group)

Is this analysis by the Hill’s Group too reductionist in attributing so much of the era of earlier western material prosperity to the big discoveries of ‘cheap’ oil, and the subsequent elusiveness of growth to the decline in net energy per barrel available for GDP growth?  Are we in deep trouble now that the IOCs use more energy in their own processes, than they are able to deliver net to industrialised world? Maybe so. It is a controversial view, but we can see – in plain dollar terms – some tangible evidence fo rthe Hill’s Groups’ assertions:

 


Source: https://srsroccoreport.com/wp-content/uploads/2016/08/Top-3-U.S.-Oil-Companies-Free-Cash-Flow-Minus-Dividends.png

(The top three U.S. oil companies, ExxonMobil, Chevron and ConocoPhillips: Cash from operations less Capex and dividends)

Briefly, what does this all mean? Well, the business model for the big three US IOCs does not look that great: Energy costs of course, are financial costs, too.  In 2016, according to Yahoo Finance, the U.S. Energy Sector paid 86% of their operating income just to service the interest on the debt (i.e. to pay for those extraction costs). We have not run out of oil. This is not what the Hill’s Group is saying. Quite the reverse. What they are saying is the surplus energy (at a ratio of now less than 10:1) that derives from the oil that we have been using (after the energy-costs expended in retrieving it) – is now at a point that it can barely support our energy-driven ‘modernity’.  Implicit in this analysis, is that our era of plenty was a one time, once off, event.

They are also saying that this implies that as modernity enters on a more severe energy ‘diet’, less surplus calories for their dollars – barely enough to keep the growth engine idling – then global demand for oil will decline, and the price will fall (quite the opposite of mainstream analysis which sees demand for oil growing. It is a vicious circle. If Hills are correct, a key balance has tipped. We may soon be spending more energy on getting the energy that is required to keep the cogs and wheels of modernity turning, than that same energy delivers in terms of calorie-equivalence.  There is not much that either Mr Trump or the Europeans can do about this – other than seize the entire Persian Gulf.  Transiting to renewables now, is perhaps too little, too late.

And America and Europe, no longer have the balance sheet ‘room’, for much further fiscal or monetary stimulus; and, in any event, the efficacy of such measures as drivers of ‘real economy’ growth, is open to question. It may mitigate the problem, but not solve it. No, the headwinds of net energy per barrel trending to zero, plus the other ‘secular’ dynamics mentioned above (demography, China slowing and technology turning job-destructive), form a formidable impediment – and therefore a huge political time bomb.

Back to Davos, and the question of ‘what to do’. Jamie Dimon, the CEO of  JPMorgan Chase, warned  that Europe needs to address disagreements spurring the rise of nationalist leaders. Dimon said he hoped European Union leaders would examine what caused the U.K. to vote to leave and then make changes. That hasn’t happened, and if nationalist politicians including France’s Marine Le Pen rise to power in elections across the region, “the euro zone may not survive”. “The bottom line is the region must become more competitive, Dimon said, which in simple economic terms means accept even lower wages. It also means major political overhauls: “I say this out of respect for the European people, but they’re going to have to change,” he said. “They may be forced by politics, they may be forced by new leadership.”

A race to the bottom in pay levels?  Italy should undercut Romanian salaries?  Maybe Chinese pay scales, too? This is politically naïve, and the globalist Establishment has only itself to blame for their conviction that there are no real options – save to divert more of the diminished prosperity towards the middle classes (Christine Lagarde), and to impose further austerity (Dimon). As we have tried to show, the era of prosperity for all, began to waver in the 70s in America, and started its more serious stall from 2001 onwards. The Establishment approach to this faltering of growth has been to kick the can down the road: ‘extend and pretend’ – monetised debt, zero, or negative, interest rates and the unceasing refrain that ‘recovery’ is around the corner.

It is precisely their ‘kicking the can’ of inflated asset values, reaching into every corner of life, hiking the cost of living, that has contributed to making Europe the leveraged, ‘high cost’, uncompetitive environment, that it now is.  There is no practical way for Italians, for example, to compete with ‘low cost’ East Europe, or  Asia, through a devaluation of the internal Italian price level without provoking major political push-back.  This is the price of ‘extend and pretend’.

It has been claimed at Davos that the much derided ‘populists’ provide no real solutions. But, crucially, they do offer, firstly, the hope for ‘regime change’ – and, who knows, enough Europeans may be willing to take a punt on leaving the Euro, and accepting the consequences, whatever they may be. Would they be worse off? No one really knows. But at least the ‘populists’ can claim, secondly, that such a dramatic act would serve to escape from the suffocation of the status quo. ‘Davos man’ and woman disdain this particular appeal of ‘the populists’ at their peril.





The Peak Oil Election

6 12 2016

The fact is that because oil production cannot be increased, economic growth is now over. Donald Trump’s promise to bring back coal production, increase all fossil fuel extraction and rebuild manufacturing are simply not going to happen, not because of Trump but because policy is no longer in charge. From now on, geology and physics call the shots.

 

The peak for conventional crude production arrived between 2008 and 2011. It seems that we passed the peak for “all liquids” in 2015, even though it will take some more time to be sure that an irreversible decline trend has started. Of course, reaching the peak has generated a vehement denial that the peak even exists. In this article, Eugene Marner comments on how and why the presidential elections completely ignored the hard facts of the declining net energy supply from fossil fuels.  (Image from “The Victory Report“)

Republished from Ugo Bardi’s excellent blog……..

From  The Daily Star, by Eugene Marner

Here in the USA, we held an election recently that left most surprised, many dismayed, and many others eager to explain what happened, why it happened and what we do now. Lots of deep thinking and heavy breathing have gone into those analyses and I don’t mean to compete here with students of history and politics. I would, however, like to offer what I think may be an important part of the context for recent events, a context that is defined and enforced by geology and physics. I suggest that the election of 2016 can be called the Peak Oil Election, although the issue certainly never came up in public.

Back in November 2000, The Daily Star published a guest commentary in which I wrote about peak oil, the moment when global production of oil reaches its maximum and starts its inevitable decline. I had hoped to rouse people to think about the grave consequences that would ensue when oil, the key resource that fuels and supports our civilization, is no longer widely and cheaply available. Clearly that didn’t work very well, as most people still don’t have any idea what peak oil means, much less that its consequences are unfolding around us right now. No doubt our media, always complicit in a corporate agenda (oil companies are big advertisers), have not done much to inform the public but, more alarming than the blithe disregard of the population at large, is the apparently total cluelessness of both the two major presidential candidates and most of their advisers and entourages as well as the Congress. The Army Corps of Engineers issued a report back in September 2005 called Energy Trends and Implications for U.S. Army Installations that sounded the alarm about peak oil coming soon but that didn’t get much attention, either.

The economy is widely acknowledged to be the critical factor in most elections. Both Donald Trump and Hillary Clinton, like most politicians everywhere, talked and continue to talk about “economic growth.” Voters can forgive scandals, bigotry, nastiness, stupidity and just about everything else but, when they see their standard of living falling, their jobs vanishing, their children with no future (and sometimes with nothing to eat), they blame politicians, rightly or wrongly. Politicians usually pretend to have solutions that almost always involve some path or other to “growth.”

Although none of us alive today can remember a time when economic growth was not part of our expectation for the future, such growth has only been conceived of for about the last 200 years. Until fossil fuels became the energy that powered the Industrial Revolution, economies grew by making war on their neighbors and taking their wealth. That was the stuff of history: empires rose on the principal of capturing territory and exacting tribute and eventually collapsed under the weight of their military costs and the expense of hauling all the loot back home.

Europeans had nearly exhausted the resources of their corner of the Eurasian landmass when Columbus came upon what was called the New World. Of course, it was just as old as every other place and, contrary to the persistent mythology, was not empty but chock full of animals, plants and, yes, many millions of human beings living in complex cultures. For the next three centuries, first the Spanish and Portuguese and, soon after, the Dutch, French and English crossed the Atlantic to subdue, conquer, and kill off the inhabitants in order, in traditional imperial fashion, to steal their stuff. Europe became rich again. That was how growth was done before about 1800 and the beginning of the fossil fuel age.

From the beginning of the 19th century, the Industrial Revolution was powered by coal, which was dirty but had much higher energy content than wood and charcoal, the main fuels that humans had used until then. In 1859, a hustler who called himself “Colonel” Edwin Drake drilled the first commercially viable oil well in Titusville, Pennsylvania and the petroleum age began. Oil is an incomparable fuel: at the beginning it was easily extracted, easily transported and, best of all, a single gallon of oil contains as much energy as a fit man working hard for three months or about 700 men working for an hour. One gallon. That huge amount of energy suddenly available is what gave rise to what we now call “economic growth.” More production and consumption requires more energy inputs and oil made it possible. But on a finite planet, nothing can go on forever and, by the 1960s, oil companies were finding less new oil each year than we were burning. Thus, about 40 years later, peak oil. Coal and gas will continue to be available for a while, but both will start to decline within a decade or two. Both already have serious financial problems, and neither one can do what oil does.

Let me return to why I called this the Peak Oil Election. Neither candidate spoke about it. Perhaps they don’t know about it. Or if they do, don’t want to believe it. Or maybe no politician can get elected by promising that the economy will continue to contract and energy supplies become ever scarcer. It was the Peak Oil Election because peak oil defeated both of them. Without increasing energy consumption, there can be no economic growth and, without increasing supplies, there can be no increase in energy consumption. The so-called renewables are hopelessly dependent upon fossil fuels for manufacture, installation and maintenance and are much less energy-intensive than fossil fuels.

The fact is that because oil production cannot be increased, economic growth is now over. Donald Trump’s promise to bring back coal production, increase all fossil fuel extraction and rebuild manufacturing are simply not going to happen, not because of Trump but because policy is no longer in charge. From now on, geology and physics call the shots. The remaining oil is too expensive to get to and extract. Oil companies can’t make a profit at a price that customers in a contracting economy can afford to pay. The growth game is finished as will be soon the multitude of financial frauds that, starting with the peak of United States oil production in 1970, have come to comprise much of our economy.

We need a new sort of politics and economy: local, cooperative, community-based, low-energy, conservationist, non-polluting, an economy that sustainably supports biological needs and health, rather than pursuing riches. I don’t think any politicians are going to do that for us; we need to do it for ourselves.

In Genesis 3:19, God instructs Adam that his punishment for disobedience will be “In the sweat of thy face shalt thou eat bread.” Apparently, humans didn’t like that very much, as all of history reveals them trying to get around that decree by any means possible: forcing others to do the work (slavery), getting rich and hiring others to do the work (wage slavery), or by burning oil (energy slavery). The time is here again for community cooperation, for low-tech solutions like the power of oxen, horses and mules, for relatively inexpensive simple technologies that can be made locally, like hoes, scythes, and pitchforks, and for the sweat of our faces. This isn’t a matter of virtue but of necessity; a simpler life is coming whether or not we choose to embrace it.

Eugene Marner lives in Franklin.





The Party’s Over…..

17 10 2016

I almost republished Raul Ilargi Meijer’s excellent article titled “Why There is Trump”, but I was too busy, or ran out of data or some other poor excuse.  Anyhow, this new article quotes Raul’s writing so much, I no longer feel the need to. This item was lifted straight from the Automatic Earth, and because it’s written by someone with an important past, and the subject matter is critical, it needs to be shared around.

The farcical US presidential election as far as I am concerned is proof positive that America is in an utter state of collapse. Let’s face it, what intelligent person would want to be in charge right now, when nobody will be willing to implement any of the solutions I at least believe are necessary?

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Alastair Crooke: ‘End of Growth’ Sparks Wide Discontent

Raul Ilargi Meijer, the long-standing economics commentator, has written both succinctly – and provocatively: “It’s over! The entire model our societies have been based on for at least as long as we ourselves have lived, is over! That’s why there’s Trump.

“There is no growth. There hasn’t been any real growth for years. All there is left are empty hollow sunshiny S&P stock market numbers propped up with ultra-cheap debt and buybacks, and employment figures that hide untold millions hiding from the labor force. And most of all there’s debt, public as well as private, that has served to keep an illusion of growth alive and now increasingly no longer can.

“These false growth numbers have one purpose only: for the public to keep the incumbent powers that be in their plush seats. But they could always ever only pull the curtain of Oz [Wizard of Oz] over people’s eyes for so long, and it’s no longer so long.

“That’s what the ascent of Trump means, and Brexit, Le Pen, and all the others. It’s over. What has driven us for all our lives has lost both its direction and its energy.”

Meijer continues: “We are smack in the middle of the most important global development in decades, in some respects arguably even in centuries, a veritable revolution, which will continue to be the most important factor to shape the world for years to come, and I don’t see anybody talking about it. That has me puzzled.

“The development in question is the end of global economic growth, which will lead inexorably to the end of centralization (including globalization). It will also mean the end of the existence of most, and especially the most powerful, international institutions.

“In the same way it will be the end of -almost- all traditional political parties, which have ruled their countries for decades and are already today at or near record low support levels (if you’re not clear on what’s going on, look there, look at Europe!)

“This is not a matter of what anyone, or any group of people, might want or prefer, it’s a matter of ‘forces’ that are beyond our control, that are bigger and more far-reaching than our mere opinions, even though they may be man-made.

“Tons of smart and less smart folks are breaking their heads over where Trump and Brexit and Le Pen and all these ‘new’ and scary things and people and parties originate, and they come up with little but shaky theories about how it’s all about older people, and poorer and racist and bigoted people, stupid people, people who never voted, you name it.

“But nobody seems to really know or understand. Which is odd, because it’s not that hard. That is, this all happens because growth is over. And if growth is over, so are expansion and centralization in all the myriad of shapes and forms they come in.”

Further, Meijer writes: “Global is gone as a main driving force, pan-European is gone, and whether the United States will stay united is far from a done deal. We are moving towards a mass movement of dozens of separate countries and states and societies looking inward. All of which are in some form of -impending- trouble or another.

“What makes the entire situation so hard to grasp for everyone is that nobody wants to acknowledge any of this. Even though tales of often bitter poverty emanate from all the exact same places that Trump and Brexit and Le Pen come from too.

“That the politico-econo-media machine churns out positive growth messages 24/7 goes some way towards explaining the lack of acknowledgement and self-reflection, but only some way. The rest is due to who we ourselves are. We think we deserve eternal growth.”

The End of ‘Growth’

Well, is global “growth over”? Of course Raul Ilargi is talking “aggregate” (and there will be instances of growth within any contraction). But what is clear is that debt-driven investment and low-interest-rate policies are having less and less effect – or no effect at all – in producing growth – either in terms of domestic or trade growth, as Tyler Durden at ZeroHedge writes:

 

“After almost two years of the quantitative easing program in the Euro Area, economic figures have remained very weak. As GEFIRA details, inflation is still fluctuating near zero, while GDP growth in the region has started to slow down instead of accelerating. According to the ECB data, to generate €1.0 of GDP growth, €18.5 had to be printed in the QE, … This year, the ECB printed nearly €600 billion within the frame of asset purchase programme (QE).”

Central Banks can and do create money, but that is not the same as creating wealth or purchasing power. By channelling their credit creation through the intermediary of banks granting loans to their favored clients, Central Banks grant to one set of entities purchasing power – a purchasing power that must necessarily have been transferred from another set of entities within Europe (i.e. transferred from ordinary Europeans in the case of the ECB), who, of course will have less purchasing power, less discretionary spending income.

The devaluation of purchasing power is not so obvious (no runaway inflation), because all major currencies are devaluing more or less pari passu – and because the authorities periodically steam hammer down the price of gold, so that there is no evident standard by which people can “see” for themselves the extent of their currencies’ joint downward float.

And world trade is grinding down too, as Lambert Strether of Corrente rather elegantly explains: “Back to shipping: I started following shipping … partly because it’s fun, but more because shipping is about stuff, and tracking stuff seemed like a far more attractive way of getting a handle on ‘the economy’ than economics statistics, let alone whatever books the Wall Streeters were talking on any given day. And don’t get me started on Larry Summers.

“So what I noticed was decline, and not downward blips followed by rebounds, but decline, for months and then a year. Decline in rail, even when you back out coal and grain, and decline in demand for freight cars. Decline in trucking, and decline in the demand for trucks. Air freight wobbly. No Christmas bounce at the Pacific ports. And now we have the Hanjin debacle — all that capital tied up in stranded ships, though granted only $12 billion or so — and the universal admission that somehow “we” invested w-a-a-a-a-a-y too much money in big ships and boats, implying (I suppose) that we need to ship a lot less stuff than we thought, at least across the oceans.

“Meanwhile, and in seeming contradiction not only to a slow collapse of global trade, but to the opposition to ‘trade deals,’ warehousing is one of the few real estate bright spots, and supply chain management is an exciting field. It’s disproportionately full of sociopaths, and therefore growing and dynamic!

“And the economics statistics seem to say nothing is wrong. Consumers are the engine of the economy and they are confident. But at the end of the day, people need stuff; life is lived in the material world, even if you think you live it on your device. It’s an enigma! So what I’m seeing is a contradiction: Less stuff is moving, but the numbers say ‘this is fine.’ Am I right, here? So in what follows, I’m going to assume that numbers don’t matter, but stuff does.”

Fake Elixir

Or, to be more faux-empirical: as Bloomberg notes in A Weaker Currency is no longer the Elixir, It Once Was:“global central banks have cut policy rates 667 times since 2008, according to Bank of America. During that period, the dollar’s 10 main peers have fallen 14%, yet Group-of-Eight economies have grown an average of just 1%. Since the late 1990s, a 10% inflation-adjusted depreciation in currencies of 23 advanced economies boosted net exports by just 0.6% of GDP, according to Goldman Sachs. That compares with 1.3% of GDP in the two decades prior. U.S. trade with all nations slipped to $3.7 trillion in 2015, from $3.9 trillion in 2014.”

 

With “growth over,” so too is globalization: Even the Financial Times agrees, as its commentator Martin Wolf writes in his comment, The Tide of Globalisation is Turning: “Globalisation has at best stalled. Could it even go into reverse? Yes. It requires peace among the great powers … Does globalisation’s stalling matter? Yes.”

Globalization is stalling – not because of political tensions (a useful “scapegoat”), but because growth is flaccid as a result of a veritable concatenation of factors causing its arrest – and because we have entered into debt deflation that is squeezing what’s left of discretionary, consumption-available, income. But Wolf is right. Ratcheting tensions with Russia and China will not somehow solve America’s weakening command over the global financial system – even if capital flight to the dollar might give the U.S. financial system a transient “high.”

So what might the “turning tide” of globalization actually mean? Does it mean the end of the neo-liberalist, financialized world? That is hard to say. But expect no rapid “u-turn” – and no apologies. The Great Financial Crisis of 2008 – at the time – was thought by many to mark the end to neo-liberalism. But it never happened – instead, a period of fiscal retrenchment and austerity was imposed that contributed to a deepening distrust of the status quo, and a crisis rooted in a widespread, popular sense that “their societies” were headed in the wrong direction.

Neo-liberalism is deeply entrenched – not least in Europe’s Troika and in the Eurogroup that oversees creditor interests, and which, under European Union rules, has come to dominate E.U. financial and tax policy.

It is too early to say from whence the economic challenge to prevailing orthodoxy will come, but in Russia there is a group of prominent economists gathered together as the Stolypin Club, who are evincing a renewed interest in that old adversary of Adam Smith, Friedrich List (d. 1846), who evolved a “national system of political economy.” List upheld the (differing interests) of the nation to that of the individual. He gave prominence to the national idea, and insisted on the special requirements of each nation according to its circumstances, and especially to the degree of its development. He famously doubted the sincerity of calls to free trade from developed nations, in particular those by Britain. He was, as it were, the arch anti-globalist.

A Post-Globalism

One can see that this might well fit the current post-globalist mood. List’s acceptance of the need for a national industrial strategy and the reassertion of the role of the state as the final guarantor of social cohesion is not some whimsy pursued by a few Russian economists. It is entering the mainstream. The May government in the U.K. precisely is breaking with the neoliberal model that has ruled British politics since the 1980s – and is breaking towards a List-ian approach.

 

Be that as it may (whether this approach swims more widely back into fashion), the very contemporary British professor and political philosopher, John Gray has suggested the key point is: “The resurgence of the state is one of the ways in which the present time differs from the ‘new times’ diagnosed by Martin Jacques and other commentators in the 1980s. Then, it seemed national boundaries were melting away and a global free market was coming into being. It’s a prospect I never found credible.

“A globalised economy existed before 1914, but it rested on a lack of democracy. Unchecked mobility of capital and labour may raise productivity and create wealth on an unprecedented scale, but it is also highly disruptive in its impact on the lives of working people – particularly when capitalism hits one of its periodic crises. When the global market gets into grave trouble, neoliberalism is junked in order to meet a popular demand for security. That is what is happening today.

“If the tension between global capitalism and the nation state was one of the contradictions of Thatcherism, the conflict between globalization and democracy has undone the left. From Bill Clinton and Tony Blair onwards, the center-left embraced the project of a global free market with an enthusiasm as ardent as any on the right. If globalisation was at odds with social cohesion, society had to be re-engineered to become an adjunct of the market. The result was that large sections of the population were left to moulder in stagnation or poverty, some without any prospect of finding a productive place in society.”

If Gray is correct that when globalized economics strikes trouble, people will demand that the state must pay attention to their own parochial, national economic situation (and not to the utopian concerns of the centralizing élite), it suggests that just as globalization is over – so too is centralization (in all its many manifestations).

The E.U., of course, as an icon of introverted centralization, should sit up, and pay attention. Jason Cowley, the editor of the (Leftist) New Statesman says: “In any event … however you define it, [the onset of ‘New Times’] will not lead to a social-democratic revival: it looks as if, in many Western countries, we are entering an age in which centre-left parties cannot form ruling majorities, having leaked support to nationalists, populists and more radical alternatives.”

The Problem of Self-Delusion

So, to return to Ilargi’s point, that “we are smack in the middle of the most important global development in decades … and I don’t see anybody talking about it. That has me puzzled” and to which he answers that ultimately, the “silence” is due to ourselves: “We think we deserve eternal growth.”

 

He is surely right that it somehow answers to the Christian meme of linear progress (material here, rather than spiritual); but more pragmatically, doesn’t “growth” underpin the whole Western financialized, global system: “it was about lifting the ‘others’ out of their poverty”?

Recall, Stephen Hadley, the former U.S. National Security Adviser to President George W. Bush,warning plainly that foreign-policy experts rather should pay careful attention to the growing public anger: that “globalization was a mistake” and that “the elites have sleep-walked the [U.S.] into danger.”

“This election isn’t just about Donald Trump,” Hadley argued. “It’s about the discontents of our democracy, and how we are going to address them … whoever is elected, will have to deal with these discontents.”

In short, if globalization is giving way to discontent, the lack of growth can undermine the whole financialized global project. Stiglitz tells us that this has been evident for the past 15 years — last month he noted that he had warned then of: “growing opposition in the developing world to globalizing reforms: It seemed a mystery: people in developing countries had been told that globalization would increase overall wellbeing. So why had so many people become so hostile to it? How can something that our political leaders – and many an economist – said would make everyone better off, be so reviled? One answer occasionally heard from the neoliberal economists who advocated for these policies is that people are better off. They just don’t know it. Their discontent is a matter for psychiatrists, not economists.”

This “new” discontent, Stiglitz now says, is extended into advanced economies. Perhaps this is what Hadley means when he says, “globalization was a mistaalastair-crooke-photoke.” It is now threatening American financial hegemony, and therefore its political hegemony too.

Alastair Crooke is a former British diplomat who was a senior figure in British
intelligence and in European Union diplomacy. He is the founder and director of the Conflicts Forum, which advocates for engagement between political Islam and the West.





More on the thermodynamic black hole…

12 10 2016

I recently wrote about the thermodynamic black hole; articles about ERoEI keep popping up in my in tray that truly baffle me…… As Alice Friedemann told Chris Martenson in the podcast I discussed in the aforementioned blog post, “everyone disagrees on what to leave in or out of their ERoEI analyses”….

I was pointed to another blog called Ramez Naam where the following was published…:

There’s a graph making rounds lately showing the comparative EROIs of different electricity production methods. (EROI is Energy Return On Investment – how much energy we get back if we spend 1 unit of energy. For solar this means – how much more energy does a solar panel generate in its lifetime than is used to create it?)

This EROI graph that is making the rounds is being used to claim that solar and wind can’t support an industrialized society like ours.

But its numbers are wildly different from the estimates produced by other peer-reviewed literature, and suffers from some rather extreme assumptions, as I’ll show.

Here’s the graph.

eroi-of-solar-wind-nuclear-coal-natural-gas-hydro-800x630

This graph is taken from Weißbach et al, Energy intensities, EROIs, and energy payback times of electricity generating power plants (pdf link). That paper finds an EROI of 4 for solar and 16 for wind, without storage, or 1.6 and 3.9, respectively, with storage. That is to say, it finds that for every unit of energy used to build solar panels, society ultimately gets back 4 units of energy. Solar panels, according to Weißbach, generate four times as much energy over their lifetimes as it takes to manufacture them.

Personally, I think these figures are a bit on the optimistic side, yet the author has a problem with them for being too low…!  Ramez Naam, who was born in Cairo, Egypt, and emigrated to the US at the age of 3 is a computer scientist, futurist, angel investor, and award-winning author, who also worked for Microsoft.  Enough said?  And what on Earth is an angel investor?

Anyhow, he further writes…:

Unfortunately, Weißbach also claims that an EROI of 7 is required to support a society like Europe. I find a number that high implausible for a number of reasons, but won’t address it here.

I’ll let others comment on the wind numbers. For solar, which I know better, this paper is an outlier. Looking at the bulk of the research, it’s more likely that solar panels, over their lifetime, generate 10-15 times as much energy as it takes to produce them and their associated hardware. That number may be as high as 25. And it’s rising over time.

I have seen others, like Susan Krumdieck claim that to keep our complex matrix going, an ERoEI of at least 10 is needed, so it’s interesting that Weißbach aims lower.

What I’d like to know is, how can anyone claim “ it’s rising over time.”?  Last time I looked, all renewables were entirely made using fossil fuels, and their ERoEI is plummeting…

Remember the “Twilight of the age of oil” series published here some time ago? One of the charts in that series of article resurfaced on another blog (through Zerohedge)……

The Coming Thermodynamic Oil Collapse Is Worse Than I Realized

Last week, I spoke with Bedford Hill of the Hills Group about their “Thermodynamic Oil Collapse” model.  What an interesting conversation it was.  Bedford Hill was the project manager of a group of engineers that put over 10,000 hours in designing their Thermodynamic Oil Collapse model.

Bedford told me that after they ran the model, the results were so shocking, they sat on the damn thing for two years before publishing.  I asked him did any of the engineers that worked on the model disagree with the results?  His answer was, “Not a single one disagreed.”

It has taken me some time to digest this new energy information as well understand the details by talking with Bedford Hill and Louis Arnoux of nGeni.  Again, I will be interviewing these gentlemen on this Thermodynamic Oil Collapse model and the implications shortly.

EROI levels

Anyone interested in reading the Hills Group work, you can go to their website, thehillsgroup.org, or check out their detailed report.

The rapidly falling EROI – Energy Returned On Invested is gutting the entire U.S. oil industry and economy.  Instead of the United States enjoying real fundamental growth based on increased energy consumption, we have turned to inflating electronic digits as an indication of our wealth.

As I explained in the beginning of the article, U.S. energy consumption has been flat for the past six years, while U.S. GDP has increased nearly 25%, as our supposed net worth has jumped 54%.  Again, this goes against any sound fundamental economic theory.  We have totally removed ourselves from reality.

While the Fed and Central Banks will continue to prop up the markets by printing money and buying bonds and stocks, they can’t print barrels of oil or energy BTU’s.

There lies the Rub…

So I ask…….. how can the ERoEI of anything, let alone solar power, go up, when the primary source of energy to do all those thing, mainly oil, is falling off a cliff?

But wait, there’s more…..   Geoff Chia sent me an email regarding an open letter he sent to the Doomstead Diner in which Louis Arnoux gets mentioned again….  Here’s what Geoff wrote…:

This open letter to The Zeitgeist Movement replaces an essay I originally promised to Diners, “Peak Oil Revisited Part 2: Why business as usual guarantees that global industrial collapse will be complete by 2030”. I have not had the time to elucidate all aspects of my argument in detail and Dr Louis Arnoux is probably doing a better job with his articles on this topic anyway. He is a true energy expert, I am merely a lay person trying to interpret the thoughts of the experts for the general public.

The other “Peak Oil Revisited” essay I promised, “Part 1b: Is an International Standardised Energy Dollar feasible?” has proved to be much more complicated than originally envisioned and is the lowest of my priorities at the moment. Even if an ISED is feasible it is unlikely to ever see the light of day for political reasons.

graph1-theelm-300x226As you know I ran sustainability meetings for doctors and scientists from 2006 to 2013. I note your Zeitgeist group is holding a meeting on sustainability on 10 September 2016. As a starting point for your discussion you may wish to display on your projection screen the letter I wrote earlier this year to “Doctors for the Environment Australia” . When I subsequently met with the Queensland DEA representative, Dr David King, he could not offer any factual or logical objections against my letter. His only comments were that although my views were consistent with those of many scientists, he felt he had to give DEA members “hope”. DEA are operating on the false hope they can fix rampant global warming which has now spiralled out of control. They have completely ignored more immediate energy and economic issues.

graph2-elm-over-netenergy-300x179Energy analyst Dr Louis Arnoux has informed me that world average1 EROI (energy return over invested, or to use the proper mathematical description for this ratio, energy return divided by energy invested) for petroleum fell below 10:1 a few years ago. Dr David Murphy’s figure for world average EROI of 17:1 for 2013 was an overestimate because Murphy himself wrote in his paper (published by the Royal Society) that his figure did not account for the energy costs of fuel refinement and transportation2.

graph3-net-energy-cliff-300x240According to other EROI luminaries, Drs Hall and Lambert3, a ratio of 10:1 is the minimum required for a complex industrial economy to function properly.

Some parts of the industrial world can continue to function at present because they have captured4 the few remaining high EROI (>10:1) sources for themselves. Others areas eg Southern Europe are losing or have lost access to such high net energy sources (“Hi-NES”)5, hence they are now deindustrialising and collapsing. The rest of the world will never industrialise. We have no significant liquid hydrocarbon replacements for conventional petroleum. Unconventional petroleum, with its woeful EROI of 3:1 or less, is an environmentally devastating scam and a stock market Ponzi scheme.

Decline in Hi-NES is the primary reason for the current global economic contraction6, a fact that conventional economists are too venal or too stupid to acknowledge. The present low price of oil is deeply misleading and is hiding the fact that oil has become less affordable/available for most people around the world due to demand destruction and deflation, temporarily freeing up more oil for “lucky” countries such as Australia.

Dr Jeffrey Brown’s export land model (ELM) shows that oil availability for oil importing countries will eventually fall off a cliff (see graph 1 from postpeakliving.com in which I have corrected a caption: the red line shows GROSS world oil production, which does NOT take into account the energy invested in that oil production. Hence the yellow circle is an overestimate of when zero oil will be available to oil importing countries). A more accurate curve on which to superimpose the ELM should be downslope of the Net Hubbert curve as shown in graph 2. Prior to me doing this, I do not believe anyone else has combined ELM and EROI concepts and it is high time someone did so.

A most vital concept to understanding why global industral societies will soon suddenly and catastrophically collapse, just as a teetering Jenga tower suddenly collapses, is the mathematical fact that the net energy available (= energy return minus energy invested) falls off a cliff when EROI declines to 5:1 (see graph 3).

Sudden catastrophic collapse is consistent with the view of Dr Ugo Bardi, one of the original “Limits to Growth” scientists, who calls this phenomenon the “Seneca cliff”. Dr Bardi is an incredibly smart scientist whose dire warnings over many years have been blithely ignored by all the stupid sheeple around him, hence he titled his blog “Cassandra’s Legacy”.

In human terms, plummeting EROI in the absence of any plan to transition to a post carbon lifestyle, will mean social breakdown, war, starvation7and mass die off on a monumental scale. No part of the world which depends on petroleum will be spared.

We can understand why TPTB promote false hopes for the future to the clueless sheeple, using extravagant bread and circuses like the Olympics. Such theatrics keep the herd distracted and subdued. Be assured that once the masses revolt, the drones will be deployed.

On the other hand, offering intelligent people false hope for the future is in my view deeply inappropriate, especially if useful measures can be taken right now to mitigate impending hardships. Unfortunately the window of opportunity is closing fast. What is your transition plan?

You may vehemently reject my warnings and choose to ignore this letter because everything seems “fine” to you now, however denial will not make a looming catastrophe magically disappear.

One of your previous speakers promoted manned space travel to Mars. How useful, do you think, is that sort of meeting?

Regards

Geoffrey Chia, August 2016

IF you like further homework, I found some most interesting links on that SRSrocco website, including videos called the Hidden Secrets of Money made by Mike Maloney who was interviewed by Chris Martenson, and another articles on the collapse of the USA through analysing  its disintegrating infrastructure…..

It’s raining here, still, and I may go to the Community House to watch the hidden secrets of money there before I run out of bandwidth……

Enjoy!

Geoff Chia’s footnotes

Footnotes:

  1. Global “average” EROI of below 10:1 at present means that most oil fields now yield EROI below 10:1 (eg perhaps only 8:1 or 6:1). However there are a few oil fields which continue to yield a high EROI (eg perhaps 20:1), oil fields which the vultures are now circling.

  2. Murphy DJ. 2014 The implications of the declining energy return on investment of oil production. Phil. Trans. R. Soc. A 372: 20130126.

  3. Lambert, Jessica G., Hall Charles A. S. et al. 2014. Energy, EROI and quality of life. Energy Policy 64:153–167 “There is evidence…that once payments for energy rise above a certain threshold at the national level (e.g. approximately 10 percent in the United States) that economic recessions follow. “

  4. Such capture can be accomplished by fair means (eg providing useful products to the oil vendors in exchange for their oil), or foul (eg the criminal protection racket known as the Petrodollar).

  5. Being starved of credit

  6. In China, intolerable pollution has been a major factor for their economic slowdown, as well as the marked reduction in overseas demand for their industrial output

  7. Mass agriculture is crucially dependent on petroleum (also natural gas)