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Richard Heinberg: The Oil 'Revolution' Story Is Dead Wrong

The data tell a vastly different tale than the media
Sunday, March 9, 2014, 1:45 PM

With all the grandiosity of the media headlines touting our destiny as the new "Saudi America", many pundits have been quick to pronounce Peak Oil dead.

Here at PeakProsperity.com, one of the most frequent questions we've received over the past two years is: will the increased production from new "tight" oil sources indeed solve our liquid fuels emergency?

Not at all, say Chris and this week's podcast guest, Richard Heinberg. Both are fellows at the Post Carbon Institute, and you are about to hear one of the most important and most lucid deconstructions of the false promise of American energy independence:

I recently went back and reread the first edition of The Party’s Over because it was the tenth year anniversary. And I was actually a little surprised to see what it really says. My forecasts in The Party’s Over were really based on the work of two veteran petroleum geologists—Colin Campbell and Jean Laherrère. So they were saying back before 2003, because it published in 2003, so it was actually written in 2001 and 2002. So they were saying back in 2000 and 2001 that we would see a peak in conventional oil around 2005—check—that that would cause oil prices to bump higher—check—which would cause a slowdown in economic growth—check. But it would also incentivize production of unconventional oil in various forms—check—which would then peak around 2015, which is basically almost where we are right now and all the signs are suggesting that that is going to be a check-off, too. So amazing enough, these two guys got it perfectly correct fifteen years ago.

The big news right now is that the industry needs prices higher than the economy will allow, as you just outlined. So we are seeing the major oil companies cutting back on capital expenditure in upstream projects, which will undoubtedly have an impact a year or two down the line in terms of lower oil production. That is why I think that Campbell and Laherrère were right on in saying 2015, 2016 maybe, we will also start to see the rapid increase of production from the Bakken and the Eagle Ford here in the US start to flatten out. And probably within a year or two after that, we will see a commencement of a rapid decline.

So you know, on a net basis, taking all those things into account, I think we are probably pretty likely to see global oil production start to head south in the next year or two.

But this change in capital expenditure by the majors, that is a new story. You know, just a couple of years ago, they needed oil prices around $100 a barrel in order to justify upstream investments. That is no longer true. Now they need something like $120 a barrel but the economy cannot stand prices that high. So you know, if the price starts to go up a little bit, then demand just falls back. People start driving less. And so the economy is unable to deliver oil prices to the industry that the industry needs. I think Gail Tverberg is saying this is the beginning of the end. I think she's right.

If we [continue along with our current policies and dependence on petroleum] then everything will eventually change -- as a result of the economy coming apart, the debt bubble bursts, you know, agriculture declines because of the expense of oil and because of depletion of topsoil and because you cannot trust the weather anymore. And we have a very dystopian future if we do not do anything.

So it has never been more important for the average person to understand energy issues than it is right now. But I doubt if there has ever been a time when energy issues have been so deliberately confused by the people who should be explaining it to us.

Click the play button below to listen to Chris' interview with Richard Heinberg (49m:43s):

Transcript: 

Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson, and today, I am really excited to introduce a man who needs no introduction, Richard Heinberg, author, educator, speaker, writer now of eleven books including Party’s Over, the one that got me started on the peak oil story, The End of Growth, and Snake Oil: How Fracking’s False Promise of Plenty Imperils Our Future.

Richard Heinberg: Try say that fast five times.

Chris Martenson: [Laugh] I did, and that is the best I could do [laughter]. Welcome, Richard.

Richard Heinberg: Good to be with you, Chris.

Chris Martenson: So I want to start here. The Party’s Over, the book that did get me started on peak oil, written in 2003. And very clearly articulated, oil is a finite substance, and we built this whole giant growing economic model around it and that is a problem, it is a predicament. Here we are, eleven years later in 2014, and the party is still continuing. What is going on?

Richard Heinberg: Well, you know, I recently went back and reread the first edition of The Party’s Over because it was the tenth year anniversary. And I was actually a little surprised to see what it really says. My forecasts in The Party’s Over were really based on the work of two veteran petroleum geologists—Colin Campbell and Jean Laherrère. So they were saying back before 2003, because it published in 2003, so it was actually written in 2001 and 2002. So they were saying back in 2000 and 2001 that we would see a peak in conventional oil around 2005—check—that that would cause oil prices to bump higher—check—which would cause a slowdown in economic growth—check. But it would also incentivize production of unconventional oil in various forms—check—which would then peak around 2015, which is basically almost where we are right now and all the signs are suggesting that that is going to be a check-off, too. So amazing enough, these two guys got it perfectly correct fifteen years ago.

Chris Martenson: Well, it is an amazing part of the story is that at a price, there is always more oil, right? If it was a trillion dollars a drop, I assume we would find ways to actually flip North Dakota over and scrape the source rock out. And so the price and availability and supply of oil is always a big deal. I see that a lot when people are talking about the resources of natural gas that exist but fail to tell me at what price those exist, right? To get the resource is always possible but the price is important.

And yet, we look at the economic sphere and we discover that the economy also has a price for oil but it's what it can afford to pay.

Richard Heinberg: That is exactly right.

Chris Martenson: And as I look across the last three years, we have roughly been averaging $100 a barrel on the international landscape. And what do we see? We see Ukraine suddenly dissolving, we see Southern Europe with 50% unemployment rates—all things that I think were predicted by almost anybody who was really looking at the peak oil story a long time ago. It is all really coming true and yet the story today is not really connecting those two pieces together, except for people like you and myself and a number of others, but really a handful.

Richard Heinberg: Right. Yeah, the big news right now is that the industry needs prices higher than the economy will allow, as you just outlined. So we are seeing the major oil companies cutting back on capital expenditure in upstream projects, which will undoubtedly have an impact a year or two down the line in terms of lower oil production. That is why I think that Campbell and Laherrère were right on in saying 2015, 2016 maybe, we will also start to see the rapid increase of production from the Bakken and the Eagle Ford here in the US start to flatten out. And probably within a year or two after that, we will see a commencement of a rapid decline.

So you know, on a net basis, taking all those things into account, I think we are probably pretty likely to see global oil production start to head south in the next year or two.

But this change in capital expenditure by the majors, that is a new story. You know, just a couple of years ago, they needed oil prices around $100 a barrel in order to justify upstream investments. That is no longer true. Now they need something like $120 a barrel but the economy cannot stand prices that high. So you know, if the price starts to go up a little bit, then demand just falls back. People start driving less. And so the economy is unable to deliver oil prices to the industry that the industry needs. This is—I think Gail Tverberg is saying this is the beginning of the end. I think she is right.

Chris Martenson: Well, this part about the oil majors, I really want to harp on this because to me, this is a smoking gun. The oil majors are not in the business of supplying us oil. They are in the business of making money and they have been extraordinarily good at it. And they are businesses. Very intelligent people—I know a lot of people who work at Shell and Exxon. They are really hardworking. And they have scoured the globe. They have looked at all their possible opportunities and they have come to the conclusion that the extent to which they spend money on capex is the extent to which they are going to hurt cash flows and the potential for shareholder value and dividend payments.

So they have decided to cut back on capex—capital expenditures—meaning exploring for new finds, in-fill drilling in existing places, all the places, that upstream word you mentioned, that is creating more supply. They all have now, I think we are on the fifth year of declining output from the seven oil majors. These are the big ones—Total, Exxon, Shell, BP, etc.—and they have been spending, I think they have doubled their capex in the last five years and their collective output is down at least 10% or 12%. So they are spending more, getting less, and they have just thrown in the towel this year and said, “Until and unless oil prices are higher than they currently are, we cannot invest in this game anymore.” How is that not front-page news with Congressional committees being formed immediately in urgent haste?

Richard Heinberg: Yeah, I totally agree with you. I mean, this is extraordinarily important news and we are just not hearing it really. I mean, you know, the occasional article in the Wall Street Journal. But this is going to impact our entire way of life.

Another way of looking at this is declining energy return on energy investment. We have been talking about declining financial returns on investment in the oil industry and as you say, that is huge news. But just as big of news is declining energy returns. You know, high energy returns on energy investment is what made the Industrial Revolution happen. It is what made the middle class, it is what made urbanization and all the rest.

But you know, the industry is having to invest not just more money but also, more energy in producing unconventional oil and gas. So this means that more labor and more real investment of materials, as well as money, has to go into the energy production business all the time.

Now, if we go all the way back to the average energy profits of agrarian times, which were maybe three or four, five to one, something like that. You know, basically, virtually three-quarters of the population would have to be involved in producing energy in order to produce enough surplus for the other 25% to live in towns and specialize in being bankers or mayors or [laugh] whatever else, you know, stamp collectors, who knows. But that is the path we are on.

I read an article the other day talking about solar energy and how it produces more jobs than the oil industry and the coal industry combined. But what the article did not say is that yes, and solar provides only a tiny proportion of the energy to society as coal and oil combined. So yeah, we want more jobs. That is a good thing. But look at where this is headed. If this trend continues, then at some point basically, there is not going to be enough surplus to fund all the things that we are used to, like education, healthcare, [laugh]…

Chris Martenson: Retirement?

Richard Heinberg: Yeah, right, on and on.

Chris Martenson: Well, speaking on solar for a second, whenever I give a talk, inevitably the hand goes up and says, “But what about this alternative future?” You know, Amory Lovins, we are all going to have carbon fiber cars and going to have this solar future. And for a while there, I had a hard time getting the energy return on energy-invested data out of what solar really was. I sort of have this twenty to thirty to one thing waving around on a graph. But that was industry-supplied data. And so the only real data I have seen so far is Charlie Hall and another gentleman whose name I do not…

Richard Heinberg: Pedro Prieto.

Chris Martenson: Yes, they took a look at the Spanish return. So Spain has enough experience and they have built both an aggregated solar tower collector with all the mirrors pointing at a central device, plus they have lots of install base. And they came up with some interesting results, didn’t they? When they looked at the energy return.

Richard Heinberg: Yeah, they came up with, I think, a five to one or less. And just so folks understand, you know, a five to one return on investment would be great in the financial world. But in the energy world, everything we do requires energy whether—again—it is healthcare or education or manufacturing. All those things use energy but they do not produce any energy. So the little bit of energy that we invest in getting more energy has to be extraordinarily productive. Historically, it was in the range of a hundred to one with oil and coal and the early Industrial Revolution. Now in the US, it is down to about ten to one.

So it is questionable whether we can continue to operate a complex industrial society on energy profit ratios of less than ten to one. So if solar really is five to one, that is problematic.

Now, my friend, Chris Nelder, would probably be sitting here arguing with us that, in fact, solar is much better than that. And I am not an engineer myself, I have not done the calculations so I do not know. But I think there is good reason to assume that renewable energy sources, intermittent energy sources like solar and wind can give us better energy returns than were common during the agrarian era. But they are not going to be able to power the way of life we have gotten used to with cheap, portable, on-demand energy from oil and fossil fuels.

Chris Martenson: Well, my perception—and perhaps this is wrong—but when I look back and when people were in agrarian societies, I see those as times when people’s work life was rather expansive. The farming life is not easy. Anybody listening who is a farmer knows that and I have hung out with lots of farmers. It is a pretty full-time commitment. When the growing season is up, you are working hard. And what I see today is that even on minimum wage, which I think is paltry, but even on minimum wage, your need to work—the number of hours you have to work in order to buy the number of calories you need to live for the day—is really still very modest by any agrarian standard whatsoever.

And so that is what I think we are talking about here is that we have got these very expansive lifestyles that have sort of pushed out into all these really creative ways of existing. And those, just by necessity, retract as the amount of surplus energy we have shrinks.

Richard Heinberg: Yeah, and we are seeing that. Americans—even though the GDP is going up—for most Americans, their actual experience is that they are losing ground. Yeah, there are more jobs being created each month, we hear the statistics from the government. But they do not pay as much as the jobs that disappeared over the last few years. And so on average, people are finding that they are losing ground. And this is exactly what we would predict based on what we have been talking about with regard to the larger energy picture.

Chris Martenson: Oh, absolutely. So, I want to finish out on the energy story before we move on to really, the implications and I think socially, culturally, and psychologically of all this. Because you have got some fascinating things to say there. I have a quote I want you to build out on.

But first, let’s really talk—so the shale miracle has really been pumped and hyped. And from my perspective, it is a lot of propaganda at this point in time because what I see are pieces in the New York Times even, which look like PR collateral shipped out by Range Resources and copy and pasted into the article.

Richard Heinberg: [Laugh] That is exactly what they are probably. [laughter]

Chris Martenson: Range Resources being one of the premiere North American operators in the shale play, not to pick on them personally. But something is really interesting going on there when we look at the Red Queen Syndrome, which says you have to run really fast. And I think people are familiar with this now because the shale wells deplete so rapidly that when you are in a semi-mature play like the Barnett, soon to be the Bakken, you have to then put in a thousand, fifteen hundred, maybe two thousand wells per year just to maintain production. Because behind you, your existing wells are falling off these cliffs. So you are running in place just putting in these new high-producing but rapidly depleting wells.

And in that story, somehow we are supposed to believe that this is our new energy future. But you said something really interesting earlier, which is that the Bakken is probably going to top out at some point in the not too distant future a couple, three years away. When did we first start drilling seriously in that? 2007?

Richard Heinberg: Well, the Bakken has been producing for a long time with conventional wells. But in terms of horizontal, hydrofactured wells, yeah, just in the last few years. I think 2007 is probably a good number.

Chris Martenson: So we are talking about supposedly one of the most productive, most amazing fields, and it is going to go from basically inception to peak in ten years. That is a completely different profile from the Ghawar, which is still, what, first tapped in the thirties, I think, and really producing in the fifties maybe?

Richard Heinberg: Late forties probably.

Chris Martenson: Yeah. And it did not hit a peak of production for decades, many decades. And we will have a long gentle down slope of many, many decades.

Richard Heinberg: Right, right. That is the difference between a conventional oil well where you have caprock and highly porous rock holding the fuel and what we are seeing here in the US in these unconventional plays, which is—you used the term earlier, “source rock.” This is rock that has very low permeability. Much of the oil is already migrated out of it into conventional reservoirs or just migrated to the surface and volatized probably millennia ago. And getting that oil out is technically possible but it is really difficult. It does not want to move through the rock, it wants to say right where it is. That is why they horizontally drill and hydrofracture it.

But these are the last, worst plays—onshore plays—in North America. And geologists have known about them for decades and thought, you know, “We will never be going after source rocks,” but here we are. That is where we are. This is the bottom of the barrel.

Chris Martenson: Arthur Berman put it beautifully in a presentation I saw where he said, “It is not a shale revolution, it is a retirement party.” And I held a piece of this so-called "source rock" in my hand and I would not be disappointed to have this stuff as kitchen counter surface. It is not this open, wonderful, porous material that you could put your lips up to and suck something through. It is literally solid rock, by my human interpretation of feeling it. A little greasy, but it is basically just really, really impenetrable stuff, and that is what we are going after.

So between the oil majors saying, “We cannot make money at $100 a barrel. We are slowing down or stopping or even reversing capex,” and then the idea that we are drilling into things that take this extraordinary effort that are going to peak within maybe ten to fifteen years of their initial rapid, almost frantic production. And yet, somehow through this story, most people I talk to have no concern whatsoever because that is what they have been told. "Our energy concerns are in the rearview mirror, we have a hundred years of natural gas." We have all sorts of things that are just contextually and patently false. Like, provably false.

Richard Heinberg: Amazing public relations machine that the industry has trotted out. But you know, they need that public relations in order to maintain the value of their assets. And those assets are basically millions of acres of drilling leases. And especially in the dry gas area, you know, they need those drilling leases to be valuable so they could sell them at a profit. And that is what many of these companies are subsisting on. Companies like Chesapeake that has not turned a profit on actual production of dry gas in any one of the last ten years, but still remains a profitable company. How? By selling off drilling leases. So how do you maintain the value of those drilling leases? Through the fiction that there are a hundred years’ worth of gas there; that you can drill anywhere and hit a bonanza.

And that is what we decided to test with our Drill Baby Drill report that David Hughes authored at Post Carbon Institute. We looked specifically at the assumptions that they are making that the different plays are uniform among themselves and also, within plays. That in fact, you can drill almost anywhere successfully. And we looked at almost sixty-five thousand wells, we looked at the location of each well, the initial production rate, the rate at which they decline over time. And we found that those assumptions are not confirmed. That there are only small core areas within each of the plays that are initially significantly productive and that production declines rapidly over time in almost all wells within the plays.

So take all those things into account and you get a very, very different picture not just from what the industry is telling us but also, from what the government is telling us. President Obama in his State of the Union address in January was touting shale gas and tight oil as the energy saviors of America. And when you have it coming from the President himself, I mean, what more credibility could you possibly want? And yet, it is all down to public relations. The assumptions are disconfirmed by the actual drilling data.

Chris Martenson: And when you say government, I also think the state governments have really fallen down on the job. I think Texas does the best possible job of managing the situation. They have got really high quality people who know how to regulate the environment. I think they do a pretty good job with—you know, given the number of holes they punch in the ground, the number of accidents that you have with casing failures or water table disruptions statistically are low. Still very damaging to those that actually get impacted by them. And yet despite that, all that great sort of oversight and with Texas taking the highest severance tax, which is a direct tax on actual production, out of any of the like—you know, Pennsylvania is not even getting remotely what Texas takes.

Even with that, the Department of Transportation in Texas did this analysis and said, "Fracking is doing about four billion dollars of damage to our road surfaces and bridges on a yearly basis. These eighty-thousand-pound trucks, of which it might take as many as almost twelve hundred to complete a single well—six hundred if you want to re-frack it—and those twelve hundred trucks weighting eighty thousand pounds filled with sand and water and fracking fluid and who knows what and giant diesels and…

Richard Heinberg: Drilling rigs, yeah.

Chris Martenson: "…drilling rigs and stuff. They are only collecting about a billion dollars in severance tax back to repair the road damage and doing four billion in damage." Who is going to pay that?

Richard Heinberg: Right, yeah. Well, you know, this story is slowly starting to leak out to state and local officials. I say slowly because there is still a lot of public officials who are victims of the snow job of the industry saying, you know, "This is going to be a bonanza for states in terms of not only tax revenues, severance taxes, but also, in terms of jobs and therefore, state income tax revenues and so on."

But more and more analysis is showing that the jobs are fewer. They often go to out-of-state workers who are flown in to do the fracking jobs and well completions. That the costs to state and local governments are often greater than revenues. And as this news comes in, you know, more and more places are turning against fracking. It has really gotten its toehold here in the US largely because of the subsurface mineral rights ownership regime in the US, which is different from almost everywhere else in the world where property owners also own subsurface mineral rights. So they benefit directly financially from fracking operations.

But it is still dividing neighbor against neighbor and it is still resulting in this boomtown frenzy that turns communities upside down. And more and more places are enacting laws or restrictions against fracking. Now this is in the United States. Elsewhere in the world where people do not own subsurface mineral rights and have no direct financial stake in oil or gas production, you can bet that the public outcry against this technology is going to be ten times greater than in the US. So when people talk about "Oh, we are just getting started and what we are going to do in the UK and Australia and China and so on," well, wait a minute. It is probably not going to go so well both because of the things I was just talking about and also, because the geology is different.

Chris Martenson: Right. And the regulatory environment, certainly in Europe—I will not speak as much about China, obviously, in this regard, but what—a lot of people are concerned about fracking fluid in the water table, but I think they are missing a big part of the story, for me. So, I was a former toxicologist. You know, fracking fluid—five hundred nasty chemicals in random combinations—toluene, benzene, xylene, you pick it, right?

Richard Heinberg: Known cancer-causing chemicals.

Chris Martenson: Awesome stuff, right? The fracking operation, you pump all these millions of gallons of water plus however many gallons of this fracking fluid down. You pop it and then it flows back and it goes into this big holding pit. And this is where I do not think Europe is going to lie down on this. When it goes into the holding pit, anything that wants to aerosolize or volatilize or otherwise drift away from that holding pit is free to do so. And lots of people downstream from these operations during the fracking operation report nausea, headaches, nosebleeds, all kinds of things that are very consistent with polyaromatic hydrocarbon toxicity. It is clear as day. And the reason that the oil companies can do this is because of the so-called Halliburton Amendment. They are exempt from any clean air act, clean water act regulations around these chemicals.

So what it is interesting is you could have literally hundreds of gallons of these things aerosolizing out of the fracking pit and going downstream. And right next door, you could have a dry cleaner that accidentally spills a liter of the same substance and boy, they would get in trouble—a huge amount of trouble because the EPA would regulate the bejesus out of that particular incident. There would be hazmat teams and oil scrubbies. And it is just this dichotomy between what we allow in the name of oil production versus other ways we would regulate ourselves. The gap is just enormous in the US. I do not think that gap exists in Europe.

Richard Heinberg: Yeah, I think you are right about that. It is going to be much, much more difficult for this. And you already see the public reaction in places like Romania and the UK—some pretty gutsy citizen efforts to stand in the way of trucks and just prevent this from happening.

Chris Martenson: Well, I guess that is encouraging. Now from my perspective, I think fracking happened because it happened so fast and under the radar in the US. In fact, I started tracking what I thought was a very obvious PR campaign back in 2011. There were a number of articles—one in Reuter’s, one in the New York Times, one in the Washington Post that all had very similar language that basically boiled down to, "If the government and the environmentalists get out of the way, this is an awesome story," right? And there were flavors of that in each one of these pieces. I said, “Wow, somebody has got a PR message that says, ‘If we can just get the environmentalists out of our way and if we can get the government regulators out of our way, shale oil and gas is going to be this awesome thing.’” It was a very, very brilliant campaign. [claps] Golf claps, right? It was nice.

But people bought it. They ran with it and it took years for citizens with nosebleeds and nausea and dizziness and destroyed aquifers to say "time out" on this. And so it took a while for this story to really begin to develop, and it is developing.

But I want to get to this quote because I think this is the crux of the whole thing. It is a recent article from your newsletter found at your website, RichardHeinberg.com. And the quote is, “Today, it is especially difficult for most people to understand our perilous global energy situation precisely because it has never been more important to do so.” What do you mean?

Richard Heinberg: [Laugh] Yeah. Well, that is from an essay where I sort of take apart the politics of energy. You know, energy has never been more important—it has always been incredibly important because it is the basis of life, it is the basis of the economy. But it is even more important right now because we are faced with a requirement for an energy transition both because of climate change and because of the depletion of the energy sources we have been relying on, all the things we have just been talking about.

So we know we have to get off of fossil fuels and this is going to be a huge job. It is going to require trillions of investment and decades of work and so on. But nothing is happening. Why? Because it is totally politicized. Climate change is completely politicized. On one hand, you have Democrats who say, “Oh, look at the science. You know, it is clear this is an important thing. We have got to do something about. We do not know what but we have got to do something about it.” And then the other political party says, “No, it is not happening. No, no, it is all just a conspiracy theory. There is no climate change.” [Laugh] "And if the weather is changing a little bit, it is not because of fossil fuels. You know, that cow farts or I do not know, we do not know." [Laugh]

So as a result, nothing happens, you know, nothing happens with climate—depletion is not acknowledged. All of the things we have been talking about with the problems of the oil majors and capex, none of that is talked about by politicians because it would actually require them to do something.

So it has never been more important for the average person to understand energy issues than it is right now. But I doubt if there has ever been a time when energy issues have been so deliberately confused by the people who should be explaining it to us.

Chris Martenson: Well, I have certainly seen that. You know, one piece that I have to fight constantly is this idea of energy independence, where they lump all the BTUs from coal, natural gas, oil, hydro, wind into one spot as if they are the same thing and then say, “Oh, look, we are almost independent on this basis.” It is a really bizarre way to do it and it is very deliberately obfuscatory and confusing, and unnecessarily so.

I am wondering in this quote, though, if there is not a sense that it is difficult for people to talk about this precisely because it is just too large.

Richard Heinberg: Yeah. Well, I think that is true, too. You know, if you go very far into this and you really start following the evidence closely, it gets kind of overwhelming. Not just in terms of the detail and the requirement for some math and engineering knowledge and so on, but just in sort of human toll, understanding that our entire way of life is really on shaky legs right now. And that we cannot count on a future looking anything like what we have today and that our children’s future is likely to be very, very different and far poorer than our lives.

This is, psychologically, it is very difficult for a lot of people. I call this "toxic knowledge." And my books are full of this toxic knowledge and I always have kind of mixed feelings about conveying this stuff because I know I am going to depress people. I am going to cause them to go through probably some trying times personally, coming to terms with this information. And yet, is it better to know or not to know? Is it better to live in denial or to be aware of troubling truths? And when I think it through, I always come down on the latter side—it is better to know.

Chris Martenson: Well, I agree. And not doing anything is still doing something in this story, right?

Richard Heinberg: That is true.

Chris Martenson: There is no avoiding this. I understand the human desire to avoid unpleasant information. You know, if you have got that angry, irregular mole on the back of your leg, you can choose to ignore it or not. You know, that is really where we are at in this story. It is like, maybe we do not want to have to face this but here we are.

And so I really think of this as just a monumental, colossal failure of leadership, if not imagination. I totally understand if you are an unimaginative politician, you look at this story, and you say, “I cannot talk to people about self-imposed hardship and austerity. They are going to hate that.” And they would.

Richard Heinberg: Yeah, absolutely right.

Chris Martenson: But the failure of imagination is, “Oh, by the way, we have done some really hard things in the past if we had the appropriate vision.” And that is what we are lacking—that vision that says here is where we are going to go and here is how we are going to get there. "Hey, we have to fight some Nazis so here are all the things you are going to have to do without as we go through this process." If conveyed properly, I think people will move mountains. Conveyed improperly, which is just, “Oh, by the way, we just want your energy to become more expensive until you start using less of it and all your jobs sort of fall away,” I agree, bad story.

Richard Heinberg: [Laughter] Yeah.

Chris Martenson: But what is really troubling for me in this story is when I talk to younger people, there is this extraordinary divide between my generation, the Boomers, and younger people, say the Millennials, and the poor Xers stuck in between. But the Millennials have looked into this larger narrative and said, “I do not get it. You know, how does preserving the status quo help me at all? Crumbling infrastructure, maybe an inappropriate infrastructure for the future I see coming, massive amounts of debt. I am going to have to pay for your retirements with no guarantee that I will get one out of this story,” and that is not really a compelling vision in their—where is that vision going to come from?

Richard Heinberg: Yeah. Well, frankly, for all the reasons I outlined in that essay that you quoted from, I think it is unlikely that it is going to come from the top anytime soon, absent some kind of major government restructuring, whether it comes in the form of a coup or revolution or what have you. Where I think it has got to come from is the bottom up. And of course, that is terribly problematic because there are lots of things you cannot do from the bottom up. You cannot institute a carbon tax from the bottom up, you cannot reform agriculture as we know it nearly as quickly and efficiently from the bottom up as you could with just a few rule changes at the USDA.

But nevertheless, that is what we have got. And it is happening. I mean, I mentioned the USDA. The USDA points out in its recent literature that the segment of agriculture in the US that is growing fastest is local food. The local food movement trumps everything else in current agriculture.

So people are getting it at certain levels. Things are happening. It is just it is kind of below the radar and it is not going to be fast enough. It is not going to be enough of a change to avert the kinds of climate impacts that we are all concerned about and so on. But it is the leverage point we have. Operating locally, whether it is through the local grange or transition towns or just in your own backyard with your own neighborhood, that is where we can make a difference and a lot of people are already doing it.

Chris Martenson: In the absence of a compelling national narrative, people are arriving at their own. And by the way, it is very common. I go all kinds of places. I see the same sets of responses and reactions in Louisville as I do in Sacramento as I do in Austin. Still on a fairly small percentage basis but really growing...

Richard Heinberg: Yeah, when I tell people I am from California, they all go, “Oh, well, in California you have blah, blah, blah, blah. That must be so easy there.” But you know, when I travel around, I see basically the same thing happening everywhere. You know, whether it is Michigan or New York State or British Columbia, you know. The local food movement is happening, farmers markets are happening, people are concerned about where energy is coming from and they are doing what they can to put solar panels on their own houses and do what they can in their communities.

Chris Martenson: Well, with that, a gentleman I was talking to yesterday, I think, outlined it very well. He said—he has done all those things. He said, “I have got my solar panels, I have got my garden, I support local food.” Very necessary, completely insufficient steps.

Richard Heinberg: Absolutely.

Chris Martenson: There is this gap [laughter], you know?

Richard Heinberg: Yeah.

Chris Martenson: And he feels uncomfortable with it but a.) you have to be the change you want to see, so what else can you do besides be that change? And at the same time, in the sense that the things that we cannot control are still very large and potentially overwhelming, they might swamp our efforts.

Richard Heinberg: That is true.

Chris Martenson: And how do we begin to close that up? What can we possibly do?

Richard Heinberg: Well, I think knitting together all of those local movements is really important. I think what you are doing with Peak Prosperity, what we try to do with Resilience.org, is helping people understand that they are not alone in this. That there are people everywhere who are fighting the same fight. Help them connect up first with the people in their local communities, but also with people maybe on the other side of the planet who face the same challenge and figure out a really good strategy for dealing with it. Beyond that, I wish I could say, “Well, let’s start a new political party,” you know, or something like that. But frankly, right now, maybe it is just the mood I am in but I do not have much hope for that.

Chris Martenson: Yes, I applaud people who are trying to work from what I will call the top down, you know.

Richard Heinberg: Yeah, if somebody is working with a big organization like 350.org or Sierra Club or trying to infiltrate the Democratic Party and change its policies with regard to fracking, you know, more power to you. If you can make some change at the top end, you have my total support. And I do not want to be discouraging with that.

Chris Martenson: I am in the same camp. I do think that this has to be local from the ground up. And here is part of it, I mean, if you just sort of—let’s take two steps back and we will look at the big picture again and we will say, let’s imagine for the moment that all of a sudden, world governments get religion around climate change and they really look at this. And obviously, the big sources of carbon happen to all be from coal, oil, and natural gas. That is most of it. So we get religion. We suddenly say, "Within twenty years we have to be burning 75% less of these things." The implications of that are extraordinary. You know, literally, it means my lights might not come on when I flick the switches. It means that I will not be able to transport myself by putting fuel into my tank. It means everything suddenly changes. If there was an Apollo Project and a Manhattan Project, it would be both of those times some other large number, like 100, in terms of the change we would have to go through to restructure ourselves in pretty much every way I can imagine. Plus pour all of this investment into these alternative energies so that we have something we can do.

If that happens, everything changes. But if we do not do that…

Richard Heinberg: Everything changes.

Chris Martenson: Everything changes [laughter].

Richard Heinberg: Yeah, and if we do not do that, then everything changes as a result of the economy coming apart, the debt bubble bursts, you know, agriculture declines because of the expense of oil and because of depletion of topsoil and because you cannot trust the weather anymore. And we have a very dystopian future if we do not do anything.

Whereas if we do what you were describing earlier, you know, if we were to take all of these challenges seriously and put trillions of dollars into the energy transition and relocalize food systems and all the rest, it would be the biggest thing we have ever done as a species. And it would be really hard and all the things you are saying—yeah, we would probably find a lot of economic casualties along the way. But I think the end result would be a lot better.

Chris Martenson: It might also be exciting and fulfilling for people who are engaged in that.

Richard Heinberg: We would have a huge project to devote ourselves to, and for young people, I think it makes all the difference in the world. If you see the world around you basically going the wrong direction and coming apart, that is one thing. But if you see a big challenge ahead that you can devote your life to, even if it is a challenge on a scale of World War II, you know. It gave a lot of people—it gave their lives meaning.

Chris Martenson: Well I agree. I am going to float an idea. Because we talked about this gap between the Millennials, the young people on the one hand, and Boomers on the other hand. Roughly speaking, Millennials without a whole lot of assets because they are at that stage of their life; Boomers with a lot of assets. Now let’s connect that, "I have assets" to this idea that we are kind of darned if we do, darned if we do not, big change is coming.

And so the challenge I would like to promote is this idea that Boomers, to the extent that they have assets and a sense of legacy potentially looming in front of them, really ought to be non-status quo, putting those assets to work while they still have utility. While you can still get traction. You know, the big brown truck of happiness will still roll up your driveway after you click “Buy” on Amazon, right? And give you awesome things, right?

Richard Heinberg: [Laugh] Why not adopt a farmer?

Chris Martenson: But why not that? You know, "I am too old to farm, I do not want to own one." I hear that a lot. And yet, these are people who, some of them are sitting on quite sizable, still recognizable assets in the financial system. The challenge is: why not put those in a place, in a direction, that feels good and makes sense today?

Richard Heinberg: Yeah. And for the young farmers—and there are whole organizations of young farmers now—one of them that I follow closely is the Greenhorns. And they are doing great work. And these are young people who are totally dedicated to farming and ecological—a truly sustainable way. And almost universally, the one thing they lack is access to land. And if they get access to land, it is usually on the basis of land rental.

So okay, supposing you are a wealthy Baby Boomer and you want to adopt a farmer, under what conditions is that actually a fair relationship? I do not know that there is anybody who has totally worked out the answer to that question but it is a question that needs to be addressed. Because if this turns out to be just a new form of serfdom where, yeah, there are a lot of young Millennials around who are capable of working hard and you know, "we can teach them how to farm, okay, let’s put them to work for us" [laugh], you know? There is something wrong with that picture, you know. At the end of the day, the people who do the work need to end up owning the land. Again, I do not know how that looks, legally, but these young people need a sense of an end game in this.

Chris Martenson: Well, sweat equity is real equity and this idea that paper money is the be-all-end-all, that is sort of our cultural narrative, right? And if you have that form of capital, you have it all. And we have not traditionally awarded sweat equity. In fact, the trends in labor are not good over the past decade and a half so we are even devaluing the human inputs more. And "oh, robotics, we will just do this—it will all be about capital."

So you are right. We have to find a way to make this equitable and here is that gap between the younger and the older generations: The older generations have everything to lose if the status quo is not maintained, right?

Richard Heinberg: Right.

Chris Martenson: And to be fair, they have paid into the system, they have worked hard, played by the rules, and had this expectation of retirement, all within the parameters of the system, but now we get to this new part of the story where we say, “Oh, we have over-crossed,” right? And we know this, right? The entitlement programs, a hundred trillion underfunded and basic pensions everywhere underfunded and unlikely that that is ever going to, sort of, recover. And so there has to the sense of releasing of expectations, releasing of what we thought we were promised on one end of the generational scale and finding a way to make it fair for the people on the other end. Because this is ultimately turning into a story that is not fair. And by nobody’s fault. Can I say “not fair” without blaming?

Richard Heinberg: Yeah.

Chris Martenson: And so there is a fairness gap there. And I talk to young people and they look square at it and they go, “Yeah, I am not participating in that. That does not look right at all.” And so here is an example of that: I know a guy in his thirties who lives in my county. I happen to live in one of the poorer counties in Massachusetts on a per-capita income basis. Very intelligent, working three jobs really intelligently. Still has to make use of food stamps, right? This is who he is. He has pieced this life together out of what is available as hardworking and as diligently as anybody I can imagine—probably better than I was doing at that age for sure. But I grew up in a different time, right?

And so I look at that and I say, “That is really fundamentally not fair,” particularly when you have people on the other end who are sitting on relatively large-ish-sized asset bases at this point but they are desperately afraid of losing it. This guy on this end has nothing, these people are desperately afraid of losing it. We have got to close that gap.

Richard Heinberg: That is right. Yeah, one way or another, we have to address the problem of wealthy inequality in this country. Otherwise, it is already tearing us apart but it is going to do so much more savagely as time goes on.

This is what creates revolutions [laugh], I mean, look back historically, if the wealth disparity gets just too extreme. And we are backing gilded age levels of wealth disparity right now.

So how do you address that? Well, through different banking rules, through all different possibilities. In my book, The End of Growth, I suggested the possibility of haircuts for everyone. You know, just chop a zero off the end [laugh] of all debts and assets. I do not know how likely that is but we are going to have to do something like that.

Chris Martenson: Well, it is encouraging that we see this at the local level. I agree that I do not see much yet at the national level to give me hope. Let me be honest. I think we are further away from what I would call a rational discussion in DC, not closer, over the ten years I have sort of engaged in this project of awareness. And so that…

Richard Heinberg: That is a sad commentary.

Chris Martenson: It is a sad commentary. I have a little personal fault and I am like, “Really? I must have failed at what I have done.” I have a little of that lurking in there and yet it also confirms for me this idea that we have to prepare for a very different future because there are no preparations being undertaken that I am aware of. If they are doing it, it is a Skunk Works project.

Richard Heinberg: Well, the only preparations we see are, frankly, the militarization of police forces around the country and the ubiquitous surveillance. So that is not very confidence-building in terms of our future [laugh].

Chris Martenson: It is a set of responses that does make sense and I could actually, if I step into that role, I could understand why people would make those decisions.

Richard Heinberg: Yeah, well, they see that more social unrest is likely as a result of the current trends, so they are preparing for social unrest rather than addressing the trends.

Chris Martenson: Right. So with that, I see we are out of time on this wonderful interview. Thank you so much for your time today.

Richard Heinberg: I am sorry we had to end on kind of a down note.

Chris Martenson: Well, then let's not…

Richard Heinberg: I think—no, there was a lot of content in there that I think folks can draw encouragement from so I am willing to let it go at that, right? [laughter] But it has been a pleasure talking with you, Chris.

Chris Martenson: Well, thanks, and the pleasure has been mine. And people can find out more at your website, RichardHeinberg.com. And, any events coming up or anything people should know about?

Richard Heinberg: Oh, gosh. You know, my calendar is on the website and I do not look at it often enough. I do not even know what I am doing half the time.

Chris Martenson: I understand that model.

Richard Heinberg: More than a week ahead.

Chris Martenson: Well, fantastic. Because I totally understand how that works. So glad to hear you are busy and going to be out there helping to share this message. Because the summary I have is: It is not about preparing for the apocalypse; it is simply understanding and becoming emotionally accepting of the fact that these changes are coming. And if you choose to, the warning signs are all there.

Richard Heinberg: And there are lots of things that we can do ourselves and with our friends and neighbors and relatives. And the more we do, the better we feel.

Chris Martenson: So really, I see this as an invitation to get busy.

Richard Heinberg: Yup.

Chris Martenson: And the invitation is now printed in forty-eight point Helvetica font [laughter] and being hand delivered.

Richard Heinberg: Scrolling across the screen.

Chris Martenson: And there it is in the news every day and it is for anybody to see. So again, thanks for your time.

Richard Heinberg: Thanks, Chris.

About the guest

Richard Heinberg
Richard is a Senior Fellow of the Post Carbon Institute and is widely regarded as one of the world’s foremost Peak Oil educators. He has authored scores of essays and articles that have appeared in such journals as Nature, The American Prospect, Public Policy Research, Quarterly Review, The Ecologist, Resurgence, The Futurist, European Business Review, Earth Island Journal, Yes!, and The Sun; and on web sites such as Resilience.org, TheOilDrum.com, Alternet.org, ProjectCensored.com, and Counterpunch.com. 
 
He has been quoted in Time Magazine and has spoken to hundreds of audiences in 14 countries, including members of the European Parliament. He has appeared in many film and television documentaries, including Leonardo DiCaprio’s 11th Hour, is a recipient of the M. King Hubbert Award for Excellence in Energy Education, and in 2012 was appointed to His Majesty the King of Bhutan’s International Expert Working Group for the New Development Paradigm initiative.
 
Richard’s animations Don’t Worry, Drive On, Who Killed Economic Growth? and 300 Years of Fossil Fuels in 300 Minutes (winner of a YouTubes’s/DoGooder Video of the Year Award) have been viewed by 1.5 million people . 
 
Since 2002, he has delivered more than five hundred lectures to a wide variety of audiences—from insurance executives to peace activists, from local and national elected officials to Jesuit volunteers.
 
He lives in northern California with his wife and is an avid violin player.

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38 Comments

AndyR's picture
AndyR
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Posts: 9
Adopt a farmer

In New Zealand we have a great system in the Dairy industry (which is grass based farming) called sharemilking.  Where the farm owner supplies the land and buildings and the sharemilker supplies the labour, and some of the machinery and maybe the cows as well.  In exchange the sharemilker recieves a percentage of the income from the farm.  This generally gives the sharemilker a far better income then a managers wages.  It also gives the owner greater security because instead of a manager he has someone with 'skin in the game.'  It's a model that is supported by the industry and also government legislation to ensure the sharemilker isn't ripped off.

Most successful sharemilkers are eventually able to buy their own farm because they can accumulate capital in the process of farming.  Maybe that is a model worth looking at if you were wanting to adopt a farmer.

davefairtex's picture
davefairtex
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US petroleum imports

There's a reason the media is talking about US energy independence.  Its because of this chart - petroleum net imports (in mbpd):

A simple extrapolation 5 years forward says - US is independent of foreign sources of petroleum.

Part of the reason is because petroleum use is falling in the US - its down 2 mbpd from the peak in 2008.   Match that with rising shale oil production and its all very virtuous.

Anyway, that's the view from the mainstream.  If Heinberg (and Stoneleigh) are right that a big chunk of this production boom is just a property ponzi scheme designed to market shale production properties to clueless buyers, at some point the ponzi will pop, and shale production will dry up.  Given the decline rates, the new production will dry up really, really fast.  3 mbpd will vanish in a few years once drilling stops.

Wildlife Tracker's picture
Wildlife Tracker
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Are ExxonMobil's Reduced Capital Expenditures Cause for Concern?

"Oil and gas behemoth ExxonMobil (NYSE: XOM  ) upset the market on March 5 when it told analysts it would cut spending this year. The news was not well-received, and the company's shares fell hard on the day of the announcement. ExxonMobil is tightening its belt this year, and there are clear worries that there's a lack of suitable investment opportunities out there for the taking.

Reduced capital expenditures is a recurring theme going on right now across the oil and gas industry. Other global super-majors including Chevron (NYSE: CVX  ) and Royal Dutch Shell (NYSE: RDS-B  ) are adopting similar strategies this year, so it's not as if this is an ExxonMobil-specific issue."

...

"Not surprisingly, ExxonMobil doesn't see production improving this year. In fact, production is expected to be flat in 2014 after falling 1.5% last year, and will increase only 2%-3% per year from 2015-2017. A major contributor is lackluster gas production. High-margin liquids production is expected to rise 2% in 2014, but gas production is projected to drop by 2% this year."

http://www.fool.com/investing/general/2014/03/07/are-exxonmobils-reduced-capital-expenditures-cause.aspx

AndyR's picture
AndyR
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IOC's Muscled out by NOC's

The amount of capital invested in oil and gas fields next year will again set a new record, with estimates of $723 billion being spent to secure hydrocarbons for worldwide consumption, according to Barclays . The four large integrated oil companies -- ExxonMobil, Chevron, BP, and Shell -- will make up about 20% of the spending. http://www.fool.com/investing/general/2013/12/17/oil-and-gas-spending.aspx Nearly two-thirds of oil and gas companies are planning to increase their capital spending in 2014, a quarter of them by 10% or more, according to a global industry survey by UHY LLP Certified Public Accountants and PennWell Publishing’s Oil & Gas Financial Journal. http://oilpatchasia.com/2013/12/impressed-yet-2014-oil-and-gas-capex-wil... Note that these capex spends are well down on what a 2012 forecast predicted for 2014 of 1.2 Trillion capex.

lunableu22's picture
lunableu22
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Am I naive?

Seems like a "debt jubilee" is not a particularly good idea, since it penalizes non-debtors and rewards debtors.  Having said that, how about an "interest jubilee", where the borrowed money must still be paid back, but the interest is forgiven.  Then the "losers" are the ones who sought the collect that interest.  Without interest, there is no need for infinite growth, so there is no need to collect interest to "get ahead".  And if projects need to be financed, crowd-sourcing is a "vote with your dollars" way to get things happening collectively. Do we really need banks, at all?  Or politicians to "manage" our thoughts, choices, projects, money?

Jim H's picture
Jim H
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US Oil net imports

Dave,  Thank you for the chart.  I don't think that it is just coincidence that the chart peaks in 2007-2008.. I seem to remember something happening back then.  I am pretty sure that the effects of a Depression that has been covered up with borrowed (National debt) money and people's desperate attempts to use less gas  in their daily lives, the actual take-out has been more than 2 mbpd.  No doubt the US fracked oil mini-boom plays into this, however short lived.. my point is just that the overall picture is pretty complicated.     

davefairtex's picture
davefairtex
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oil consumption chart

Jim-

Here's the oil consumption chart.  We're back to 1998 levels of petroleum consumption.  Kind of interesting, it looks like it peaked in 2005.  When you divide by population (oil consumed per individual) it looks even more exciting - growing pop, declining overall consumption = double whammy.

The chart is labeled a bit oddly, but it is basically US petroleum consumption.  And it includes all the liquids, I think not just crude - not sure how much is ethanol, natgas liquids, etc.  Google for EIA PATCPUS and see what EIA puts in there.

Jim H's picture
Jim H
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2005 Oil consumption

Dave,  2005 was the year we got our first real price shock indicating what was to come in the US... price went from $1.80 per gallon up to almost $3.00 in rapid fashion.. this changed behavior, even before the economic crisis hit.   

http://www.GasBuddy.com/gb_retail_price_chart.aspx?city1=USA%20Average&c...

I think you did a good job above expounding more on some of the complicating factors. 

Stan Robertson's picture
Stan Robertson
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Posts: 525
Petroleum imports

It's a little bit hard to square up that graph that shows U.S. petroleum imports down to 6 mbopd with this one that says that we imported an average of 10.6 mbopd in 2012. ( 3.88 billion barrels in 2012 here) The problem is that we import a lot of finished products in addition to crude oil.

Phaedrus the younger's picture
Phaedrus the younger
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Posts: 32
Nice to hear Richard on the podcast!

Excellent podcast guys.   Farming fairness is a thorny but critical question.  We have 15 acres of unworked land in hay that we thought we'd lend out to young folks ready to commit to organic farming.  (no takers yet, largely because we don't have the tractor/implements to loan out)  Our thinking was to ask for a nominal fee to help defray the land tax.   After your discussion, it makes me wonder if that's asking to much.  

ps would love to have either or both my kids take an interest to build it up and eventually take it over.

treebeard's picture
treebeard
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Posts: 382
Balance

http://vimeo.com/86466357

When natural systems return to their center, healing and balance follow, when we return to our centers, healing and balance will also follow.

Arthur Robey's picture
Arthur Robey
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The Moral Virtue of Victimhood.

A common assumption is that a Debt Jubilee will only benefit debtors.

Not so If everyone was given a sum of money on the proviso that they first had to pay off their debts with it and whatever was left over they could spend as they pleased.

If the recipient of this money had no debt he would be well off.

To vote against a Debt Jubilee is to vote against your own interests.

I should imagine that the Big Banks would not be happy with such an arrangement because your debt is their asset. And if you pay it off, their asset is destroyed. So very sad.

Here is a video that might help you with this concept. How does it feel to be the victim of a grand larceny? Is there any moral virtue in such a position?

Arthur Robey's picture
Arthur Robey
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The Government is Going to Save You.

Umm.  .  . Maybe not.

FreeNL's picture
FreeNL
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Posts: 112
Arthur Robey wrote: Umm.  . 

Arthur Robey wrote:

Umm.  .  . Maybe not.

That is exactly why some dont think collapse or the end of oil is such a bad thing.

Im starting to think they might be right. No matter how much you want it to have one, this particular brand of civilization has no future.

Wendy S. Delmater's picture
Wendy S. Delmater
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Posts: 1534
Excellent podcast

While it was incredibly gratifying to hear others struggling with the exact same forces and knowledge, it was also daunting and emotionally exhausting.

Dr. Chris said,

Well, with that, a gentleman I was talking to yesterday, I think, outlined it very well. He said—he has done all those things. He said, “I have got my solar panels, I have got my garden, I support local food.” Very necessary, completely insufficient steps. . . And he feels uncomfortable with it but a.) you have to be the change you want to see, so what else can you do besides be that change? And at the same time, in the sense that the things that we cannot control are still very large and potentially overwhelming, they might swamp our efforts.

Exactly. I dealt with the overwhelmed feelings by buying five Chinese chestnut saplings. If my efforts get swamped, hopefully these will live on after me. If not, a girl's gotta eat.

Nate's picture
Nate
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Posts: 461
M. King Hubbert

M. King Hubbert gave a talk to a Congressional subcommittee in 1974 concerning the US energy policy.

Here is a transcript of his presentation with graphs. It is only 16 pages long. 

http://www.learningace.com/doc/1838448/881fcffd4297947aec32fe30572cd44a/m-king-hubbert-on-the-nature-of-growth-1974-congressional-testimony

The graphs are low quality, but the gist comes across. Use the "View full screen" option and click on the viewing window's "elevator" buttons for scrolling.

He talked about energy, growth rates, and inflation caused by a financial interest rate that was too high for the growth in energy usage. Using his logic, it now makes sense why we have ZIRP and QE without inflation. Once we go down the backside of Hubbert's peak, we'll likely see negative real interest rates. I'm not sure if that will be from defaults, confiscatory taxes, or something else.

He gave this "dumbed down" paper (suitable for congressoids) in 1974. Other than missing the timing a bit, he was quite prescient.

Nate

climber99's picture
climber99
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Inflationary

Reply to #12

This would be inflationary in two ways. Firstly, money suppy would go up relative to goods and services on offer. Secondly, a proportion money that would ordinarily go back to the bank to be destroyed (which happens when debt is repaid) wouldn't be. To counter act this, banks would simultaneously have to reduce their money creation by reducing their lending.

Arthur Robey's picture
Arthur Robey
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Posts: 2425
Money and Debt.

History shows that the FED has the banks' back. There is no need to worry about them. They are Too Big to Fail.

Johnny Citizen used to be paid in money- now his wages are debt. Instead of allowing price discovery of  the true worth of labour, the bankers have responded to the decrease of the velocity of money due to his poverty by offering him more debt.

The destruction of this debt would allow the laws of supply and demand to price labour accurately.

Industry is quite capable of oversupplying the market. (Given a reliable source of cheap portable energy.)

climber99's picture
climber99
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Posts: 53
Umm yes.

Sorry. I'm not clever enough to understand your causal links.  Money and debt is the same thing in our Fiat system so I'm guessing you want to go back to the gold standard. The Fiat system was developed so that the money supply could expand as the economy expanded.  It is just as capable of contracting as our energy production and hence our economic output contracts. 

climber99's picture
climber99
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Posts: 53
Thanks

Thank you for the link to Hubbert's paper. Just printed it and scanned it. Much of it is familiar to me so just read the part about inflation.  I do not agree with his initial assertion "money grows exponentially by the rule of compound interest".  Fiat money supply grows when the rate of money creation (from debt issuance, bank asset purchases, dividends, bank bonuses etc) exceeds the rate of money destruction (from debt repayments and interest payments). Interest rates are set by central banks to control the rate of money creation.  Interest rates and rate of money creation have an inverse relationship.

Arthur Robey's picture
Arthur Robey
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Debt and Money

Debt and money are two sides of the same coin. You can buy things with money and you can buy things with debt. The difference is in time. When would you offer your labour to cancel (or earn ) the debt/money.

Because Labour was crushed by Capital in the 70's and 80's the earning power of Labour dropped. This caused the velocity of money to tank. Capital decided to offer Labour the opportunity to get into debt so the velocity of money could increase.

The result is we now have a debt based economy. The world owes 100 Trillion. It is this 100 T that has to be shed so that the economy can recover, and real humans can escape their debt shackles.

The purpose of the economy is to serve humans, not to enslave them.

I am agnostic on the role of Gold. It is a useless metal. It is however frungible so that it too can grow, just like bitcoin can grow even though there are a finite number of bitcoin. The value of each bitcoin increases in the same way the value of each ounce of Gold  can increase with the expansion of the economy.

climber99's picture
climber99
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back to the main issue

Some days I'm very pessimistic about the future. However today I'm going to post something positive.

We currently consume about 200 kWh of energy per day per person in the UK. I reckon we could get that figure down to below 50 and still lead great happy lives. We may not be able to afford a private car, air travel, to heat your whole house, eat out etc but they are not essential. We'll have to share the available employment more equally but this will release time to grow your own food and help others too old to work. Happiness and energy consumption aren't correlated (above a threshold at least).

What is the minimum energy per capita we can live on? Interesting question. What I am sure about, our energy consumption will driven down because we will just not be able to afford to consume 200kWh of energy per day.

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Thanks

Thanks Arthur. Beginning to get what your saying.

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Bubbles Everywhere

Here are a couple of hardly-watched videos that are interesting:

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James Akins and the first oil shock, current propaganda

I am always surprised that in the "peak oil community or circles", a key person in the "oil history" isn't more talked about : James Akins

For an intro see for instance :

http://www.washingtonpost.com/wp-dyn/content/article/2010/07/26/AR201007...

And especially his key article "the oil crisis, this time the wolf is here" from April 73 (before the first oil shock).

http://www-personal.umich.edu/~twod/oil/NEW_SCHOOL_COURSE2005/articles/f...

Why ? Before this article is full of insight into the future : he even talks about tar sands and shale (but in the kerogen sense in that case).

But more importantly because, this also corresponds to most "peak oilers", more or less also being stuck in the completely wrong "common image" :

"first oil shock = Yom Kippur/Arab embargo= geopolitical story= nothing to do with geologic constraints"

When the real story was :

- end 1970 : US production peak, the energy crisis starts from there, with some heating fuel shortages for instance (some articles can be found on NYT archive on that)
- Nixon name James Akins to go check what is going on.
- Akins goes around all US producers, saying this won't be communicated to the media, but needs to be known, national security question
- The results are bad : no additional capacity at all, production will only go down, the results are also presentede to the OECD
- The reserves of Alaska, North Sea, Gulf of Mexico, are known at that time, but to be developed the barrel price needs to be higher
- In parallel this is also the period of "rebalance" between oil majors and countries on each barrel revenus (Ghadaffi being the first to push 55/50 for instance), and creation of national oil companies.
- dropping of B Woods in 71 (move to petro $) and associated $ devaluation also put pressure on raising the barrel price for producing countries.
- So to be able to start Alaska, GOM, North Sea, and have some "outside OPEC" market share, the barrel price needs to go up (always good for oil majors anyway) and this is also US diplomacy strategy
- For instance Akins, then US ambassador in Saudi Arabia, is the one talking about $4 or $5 a barrel in an OAPEC meeting in Algiers in 1972 (when it still was around $1)
- Yom Kippur starts during an OPEC meeting in Vienna, which was about barrel revenus percentages, and barrel price rise.
- The declaration of the embargo pushes the barrel up on the spots markets (that just have been set up)
- But the embargo remains quite limited (not from Iran, not from Iraq, only towards a few countries)
- It remains fictive from Saudi Arabia towards the US : tankers kept on going from KSA, through Barhain to make it more discrete, towards the US Army in Vietnam in particular.
- Akins is very clear about that in below documentary interviews (which unfortunately only exists in French and German to my knowledge, and interviews are voiced over) :
http://www.youtube.com/watch?feature=player_embedded&v=fQJ-0jAr3LQ
For instance after 24:10, where he says that two senators were starting having rather "strong voices" about "doing something", he asked the permission to tell them what was going on, got it, told them, they shat up and there was never any leak. The first oil schock "episode" starts at 18:00
(the "embargo story" was in fact very "pratical", both for the US to "cover up" US peak towards US public opinion or western one in general by putting the blame "on the Arabs", but also for major Arab producers to show "the arab street" that they were doing something for the Palestinians).

And then the second oil shock (79) result of Iranian revolution, and leading to the "Carter doctrine", with then the Reagan corollary and creation of CENTCOM.
http://upload.wikimedia.org/wikipedia/commons/thumb/3/35/Seal_of_United_...

Followed by the counter oil shock (for a big part the result of Reagan administration pushing the Saudis to produce more in order to bring the USSR down), about this for instance :

The global ignorance about all this allows to keep the messages around "old time geopolitics, this is about values, pushing democracy, bad and good guys, etc", and allows the current grotesque propaganda around "US shale boom".

How many Americans knows that US peak was in 1970 ? 5% ? 1% ? less ?

By the way, Akins report to Nixon in 1971 should be a key document, but it is still classified to my knowledge, anybody knows whether it could now be declassified ?

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"Shale, the Last Oil and Gas Train"

I saw this article/interview referenced on zerohedge yesterday.  I found it to be interesting reading.

http://oilprice.com/Interviews/Shale-the-Last-Oil-and-Gas-Train-Intervie...

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Thanks and suggestions:

Thanks for this great interview! Your podcasts are very inspirational and full of thought provoking opinions and essential information! If you are looking for interesting people to interview I can highly recommend David Korowitz (expert on risk resilience and complex system analysis) and John Jopling (author of Gaian Democracies)

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Paradigm shift?

Great interview! Some great insights here. I too think that the amount of media distortion and PR that was used to extend the shale fairytale and mislead people (even so far that they cannot see clearly the danger of this situation) is particularly disturbing.

I'd like to introduce a somewhat different perspective and a possible solution to the energy problem. I've noticed that the same thing about PR is also true for nuclear fusion research. The international collaboration - ITER - is a huge and complex project that has lot of scientific and economic infastructure tied to it. Case can actually be made that ITER is overly complex and that there are engineering obstacles/problems that might just be too great for it to ever succeed. http://goo.gl/3xESh5

Here's where I see hope:

A team based in New Jersey have actually come up with a very interesting proof of concept-reactor that is orders of magnitude cheaper than the ITER. They totally circumvent the need for continual stable confinement of the plasma - actually running the reactor as a pulsed machine. This reduces the needed materials and engineering work tenfold and makes possible for the whole installation to be small enough to fit into a garage-sized space. 

Their problem seems to be lack of funding (public investements are mostly tied to ITER and NIF) and then again underestimating the importance of proper PR work. Their strengths lie in their science/approach which to me seems rather simple and elegant. This type of reactor has a great disruptive potential and in best scenario could be put into production in a relatively short timeframe. I warmly encourage everyone interested to do some research on this subject: 

http://www.smartplanet.com/blog/bulletin/new-jersey-firm-claims-nuclear-...
http://motherboard.vice.com/blog/the-nuclear-fusion-arms-race-is-underway

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Fusion PR machine

Villburn wrote:

Great interview! Some great insights here. I too think that the amount of media distortion and PR that was used to extend the shale fairytale and mislead people (even so far that they cannot see clearly the danger of this situation) is particularly disturbing.



I'd like to introduce a somewhat different perspective and a possible solution to the energy problem. I've noticed that the same thing about PR is also true for nuclear fusion research. The international collaboration - ITER - is a huge and complex project that has lot of scientific and economic infastructure tied to it. Case can actually be made that ITER is overly complex and that there are engineering obstacles/problems that might just be too great for it to ever succeed. 

I've written before on the very subject of either poor reporting, or great PR, when it comes to fusion.

For example, from the second link you provided at the bottom of your post, we read this:

Now, 40 years later, the game has changed. A recent experiment at the Joint European Torus fusion reactor in the United Kingdom produced 20 million joules. And the National Ignition Facility in California just reached a milestone by producing more energy in a fusion reaction than was needed to start that reaction.

Um, no, not even close.  No fusion reaction has ever produced more energy than went into starting that reaction.  Instead what happened was that more energy came out of the pellet of fuel at the center of the machine than went into that same pellet.

The energy that went into the lasers was not counted....and that energy is at least 100 fold larger than was actually released.

The scientists who performed the test were very clear on the matter and I am at a loss as to why I have read the expanded claim no less than 5x since.  It's not a terribly difficult concept to grasp and then report on clearly.

So I am hopeful that there are some better methods out there that may yet surprise us all, and fusion would be very welcome - assuming humans can be trusted with unlimited, clean energy without using it as an excuse to expand to the point that we literally eat all the other species out of home and body.

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Hot Fusion Distraction.

I smell a rat. Follow the money. Who benefits from the failure of fusion? Big Oil, Big Coal. Big Centralised power Corporations. The People-not so much.

Of cause we are going to have the failure of Hot Fusion waved in our faces, just like a matador waves a red flag to distract a bull.

"Look, Look. See Fusion is So Difficult. and take it from us- there is only one way to achieve fusion- Just like the sun does it. And do you know how hard it is to reproduce the conditions in the Centre of the sun? We are trying our very best, but it is almost impossible."

That fusion can only be achieved by kinetics, Heat, is demonstratibly false See Muon Catalyzed Fusion. Don't like it? No Problem- We have many others.

When an Electrical Engineer (Frank Znidarsic) gave a lecture on the state of Cold Fusion to the big power corporations their response was that the big power corporations weren't in the business of making power, they were in the business of making a profit.

Do not be distracted.

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We should earnestly hope that fusion power remains infeasible

Let's assume for a moment that fusion power is in fact (finally) near at hand, and will give us something close to "unlimited cheap, clean energy".  This would undoubtedly be the final nail in the coffin of this particular civilization.  There'd not be a chance that its power would be used wisely to engineer a graceful descent to a civilization living within the Earth's carrying capacity for homo sapiens.  Instead, as with the "fracking bonanza", it'd be used as evidence of the power of human ingenuity to overcome all obstacles, and the industrial foot would press the pedal to the metal.

Remember, using power unavoidably generates "waste energy".  Look at the nighttime satellite photos of the earth, with all the lit-up cities and towns, generating heat as well as light.  Even with a reduction in carbon emissions by replacing fossil fuel use, exponentially increasing industrial activity would exacerbate global warming.

Of course, as Liebig's law describes, other limits would also kick in at some point.  Material resources are still needed, as are food and water (both of which we're busily degrading as fast as we can).

In summary, the "success" of fusion power would likely turn our current overshoot into hypershoot, followed by hypercrash.

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Keep going Dwig.

Seek, and do not stop looking until you find. When you find you will be perplexed. When perplexed, astounded and rule over the world.

Christ in the Gospel of St Thomas.

You did very well Dwig but you stopped short.

I urge you to keep going. I have addressed and expounded upon your concerns Here through to here.

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Proof is the bottom line for all but the Knight of Infinity

Arthur Robey wrote:

Seek, and do not stop looking until you find. When you find you will be perplexed. When perplexed, astounded and rule over the world.

Christ in the Gospel of St Thomas.

You did very well Dwig but you stopped short.

I urge you to keep going. I have addressed and expounded upon your concerns Here through to here.

Arthur:

I have had enough of your moon-pointing nonsense!

Please, don't distract me from

                                                                     looking down at my feet because

                                                                     it's only reasonable to boil things down to the bottom line.

Most of us here are ethical, rational men and women; we have (barely) learned to sublimate the lure of sensory pleasure, and now we focus on what is possible, on what must be done.  We study mean reversion, depletion, inflation, and other statistically significant probabilities, and we see the trajectories written on the wall.  This is reality.

Then there are a few fools like you:

Most people live dejectedly in worldly sorrow and joy; they are the ones who sit along the wall and do not join in the dance. The knights of infinity are dancers and possess elevation. They make the movements upward, and fall down again; and this too is no mean pastime, nor ungraceful to behold. But whenever they fall down they are not able at once to assume the posture, they vacillate an instant, and this vacillation shows that after all they are strangers in the world. This is more or less strikingly evident in proportion to the art they possess, but even the most artistic knights cannot altogether conceal this vacillation. One need not look at them when they are up in the air, but only the instant they touch or have touched the ground–then one recognizes them. But to be able to fall down in such a way that the same second it looks as if one were standing and walking, to transform the leap of life into a walk, absolutely to express the sublime in the pedestrian–that only the knight of faith can do–and this is the one and only prodigy.

                                                                                                                   -Soren Kierkegaard

Faith,  

Faith is an island in the setting sun.

But proof, yes

Proof is the bottom line for everyone.

Paul Simon

Stonily yours,

Hugh

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Proof?

Proof? What an illusion!  A fruit only for the gods, it sits at the end of the rainbow. The lash of  "proof"  is demanded, for proof can never be given by a mortal. Whispered in our ears- demanded by The Beast as a soul destroying demonstration of clay feet.

The knowledge gained is that we will be forever denied the true nature of our reality. Before we accepted, now the veil is ripped. Now we know the profound depths of our ignorance.

Denied Proof, we are given Quality.

Kierkegaard is one of us. He dances along the edge of the Abyss. The closer the edge, the more beautiful the dance. But no matter how close the edge, his feet are clay. He is my Brother.

Look Up, lest you slip!

Below is nothing but feet of clay and the dizzying depths of infinite ignorance and death.

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The world and the void

Arthur,

Thanks for the provocative reply.  As a software developer for the last half-century, seeking without stopping has been my stock in trade.  I've also found again and again that when I'm perplexed, I'm at my peak of creativity (and occasionally astounded by what I discover there).

More recently, as a student of our changing world (much richer, more complex and subtle than any human-engineered system), I find myself in a similar situation, but far more intense.  In fact, I think I'm falling in love with Gaia (tough, beautiful, terrifying, and tender); fortunately, I expect nothing in return, except for a while, to join in her dance, sort of a pale shadow of Shiva/Kali dancing over the abyss.

My hopes for the future of my four children and five grandchildren (and that of the cute little girl in "Leapfrog" -- yours?) are for human consciousness to evolve to the point where we stop getting in our own and each others' way, and become worthy dance partners for the old gal.  This, as with all significant changes in complex dynamic systems, can and must arise emergently out of myriad individual, family, and community commitments to change.

I find "ruling over the world" a complete misunderstanding of what the world is (unless the quote refers to the "inner world").  Also, it's not "a rock" to me, but the only place in the universe that humanity is suited to, has evolved (and is evolving) to be part of.

To me, perhaps the greatest flaw in the dream of "escaping" this planet, is that we'd be taking with us the deficient world view that has led us to ravage it so.  Would we be likely to treat our new homes any more kindly?  First, we must get our home (ecos) in order, including the "home" between our ears.  If we have no peace there, we will never find it anywhere.

Or, as St. Thomas also says, "If you bring forth what is within you, what you bring forth will save you.  If you do not bring forth what is within you, what you do not bring forth will destroy you."

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Excellent reply Dwig

It might be a little egocentric of me but I see this as a hugely important moment for H.Sap. My prognostication is that "we" are doomed and will be replaced by something (body?) more fitted for the role. We are a work in progress.

My fear is that what we are replaced by will be inferior to us. My feeble efforts are to ensure that that does not happen. But One never know when some small ripple in time might grow to be a mighty wave.

That child is not mine. My granddaughter is astoundingly beautiful. 

It fills my heart that you are in love with Gaia, For she must be rescued from this corner that she is trapped in. (I refer to the fact that the Goldilocks zone is drifting outward, and that her-our-feedback loop no is no longer powerful enough to protect her- us.)

Gaia is not the rock on which she exists- she is the living organism of which my granddaughter is an indispensable part. We-Us-Gaia must migrate to a safer distance from the sun.

The difficulty I have with any contemporary humans is their extremely high discount rate and their ego separateness. Even the delightful company of Peak Prosperity have a horizon of no more than a few decades.

I am so pleased that you found the quotation by Christ. It is one of my favorites. It is a bit mystical but it needs repeating.

From memory.

"Bring forth that which is within you. If you bring forth that which is within you what you bring forth will save you. If you do not have that which is within you, what you do not have will destroy you."

Arthur

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The age of Gaia

Arthur,

It fills my heart that you are in love with Gaia, For she must be rescued from this corner that she is trapped in. (I refer to the fact that the Goldilocks zone is drifting outward, and that her-our-feedback loop no is no longer powerful enough to protect her- us.)

Gaia is not the rock on which she exists- she is the living organism of which my granddaughter is an indispensable part. We-Us-Gaia must migrate to a safer distance from the sun.

I see her differently.  If what we've learned so far is correct, Gaia is about 4 billion years old, and as adapted to the geosphere she inhabits as we are to her.  In her time, she's undergone many mass extinctions, including 6 great ones (I'm counting the current great extinction, which is largely driven by our activities).  She's a tough old lady, not like the soft, fragile-seeming image of "Mother Nature".  She'll recover from this extinction as she has from the others, whether or not our species will be along for the ride.

As to the eventual death of the Earth itself, that's not something we have the knowledge or resources to deal with.  Perhaps a descendant species of ours will learn how to "rescue" her, but the best we can do is to learn how to bring our knowledge and wisdom into balance, thereby laying a better foundation for further evolution.  Can you be content to do the foundational work for a task whose completion you won't live to see?

For another, large-scale look at a possible future, check out The Next 10 Billion Years, and think about the question at the end.

If you're still into trying to move the Earth to follow the Goldilocks zone (or the even more daunting idea of moving Gaia to a different home), take the time to look into Howard Odum's work on the energy basis for life.  His book "A Prosperous Way Down" is a good place to start, and his daughter maintains a web site by that name. 

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From Reiner (Kümmel) to Arthur: Expanding past Earth

Arthur Robey wrote:

It fills my heart that you are in love with Gaia, For she must be rescued from this corner that she is trapped in. (I refer to the fact that the Goldilocks zone is drifting outward, and that her-our-feedback loop no is no longer powerful enough to protect her- us.)...Gaia is not the rock on which she exists- she is the living organism of which my granddaughter is an indispensable part. We-Us-Gaia must migrate to a safer distance from the sun.

Hi Arthur and all,

I was leafing through Reiner Kümmel's The Second Law of Economics: Energy, Entropy, and the Origins of Wealth and I came across this paragraph on page 227:

Also on page 227 is this little gem:

Cheers,

Hugh

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