Podcast

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Kurt Cobb: Money Cannot Manufacture Resources

Disproving the fatal assumption central planners make
Monday, September 21, 2015, 12:12 PM

Author Kurt Cobb writes frequently on energy and the environment and warns that our current economic policy suffers from a fatal degree of magical thinking: sufficient new resources will emerge if the price is high enough.

As any fourth grader will tell you, a finite system will not yield unlimited resources. But that perspective is not shared by those controlling the printing presses. And so they print and print and print, yet remain flummoxed when supply (and increasingly, demand for that matter) does not increase the way they expect.

Is this any way to run an economy? Or a finite planet for that matter?

Of course, a lot of people have been hearing the hype about the growth in production in the United States for crude oil. That has been happening, but it has been happening with very high cost oil. Now the prices are down and the industry is on its back. They are looking for ways to increase the amount of money they can get for that crude oil. One of those would be to sell this light tight oil, which is oversupplied in the United States to foreign refineries. They cannot do it because of the export ban. I am not sure that is going to help them much because the price of oil has gone down so low as compared to what their costs are.

We have already seen a decline in U.S. output. The prognostication that we were going to be energy independent in oil, and that we were going to become the largest provider of oil to the world, I do not think are going to work out. It shows us that high priced oil leads to low priced oil, which also leads to economic slowdown. That is what we are seeing now. That is the equation that you and I wonder how people do not see that these things are connected, and yet they do not.

I think you put your finger on it: people who run our central banks and run our government policy think that money manufactures resources. If we just put enough money out there, it will call forth the resources. There is a little bit of truth to that, because very cheap finance made it possible for us to lift this $100 barrel oil out of the shale formations of North Dakota, Texas, and other places. That is not endless, and the high price puts pressure on the economy. I think this is where we are going to have problems.

We cannot sustain those high prices in the long run. We have structured an economy for cheap energy and that is not what we have. It has resulted in a slowdown that I think is the beginning of that transformation from a high growth economy to a low growth economy. In fact, we probably already began that in 2008. 

Click the play button below to listen to Chris' interview with Kurt Cobb (47m:42s)

Transcript: 

Chris Martenson: Welcome to this Peak Prosperity Podcast. I am your host, Chris Martenson. As the world anxiously awaits whether China will adds more economic stimulus or waits on tenterhooks for the Fed’s rate policy decisions, those of us who track the undercurrents that really matter shake our heads in wonderment. How can people not see what we see? Energy is everything. The recent collapse in oil’s price and the rise in various condensate and natural gas liquids obscure the fact that crude oil production itself has not climbed at all since 2005, despite the investment of several trillions of dollars over the past ten years in the pursuit of new crude oil.

What that tells us is that it takes trillions and trillions of dollars to simply counteract the decline in existing oil wells. It is like we are on a coin-operated escalator and the pace at which we are furiously slotting in quarters is just enough to keep us stallaed in our current position. Soon, I predict we will be feeding in quarters just as furiously, just to slow down its slump back to ground level. The central bankers of the world seem delightfully unaware that the escalator even exists, or is important. But it is vitally important.

To discuss energy and resource issues with us is Kurt Cobb, a Portland, Oregon based author, speaker, and columnist focusing on energy and the environment. I love this guy. He is a regular contributor to the "Energy Voices" section of the Christian Science Monitor, and is the author of the peak oil themed novel Prelude. Out of the limelight, he works as a marketing communications consultant. He pens regular pieces for his blog found at ResourceInsights.blogspot.com. I cannot think of anybody better to have on this topic, and I am really excited for today’s interview. Welcome Kurt.

Kurt Cobb: Thanks Chris. I am glad to be on.

Chris Martenson: Let’s start here. You just penned a piece on the lifting of the export ban, or so-called export ban in the U.S. You felt it necessary to begin that piece by dismantling some myths about oil in the United States. What are they, and why did you feel it was necessary to have to dispel them at all?

Kurt Cobb: Of course, a lot of people have been hearing the hype about the growth in production in the United States for crude oil. That has been happening, but it has been happening with very high cost oil. Now the prices are down and the industry is on its back. They are looking for ways to increase the amount of money they can get for that crude oil. One of those would be to sell this light tight oil, which is oversupplied in the United States, to foreign refineries. They cannot do it because of the export ban. I am not sure that is going to help them much because the price of oil has gone down so low as compared to what their costs are.

We have already seen a decline in U.S. output. The prognostications that we were going to be energy independent in oil and that we were going to become the largest provider of oil to the world, I do not think are going to work out. It shows us that high priced oil leads to low priced oil, which also leads to economic slowdown. That is what we are seeing now. That is the equation that you and I wonder how people do not see that these things are connected, and yet they do not.

I think you put your finger on it in the introduction. People who run our central banks and run our government policy think that money manufactures resources. If we just put enough money out there, it will call forth the resources. There is a little bit of truth to that, because very cheap finance made it possible for us to lift this $100/barrel oil out of the shale formations of North Dakota, Texas, and other places. But that is not endless, and the high price puts pressure on the economy. I think this is where we are going to have problems.

We cannot sustain those high prices in the long run. We have structured an economy for cheap energy, and that is not what we have. It has resulted in a slowdown that I think is the beginning of that transformation from a high growth economy to a low growth economy. In fact, we probably already began that in 2008.

Chris Martenson: The economy worldwide has been subpar growth-wise for at least a decade now, when you average it all out. Of late, the last few years have been really subpar. I am not surprised by that. You have too much debt weighing down on it. You have oil that used to be over $100 a barrel—that was weighing on things and dragging down a few victims, I imagine Greece being one, and a few others.

On this so-called export ban, there was some lifting—the United States agreed to lift it, in part, with Mexico. We will ship tankers of this ultra-light stuff, basically gasoline straight out of the ground. It goes to Mexico and they exchange, on some terms, some of their heavier stuff back. But this idea that it would really help U.S. producers—I am looking right now at Brent Oil for December delivery, and it is $46.45. I am looking at U.S WTI and that is trading at about $1.50 less. It would not be a huge boost because the most I could imagine them getting for this stuff would be Brent prices, although I think it might go for less.

Kurt Cobb: It probably will, because if they do not offer a little bit of a discount to Brent, then people will buy based on the Brent price. I agree that I do not think it is going to do much for them. They may be looking to the future. They are looking for a rebound in the price and in my view, the price will inevitably rebound. I am just not sure it is going to rebound any time soon. They found the momentum in Congress to repeal the ban. They are going to do it now. They are going to try to do it now. It is not clear to me that the President is going to sign it running up to an election year, but he might.

It all depends on how politicians think the public is going to read this lifting of the export ban. Right now, you have the notion running about that America is somehow energy independent or we are very close to that. As long as the great mass of people think that, they may not react to this. On the other hand, if you and I, and other people inform them of what the real situation is, which is that we are importing seven million barrels of crude oil a day, maybe they will not take it so well.

Chris Martenson: Are we up to seven? The last time I checked it was 5.5. We must have had a boost recently.

Kurt Cobb: The United States has been consuming more oil products as the economy has recovered a little bit more last year and this year. You are thinking of net versus gross. We take some of those imports, put them through our refineries, and then export the gasoline, diesel, jet fuel, and so forth. When I factor all that in, that puts us at about six million barrels net per day. That is not so great either. It does up a little bit, because we have had to import more oil. As it turns out, as we have had declines in production in the United States, of course we are going to have to import more if our needs are growing. They have been, a little bit, in the last 12 months.

Chris Martenson: There is a little recovery there. Of course with cheaper gas prices, that does happen. Here is the essential part. I love what you are saying, because this cannot be repeated too much by people like us because the marketing arm of the people on the other side of this story is considerably greater. The United States is still importing six million barrels per day. Looking forward, the way I run these numbers is that assuming demand in the United States does not go up anymore, we just hold our demand steady for a while, for shale oil to really come forward and meet all of that, or any other oil prospects in the United States, we have to produce an additional six million barrels per day, on top of what we already produce.

The way I am looking at it, the shale operators hit the best plays the hardest they could, and did a magnificent job. They boosted us about four million barrels per day out of those plays. I will not fault it, because what a heck of an effort. But the idea that we are going to put another six on top of that and the capital required, I do not think the drilling positions exist. I do not think we have the plays left. What is your view on that?

Kurt Cobb: I think you hit all the high points. The one thing I would add is that the confidence of Wall Street has been shattered now. These people raised like $13 billion in the first quarter of this year, even as prices were falling, because large investors, hedge funds, wealthy people, and wealthy institutions, thought they were going to buy at the bottom—that that is what they were doing. They found out that they were catching a falling knife instead. That finance is not going to be available to the shale industry as much in the future. People are going to be much more reluctant to part with their investment dollars after getting burned so badly.

Even as prices rise, I think it is going to be difficult for the independents to raise money to go out and drill. I think that is going to be another break on the development.

As you have noted, they got the easy stuff first. This is the hard stuff, and they got the easy part of the hard stuff. Now they are going to go after the hard part of the hard stuff. That is going to cost a lot more money. I can see prices starting to get up to $120 or $130 to really make it profitable for the kind of oil in the difficult parts of the formations they want to drill.

Of course, that would probably send us right into another recession. I think we are in this narrow range of oil prices that will keep production rising or, at the top end, send us into another recession. We are trying to find the sweet spot in there. I just do not think we can do that, not with all the imbalances in the world today, the financial imbalances. You mentioned a lot of debt. There are trade imbalances. I do not think that central banks or world governments have control of the world economy the way people like to think they do. They are, in some ways, as much in the dark as any of us. We are going to find out whether they do in the next few months.

Chris Martenson: I am one of those who believes they do their level best to manipulate prices. There are lots of ways to manipulate, direct and indirect methods. They manipulate when they come out and jawbone markets higher. The Bank of Japan manipulates when they buy all the JGBs out of the postal pension system and force them to take that money and put it somewhere, wink-wink, put that into equities please. There are lots of ways to keep this all propped up.

Here is the thing that mystified me. I follow the shale industry pretty closely. Even when I was looking at it two years ago with oil over $100 a barrel, everybody was hemorrhaging free cash flow. I am an old-school business analyst. I love to tear it apart. You have three statements to worry about, your balance sheet, your cash flow statement, and your income statement. I believe that once you look at all three of those, you have a sense of things. When I see a company that is mature and consistently hemorrhaging free cash flows, at that point I say there is something really wrong with this business.

If I was analyzing the shale business and they were an auto parts company, I would say, “Wow, short target. These guys are burning cash. I know they have their balance sheet all propped up. Their income statement seems to be okay, but look at this. They are just burning the cash.” I have run this exercise. I will take some companies I know have a lot of debt. I will turn off the spigot and say, “If they do not put any more capital in, how much oil would they have to get out in order to just pay their existing debt back?” Kurt, I find company after company where at today’s oil prices, they cannot possibly pay back just existing debt. But they are still drilling. They still have capital programs. They still have money from Wall Street. I think the number I have is $44 billion by the shale operators in the first six months of 2015. It looks, smells, and feels scammish to me, at this point.

Kurt Cobb: You really are old fashioned. You have not cottoned to the new finance where you do not really have to make any cash; you can just keep pulling in investment dollars. I think that is what has happened. When you run out of other options, the drive for returns in the low return world has forced people out of safe instruments—like bonds and savings accounts—and forced investors who want to make a high return get into risky investments. This is one of the last ones that is available, and it seemed to be doing well. Everything looks good on the way up. It is just how it is going to perform when things are not doing so well.

The operators—the people who are doing the drilling—are making a lot of money. They are paying themselves big salaries. I am sure they are getting bonuses and have stock options. I am sure they have exercised them and sold some of their shares. They have no incentive to stop. You say, what about the health of their companies? They know better than anyone that the whole thing is a house of cards. If I were running one of those companies and I was only concerned with my own wealth, then I would try to gather as much capital as I could by hoodwinking the people who are going to give it to me. I would drill as many wells as I could.

What a lot of these guys are trying to do is create an asset play. They were drilling wells they knew were not going to give them any return, but they could put those reserves on their balance sheet and say, “Look. We have all these reserves. We have huge assets. You need to bid up the price or have somebody make an offer for us.” We have seen some of the major oil companies make what I think are very ill-timed offers for large drillers in the United States. They pay top dollar. I puzzled over why smart people like Exxon would buy XTO, which was the largest natural gas driller in the country, in 2008 at the top. There is an explanation for it and we can get into that. But there are all kinds of strange decisions being made by seemingly smart people. Some of them I can explain and some of them I cannot.

Chris Martenson: This is fascinating. Let’s do this. It was about a month ago that I came across an article. I think it was in FuelFix.com. It talked about how, “Hey, there is a little slowdown in drilling in some places, but all the majors have not slowed down a bit.” If you looked at their 2013, 2014, and first half of 2015 drill programs for the biggies, Chevron, Exxon, etc., they had not stopped their horizontal drilling programs. You could not even detect that the price of oil had done anything.

Here is where I went a little old-school business. I was thinking, “Maybe these big majors felt a little left out of the acreage plays and were a little late to the game. If they can just keep drilling, they have the capital to do that. They keep oil wells supplied in this country. Maybe they have a chance to pick up acreage on the cheap.” That is as close to an explanation as I could fathom. What are your insights there?

Kurt Cobb: It occurs to me that the majors are going to pick up a lot of distressed assets and sit on them until prices rise. They are waiting for that. They picked up some rather expensive assets from the shale drillers. I do not think they realized just how expensive. Again, they can sit on them. Their drilling programs? There is a lot of momentum. These things were in place at the beginning of last year. They have the money and they have it allocated. They have the contracts and they are going to drill them. That does not mean they are necessarily going to put them into production.

That is the difference between the majors and the independents. The independents are so debt ridden and are so up against it. They have to produce whatever they drill so they can at least get some money to pay the interest on their debt. Otherwise, they will break the covenants and who knows what is going to happen then? They might be forced into bankruptcy. I think many of them will be. The majors can go ahead and check out to see what is there. Then they can cap it and wait. They have the ability to wait. They have the cash and the power to wait. It is not that they are not going to produce any of it. It is just that they are not in a hurry.

Chris Martenson: To me, it looks like there is a strategy being played out here. We are going to use our size to survive. It is a good strategy. Honestly, I could have thought of that with you over a couple of drinks in an hour or so. I am sure they have that going. Do you think that is the play right now, just hunkering down and waiting for the storm to come? Is this the Forrest Gump with the shrimp boat strategy?

Kurt Cobb: I suppose it is, although he was not rich before that. These companies were already rich. Now they are doing the smart thing this time through, instead of doing the dumb thing they did in 2008, which was buying up expensive assets. They are buying up cheap assets. I think they are going to sit on them until the time comes. They do not have an incentive to oversupply the market because they do not need the cash. Why should they take oil out of the ground now? Why not just wait? They can do that. I really think that is their strategy, explicitly so.

Chevron talked about natural gas. They did not talk about oil, but they talked about natural gas. This has been a while. They said, “We just do not think it is worth it to put any new rigs in the field until we get up above $5 and closer to $6 per 1,000 cubic feet.” They have already been explicit about that, at least that company, about just sitting on their assets until the prices rise. Then, I suspect they will not drill them with the fury that the independents do, but they will drill them in a way that will keep prices profitable.

Chris Martenson: That certainly makes much better sense. I would love to see a little of that more measured pace come to this. I am sure you have seen these. There are these stories drifting out of North Dakota. We are clear that there is one long-lasting persistent thing about shale oil, and that is the damage to the roadways and bridges in the counties where the drilling takes place. What are your views on the chances that the residents and taxpayers in North Dakota are going to be stuck holding the bill for those and other damages?

Kurt Cobb: I think they are already stuck holding the bill. I think that the damage is going to be much greater. The thing is that it is not all in. not all the damage has been done. These wells play out pretty quickly, and then they have to be capped. Then who is going to care for them? Supposedly, the company is going to say they have taken care of them and that they have done what is necessary. They have done the minimum that is necessary, that the state requires. This is really long-term, but I asked an environmental consultant for oil companies that I know. I said, “Tell me about these well casings and how long they last.” I said, “What are we talking about, 50 or 75 years?” He said yes, the ones that are done properly will last that long.

I said, “What about 500 years?” We are getting ahead of the game here. People who are listening now are not going to be alive then. He said they will never survive that long. The point is that ultimately, these casings dissolve and whatever is in those wells, which is nasty stuff, is going to make its way into aquifers everywhere. Some of those wells are defective. Some of the casings are defective now, so we are having problems in a few places now. I think this is the gift that keeps on giving. I do not think I want to call it a gift. The people in North Dakota still do not know what has hit them. They get all this enormous prosperity all at once, and then it all goes away. The bills are left, but there is an environmental liability that is building up as we speak, that will continue to build for literally hundreds of years.

Chris Martenson: Thank you for bringing that up. That is one of the biggest pieces that is left out of this. I think all North Dakota would have to do, if I was a state official there, is just look at Wyoming, which has some pretty old wells on its property. Many of them are uncapped. They are leaking. The companies that drilled them are bankrupt. Now the state has to deal with thousands and thousands of these wells, assess them and try to understand them. In many cases when the company folds, a lot of the data on the wells went away. You have to do some surveys and stuff. They are leaking badly in many of these places.

When you mentioned before that you thought $120 to $130 a barrel would be the necessary price for the drillers to really wade back in, I think you have to add another $20 to $30 a barrel on top of that to account for all the damages we are talking about.

Kurt Cobb: That is assuming that we want to incorporate the price of that damage into the price of the oil. I am not sure that the states are going to be doing that. They have not done it so far. This is another thing about those old wells: Because of the sketchy data you end up with when a company goes bankrupt, and who knows where the records are, we do not always know where they are. People discover wells that are on no map and have no known registration.

The other thing we should ask ourselves, and the people of New York very wisely asked themselves this question, is what is going to be more valuable to you in the next 200 years—natural gas that comes out of the Marcellus in the next ten years or the water that you have to drink on an ongoing basis? I think that is a question that people are just not asking. There are more than two million wells now in the United States since 1946. Think about how many possibilities there are for pollution of aquifers. I am more concerned with that than I am surface pollution. Surface pollution basically ends when it is capped, unless the cap does not work.

Nobody really knows where all those wells are. I think we just have a huge mess on our hands that we did not think about when the oil age started. Who was thinking about that, that we were going to have this kind of growth in the economy, this kind of growth in population, or this kind of growth in consumption? Now that it is here, I do not know how we can retrieve it.

Chris Martenson: I run into this all the time. People do not really want to look at those long-term questions, because the answers are not good. Maybe New York did take a look at that and came to what I think is a very reasonable conclusion, which is that they are not willing to sacrifice a tiny burst of prosperity now for some unknown long-lasting things later. New York might change its tune if there was some deep energy emergency, but I think if you can buy gas for $2 or $3 for 1,000 cubic feet, why would you risk all this?

I am sure it must be very alluring to the people of North Dakota, particularly the landholders. It is interesting Kurt. When the incentives are differently aligned as they are in Europe, where people do not have the mineral rights and where they would just incur the damage and the effects, but get none of the money, they put up such stiff opposition. I have not seen any shale plays make it past the local opposition stage in Europe yet.

Kurt Cobb: You are absolutely right. Because of that land tenure in places like France, people are universally opposed to it. They have outlawed it because there was no point in proceeding. It would be too hard to get any project moving. Our sort of Byzantine land tenure here provides the sort of sub-surface rights, not always but often, to the landholder, as well as the airspace rights sometimes. This is a sort of elaborate vertical rights scheme.

One of the things it has led to is America becoming the first oil power, because it is very easy for individuals to just make the decision to drill. Now we are seeing the consequences of that. Of course, the profit was privatized and now the consequences will be socialized, as in so many things these days.

Chris Martenson: I have heard that in other places. I would have to think back to where. So much of our biased narrative on energy here in the U.S rests on this view that U.S. shale output is going to be a long-lasting and meaningful game changer. The U.S. is going to be oil independent by some shale industry PR, which you and I have already dispensed with. Let’s discuss that. From everything you have studied, is shale oil a long-lasting game changer?

Kurt Cobb: Absolutely not. It is a short-term boost to the U.S. economy. Relative to the rest of the world, it has reduced our energy crisis a little bit because we have a glut of this light tight oil that tends to reduce prices in the mid-continent. It does not do much for people on the coasts. It was the main driver of job growth post-2008. People say, “What’s not to like?” The answer is that it is not durable.

I think you are familiar with the Post Carbon Institute study "Drilling Deeper". This is a really comprehensive study. It is an independent study, independent of any industry money and independent of government money. When you look at the report, it made some very liberal assumptions about what could be drilled and what the rates of production would be, based on well history. It was not based on what people think can happen in the future, but based on what has actually happened. That is the key to understanding what is going to happen with shale. You look at what has happened to it before. You look at what the wells have done so far. You remember that is the easier stuff that we are looking at. It is going to get harder from here. It immediately leads you to the conclusion that oil production rates from shale, which is the major growth engine for oil production in the United States, is going to be a fraction of what it is today, 20 years from now.

That means we are going to have to find some other sources of energy or import a lot more oil, and you and I both think it is going to be troublesome to be trying to import more oil. You had Jeffrey Brown on recently and I think he has explained very well why it is going to be very difficult for us to find that oil in the international markets. It is not going to be there.

Chris Martenson: This is prediction-hat time. Here is the thing that concerns me. Looking at the dramatic falloff in capex, which began in February 2014, that was the first article I was writing about it. In 2014, oil was still at $110 a barrel. All seven major oil companies, actually ten international companies had all said, “We are either freezing or cutting capex because we just cannot do capex and shareholder dividends at the same time.” Of course, you cut oil in half from there and what happens? These capex budgets have been shredded.

I mentioned this before. We are on this treadmill; we have plugged trillions of dollars into this escalator. We have plugged trillions into it and we are going nowhere in terms of oil output. Prediction is very difficult, especially about the future. What do you see? What is your trend extrapolation? What do you think is going to happen here in a few years?

Kurt Cobb: The major international oil companies made a business decision. They figured out right away that the prospects they have, the leases they have in deep water and Arctic, these are the place where there is a lot of oil but it is very expensive. They just could not make money at $110 a barrel. You are rightly pointing out that now with oil below $50, there are a lot more of their leases that are not going to be profitable to drill. They just cut back and said they were going to make money off what they currently have and can produce, and that they are going to wait and see.

What does that tell us? It tells us that for those majors, their rate of production is going to continue to go down, which it has been for a few years now. I think people are not aware of that, that rate of production for the largest international oil companies in the world has continued to go down for the last seven or eight years, for most companies. That trend is in place and I think it is going to continue.

The big question is: Can the national oil companies, the ones owned by the Saudi government—Saudi Aramco and the National Iranian Oil Company—make up for that? There is an assumption in policy circles that there is so much more production that can come out of those countries that we do not really have to worry about declines from the international oil companies. I am not of that mind, and one of the straws in the wind was Saudi Arabia telling us explicitly that they would never produce more than 12.5 million barrels a day, when many forecasts even as recently as 2011 had assumed that the Saudis were going to produce 15 million barrels by 2030, 15 million barrels a day. They said, “No, we are not. You are going to have to figure out how to do that.”

Either they are saying that because they have chosen to reserve some of the oil they have for later, or because they cannot produce more than 12.5 million barrels a day. I do not know the answer, but it actually does not matter what the answer is. It tells me that there are limits, even for national oil companies, for whatever reason. I am inclined to think that we are going to see falls in worldwide production of oil in two, three, or four years. That is going to be shocking, and that is going to be jarring for the economy and for policymakers.

Chris Martenson: Very well said. Along with many others, I track this very tight relationship between energy and the economy, oil being one of the key components of that. You alluded to this before, but what do you think the price of oil is really telling us right now?

Kurt Cobb: I think it is telling us that the worldwide economy is very weak. Of course, there was the production from the shale fields that was increasing. OPEC decided they were going to continue to produce at the level they were producing. They did not add. They just produced at the level they were producing. As demand falls, somebody else is going to reduce their output. Well, look who is doing it (involuntarily, but they are doing it anyway), that is the shale players in the United States and in tar sands in Canada. They have to reduce because it just is not worth drilling extra wells. It is not worth increasing production.

I take from that that the economy is getting weaker and weaker. That has been borne out. When this happened last year, I read some pieces and said, “That is what this is telling us.” Of course, that was not the storyline; it was: “This cheap oil is because we have this glut. It is actually going to cause growth in the economy to increase because we have cheaper energy.” That is not it at all. With these low prices persisting like this, if I look at that and I look at the action in the stock market, I correlate those two things, the stock market is just starting to reflect that weakness in the world economy. Whether that weakness will persist is anybody’s guess. I will say: watch the oil price very carefully. It is going to be the first indication about whether the world economy is getting weaker or stronger.

Chris Martenson: I certainly cannot make a strong case for a good and robust economy with oil languishing around. In fact the deflationary forces seem to be pretty strong. I know that every central authority from China to Europe has a very compelling interest in not allowing deflationary forces to begin to stir and ramp their way across the landscape. But, oil is clearly telling us something. If it was more in demand, it would obviously be at a higher price, I think. I agree with you on that.

Kurt Cobb: Let me also say that you don't have to just… You could say, “Well, that is one price. We should not put too much emphasis on that.” If you look at what has happened to copper, what has happened to silver, what has happened to lead, what has happened to zinc, if you look at all these major—and if you look at what has happened to coal—you will realize these are all way down. Iron ore is way down. That tells us that the things that are the building blocks of our modern economy are not in demand. How can that not mean that we have a weak economy? Somehow, people think that commodities, the real things that we use to make stuff, do not matter. Go figure.

Chris Martenson: That is something I have been hearing for a while. Obviously, you write about resource insights. We cannot really talk resources without talking China at this point. Obviously I see that same data. What does a collapse in the price of iron ore, plus cement, plus coal, plus copper, plus oil mean? It is probably not something good. And the biggest consumer is China. Is this a temporary pause in China’s voracious appetite or do you think this is a more long-lasting change in consumption?

Kurt Cobb: I think it is a longer-lasting change. China is going through what every emerging economy that has grown robustly goes through. They have to get to the point where they stop having an investment led economy, and they have to move to a consumer led economy. That transition can take many years. It means that income has to be put into the hands of individuals rather than corporations. That can be managed, but I do not think they know how to manage it.

One of the things that tells me the slowdown is for real in China is electricity consumption. Last year, electricity rose by about 3%. Electricity consumption growth in China has been lockstep with growth for about 20 years. You get 1% GDP growth and you get 1% of electricity consumption growth. They were telling us last year that growth was 7.5% or something like that. Electricity consumption growth was 3%. At the beginning of this year, you had month on month declines in electricity consumption. The consumption was actually shrinking. That told me that the Chinese economy was actually declining.

That is one measure. There are other measures, but they seem to line up. I do not think that China can now reverse course and say, “We are going to go back to an investment led economy.” I think they are trying to move in this direction because they will just build up more capacity and the bust will be even worse when it happens. I think the sentiment has turned. One of the things that has made the central banks in China and elsewhere effective is that they were able to guide sentiment, “We are moving in this direction, so you should too.”

I think now that faith in central banking and in central governments is declining. The inability of the Chinese government… Think about the kinds of controls they have versus the United States over their financial system, and they were unable to stop a 40% decline in the stock market with a very determined and very expensive effort. That tells me that they have lost control. And if the Chinese have lost control of sentiment, which is what they really need to control, I am not sure that the rest of us are not far behind.

Chris Martenson: That is certainly how I have been reading it. Of course, the volatility in the markets has been saying that something is up. The mysterious part to me here, through all of this, is that with the lens you and I might look at this through, it says, “Obviously it was not possible to exponentially increase your consumption of resources forever.” I wonder where you think we are on that cycle. Are there actual limits that are popping up? You mentioned the price of oil as an obvious economic limit. To get as much out of the ground as we might want, it might cost $120 a barrel. If that is the new price, you expressed some concern as to whether the economy can handle that. Are there any other limits you see us bumping up against that are going to poke a hole in that idea of perpetual and endless growth?

Kurt Cobb: The most important limit I see is fresh water. Water and energy are very intimately linked. You need a lot of water to produce energy. Think about the kind of water you have to put into a coal-fired power plant. You have to boil a lot of water. Nuclear power plants; you need to boil a lot of water. You cannot just throw seawater in there; it will corrode everything. Also you have irrigation demand and drinking demand in the cities. We are using that at a rate that is much higher than it is being replenished, if we are using underground water.

Because of climate change, we are also seeing that snow melt around the world that provide spring and summer water to major cities and major growing areas, is just not there. I think that is going to be a significant limit on what we can grow in terms of food, what we can process for those process industries that need a lot of water, and the energy we can produce, because we need a lot of water to do that.

There are other resources. Rare-earths are not as rare as you might think they are, but we are using them at an increasingly higher rate. As you know, the faster you use something, the faster you deplete it. As we try to create this electronics utopia that we have in mind, we are using resources that are not totally rare, but you can use them up at the rate that we are using them up. We may find out that we have created an electronics industry dependent on resources that we do not have enough of at some point. I am not predicting that that is nearby, but when you start combining these limits, you find that if you have one, two, or three of these limits, the rest of society does not work very well. We do not have to have a limit on ten things to have problems. We just need a limit on two or three key things like food production, water, and energy, to have this cascade effect on our ability to produce other things.

Chris Martenson: Absolutely. My mental model for this is that where resources were more or less ignorable for a long time, they have now become an increasingly vigorous headwind to the old paradigm. Unfortunately, I do not see a lot of people in the halls of power who understand that or want to admit that. In fact, I see a lot of efforts being expended to convince us that, as clever monkeys, limits do not apply to us. You have crazy people at certain think tanks coming out and saying, "You have it all wrong. The more people you get, the more resources you will find. That just means more minds on the issue," and all of that.

It feels to me, as you mentioned, that the veneer might be cracking in that autocratic control of China, and that something is shifting. That is what I am sensing more and more, particularly in younger people and particularly in people who are not as invested in the status quo needing to continue for them to realize whatever dreams or belief systems they have, and all that. To me, that is a little sense of hopefulness, that there is more territory now to have these conversations than before. Are you experiencing it differently?

Kurt Cobb: I think you are right. Younger people, this Millennial generation that is coming up, they understand that something is up. They understand that things are not working the way they thought they would. They are not seeing the opportunities that they were told they would have. They know something is wrong. Therefore, they are open to solutions. They are open to new ideas. They are open to ways to make the world a place where they can realize their dreams. If you are already invested in the world as it is, if you are a CEO of a large fossil fuel company, or the CEO of any large company, you already have achieved your dream; you do not want it to go away. I think that is the fight we are seeing.

In terms of policymakers, they do not see what you and I see, that we live in a full world. This is Herman Daily’s idea. We know that because we are affecting climate. We have people now who understand that we are in the Anthropocene. We are in a new geologic age where humans are the biggest force of nature on the planet.

Here is the basic problem in our thinking—I have been talking about this all year in my writing—we think that humans are in one category and nature is in another. As long as you believe that, you will do all kinds of crazy things. You will think you can do all kinds of crazy things. You and I know the truth, that humans are part of nature. We have to figure out how to live within the natural world, within the limits it prescribes for us. We have to understand that we do not have complete knowledge. We only have very partial knowledge of how natural systems work. That requires humility, and that is something that the human race is pretty short on these days.

Chris Martenson: Wow, I agree with every word of what you just said. That is very much my viewpoint at this point, everything from the humility. The things we are discovering on a daily basis, scientifically, are astonishing. I was taught about how DNA worked and it was this linear and very unexciting thing. You just chop it up and this code is for protein. The things we are figuring out now about what it is actually doing, that it is not 95% “junk.” It turns out that it is ridiculously complex. That turns out to be true for everything. My hope for this clever monkey species of ours is that we develop the necessary humility to know that we do not know everything yet.

Kurt Cobb: Let me say one more thing on that. We have the actual science, which is what you are talking about. Scientists who are involved in these emerging areas like soil science are discovering that soil is so much more complex than we ever imagined it was. The things we are doing to it are wrecking it, but we are not sure how. Of course, in physics you are getting this tremendous expansion of ideas about how the universe formed and new ideas about new particles and so forth. In all these cutting edge sciences, we are finding out that the world is far more complex and far more astonishing than we imagined. We are having a harder and harder time putting together a unified theory about how everything works.

But, as opposed to that, we have what I would call—and I did not think this up; this is a term that has been used for a while—we have scientism, which is a belief that the world works according to known principles, that knowledge is unified, and that we can direct that knowledge to get out of the world exactly what we want, without any bad consequences. And if there are some bad consequences, we can always fix it. That is a religious belief. Scientism is a religious belief that the future will always turn out the way we want it to because we have this technological power. Real science is telling us that we are in trouble. Climate science is telling us that we are in trouble. The people who study fisheries are telling us that we are in trouble. The people who study hydrology and aquifers are telling us that we are in trouble.

Real science is saying things that the people who are in applied technology, who are making money off of that, do not like. Large corporations like science that helps them make money, and they do not like science that tells them they are undermining the habitat or the ecosphere, and endangering our very existence. That is the split.

Chris Martenson: Again, very well said. That is all the time we have for today. Kurt, thank you so much for your generous time. What a great conversation. I cannot wait to have you back.

Kurt Cobb: Chris, I have enjoyed it. I hope to come back soon. Take care.

About the guest

Kurt Cobb

Kurt Cobb combines two professional identities. He is best known for his work as a blogger, columnist, speaker and author focusing on energy and the environment. He also works as an independent marketing and publicity consultant and writer who has served an eclectic group of corporate, nonprofit, governmental and political clients.

In his role as a commentator on energy and the environment, he is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. His work has been featured on a variety of sites including Resilience, OilPrice.com, OilVoice, Econ Matters, Peak Oil Review, and Common Dreams. He is currently a fellow of the Arthur Morgan Institute for Community Solutions. He has given countless public presentations and writes a widely read blog called Resource Insights.

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15 Comments

AKGrannyWGrit's picture
AKGrannyWGrit
Status: Gold Member (Offline)
Joined: Feb 6 2011
Posts: 265
Imagination?

That means we are going to have to find some other sources of energy or import a lot more oil, and you and I both think it is going to be troublesome to be trying to import more oil. You had Jeffrey Brown on recently and I think he has explained very well why it is going to be very difficult for us to find that oil in the international markets. It is not going to be there.

What..........they will find the oil somewhere cause we are all planning on "Happy Motoring to Wal Mart" forever!

It tells me that there are limits, even for national oil companies, for whatever reason. I am inclined to think that we are going to see falls in worldwide production of oil in two, three, or four years. That is going to be shocking, and that is going to be jarring for the economy and for policymakers.

What......... Another failure of "imagination"???

It isn't the probability of running out of oil you all should be concerned about its the consequence for you and your family if you do.

My family survived a 9.4 earthquake that lasted almost 5 minutes, what's the probability of being in a quake like that?  Pretty low I expect, the consequence - we were prepared, that made a big difference.  The point is be prepared for the unexpected and gosh an oil shortage shouldn't be unexpected! Use your imagination.

AKGrannyWGrit

cmartenson's picture
cmartenson
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Posts: 4483
It's a future disaster...

There's certainly a future 'accident' coming over oil supplies.

The fiction that Iraq was going to be able to rapidly swell its production has fallen away for all but the most deluded analysts.

And then there's this:

Plunging oil prices put question mark over $1.5tn of projects

Sept 21, 2015

Plunging oil prices have rendered more than a trillion dollars of future spending on energy projects uneconomic, according to a study that suggests that the impact on industry operators is worsening.

A report published Monday says $1.5tn of potential investment globally — including in North America’s shale-producing heartlands — is “out of the money” at current oil prices close to $50 a barrel and unlikely to go ahead.

Industry operators expect capital spending on new projects to decline by between 20 and 30 per cent on average in the wake of the price slide, says Wood Mackenzie, the energy consultancy.

It calculates that $220bn of investment has been cut so far, about $20bn more than it estimated two months ago and much of it the result of projects being deferred. Such a decline in spending means that the price crash since last summer — the result of weaker Chinese demand, record US production and Saudi Arabia’s decision not to cut output — could resemble the savage downturn of the mid-1980s.

Just half a dozen new projects will be approved this year, says the Wood Mac report, and 10 or 11 in 2016, compared with an annual average of 50 to 60.

Yikes!

New projects have been slashed to just 10% of the normal volume ("a half dozen" divided by "50 to 60"). These new projects are essential to counter declines in existing production.

Set your calendars…in a couple of years there will be vast oil shortages,..  unless there’s an economic collapse so great that oil demand gets slashed at an equal or faster pace.

But recovering then? In the aftermath of all that with either a destroyed economy and/or insufficient oil supplies? This is where the holders of that $200 trillion in global debt, and $60 trillion of global equities had better sharpen their pencils and ask some tough questions…

Uncletommy's picture
Uncletommy
Status: Silver Member (Offline)
Joined: May 4 2014
Posts: 152
Law of minimums

Another cogent interview - well done,Chris. I think it highlights everything most of your podcast interviews suggest. A finite world will limit options. Our old buddy, Justus von Liebig figured it out over 150 years ago.

Most of your listeners are aware of the denial issue and have embraced its reality. So, what are we to do about it? When's the best time to plant a tree? 20 years ago! Best mining device nature ever came up with.

If we are to have an impact on the future and the lives of our children and grand children, start now and get yourself rooted (no pun intended) in the soil. No matter how small that involvement may be, it sends a message to your neighbors, kids and society in general that there is a solution. It won't happen overnight, but it is certainly more productive than bitching about it! Need potatoes? My 16 X 30 ft patch produced just under 400 lbs. Need any? E.F. Schmacher? Start small and share it with your neighbor.

charleshughsmith's picture
charleshughsmith
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Joined: Aug 15 2010
Posts: 466
Jeremy Rifkin and free electricity

What's remarkable is the incredible power of the desire to believe a technical solution will arise to solve all this painlessly. I admire Jeremy Rifkin's "outside the box" thinking on work, education, etc., but his latest book (which has sold well globally, from what I gather) forecasts that electricity will soon be abundant to the point of being essentially free, due to the wonders of electricity-generating roofing, siding, paint, etc.

Uh, right. So where do all these materials come from, and who pays for the labor to install all this stuff when the yield is near-zero?  Many people are nostalgic for the Make Work projects of the 1930s--let's just have the federal govt. install electricity-producing roofing and panels on every structure in America.

A great many people are offended by suggestions that these proposals are impractical.  I am not sure what exotic materials are in electricity-producing paint, but I suspect they're some form of "artificial photosynthesis" that is based on nano-technologies that are currently on the workbench.

If they scale, if they use cheap materials such as silicon, if they last through bad winters, if we develop cheap storage for the surplus to use at night and if we can rewire the entire nation with a million new collection systems--hey, it works! It will pay for itself somehow despite lowering the cost of electricity to near-zero.

I am all for deploying new passive collection of solar, tidal, wind etc.energy, but few look at the scale of our energy use. I would love the federal govt. to provide me with a new electric car (that magically didn't use unsustainable lithium-ion batteries) for "free" (hey, just print the money!) and recharge it by putting a coat of magic paint on my house, but the scale of all this is completely off. the magic paint might recharge 2 AA batteries or a mobile phone, not an energy-hungry vehicle.

There's a great new technology that magically improves health while providing transport. It's called a bicycle. Top labs are working on it right now...

aggrivated's picture
aggrivated
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Joined: Sep 22 2010
Posts: 291
energy supplies and population density

Yesterday I had a good conversation with a local architect who has been very proactive in rebuilding our older more urban city center over his career.  I asked when he thought the idea of walkable communities would really catch on and he said it would start at the point when driving becomes too expensive. The examples he gave were $12/gal gas &/or special monthly permits to drive into dense areas. 

As I have now had some sleep and time to digest his ideas I see unintended consequences for both these ideas.  On the high priced fuel front, this would also slow the economy and cause many consequences with our poor in this city, probably resulting is rising personal crime and theft. This would make the city center less safe.  The special driving permit idea would likely result in jobs migrating out of the city center as the cost of doing business escalates. Right now, most of our current building and infrastructure improvement is supporting the old paradigm. For a city guy this ain't easy folks.

Somewhere between dense cities with lots of energy needs and sprawling suburbs with lots of energy needs is a sweet spot of density and intentional living.  Building and zoning codes need to be changed. Old useless infrastructure removed to make way for more efficient systems.  Are there any city planner/ designer gurus that could come on for a discussion on the practical side of dealing with this in the future?  Maybe a guest + Chris + John Michael Greer or Jim Kuntsler playing devil's advocate to keep the conversation going deeper into what is possible.  Any reading suggestions on this from a hands on approach dealing with changing local vision/ local codes etc would be great.

pyranablade's picture
pyranablade
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Posts: 118
We Already know what Kunstler says

And in a sense Kunstler is right - it is too late.

We should have started large-scale "intentional living" [to use aggrivated's phrase] in the 1970's, or earlier. We should not have built the suburbs, the cul-de-sacs, the freeways, etc.

People are turned off by Kunstler because he's chosen to be a truth teller. There will be consequences for our tremendous misallocation of resources. And few people can accept it.   I

Go ahead and be positive. Reduce your own fossil fuel consumption first (many of us are making some kind of an attempt at it). But once you become energy-conscious you'll likely be less popular. People will get angry at you and think you're a kook for turning off lights in empty rooms. You'll be going against the grain.

davefairtex's picture
davefairtex
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Posts: 3267
commodity prices - chart since 2000

This is a monthly commodity price index for 8 different commodity prices, with 2000=100.  So since gold = 398 right now, it is up almost 400% in the last 15 years.

Notice: gold is outperforming everything else.

Correlations between commodities isn't perfect, but they certainly do move more or less together, and they've all done nothing but drop since China slowed down its credit growth in 2011.  And silver seems to be at the center of the pack.

When will prices all start to turn up again?  Once we all understand where things are going, we have this concept that it will happen overnight (I sure did anyway) and when it doesn't, we wonder what might have gone wrong.  I could see an economic downturn that rips the guts out of demand, which will mean commodity prices could remain low until that cycle completes, thus destroying all the "peak oil" folks (like me) who know where this has to end up eventually, but get blown up along the way because we're too early and we didn't factor in a massively deflationary debt bubble pop.

Well, that's one outcome anyway.  Will "QE for the People" change this?

Michael_Rudmin's picture
Michael_Rudmin
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Posts: 496
I think I could take that on

I have thought a good deal about microcities, and even lived in one (Silute, Lithuania) for a few years. I'd think this would be a good new forum, but city design is pointless without having assets to commit.

aggrivated's picture
aggrivated
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Posts: 291
What is the right preparation?

In a real sense I have spent the last 25 years in a microcity within a huge suburban city.  I walk to work and worship, my kids walked to school (both ways on level ground) and I can walk to the grocery, bank and doctor if I take the time to do errands that way.  The concerns I posted above are based on a growing sense that this place works because the well being of a large part of this city depends on government support. For instance, I walk through an area of about 800 apartments that are all section 8.  What happens when the funds dry up?  The more we discuss on this site the future with less energy and a reduced or collapsed economy, the more I get the feeling that the walls of my castle are weak to non existent.  No wonder people hide in walled HOA enclaves.

Living in community includes coexisting with a lot of different folks, but it won't take a very large group of homeless, hungry to make any of our cities, or our small towns very different places to live.  Chris is right I think when he says, "Set your calendars…in a couple of years there will be vast oil shortages,..  unless there’s an economic collapse so great that oil demand gets slashed at an equal or faster pace." 

As a young person I remember living through the shortages of the 1970's, but our government wasn't held up by the Hindenburg bubble back then.  Most of our communities, both urban and rural rely so much more now on the Hindenburg staying in the air and not going up in flames.  Even AkGrannyWGrit will be facing a different scenario with neighbors when the bubble pops.   How many of us have human capital sufficient to weather this storm that is on the horizon?  In some ways, I would rather face 200 hungry in a rural setting than 20,000 in an urban one.  But then rural life is next to impossible to do well in a walking community.  Thoughts, Comments?

AKGrannyWGrit's picture
AKGrannyWGrit
Status: Gold Member (Offline)
Joined: Feb 6 2011
Posts: 265
Right Preparation

Aggravated, in my opinion there is no single, right preparation.  None of us know the future which makes some of our choices more difficult. However, reducing our dependency on the just-in-time shopping centers will make life more tolerable in an emergency and in our every day activities as well.  Here are a few suggestions I have to help people prepare for a precarious future with less.

  • Do you have the skill to re-use, re-purpose and re-make items. Creativity and ingenuity will be a valuable skill. Tools are an asset!
  • Are you aware of your surroundings, can you spot the perpetrator who is scoping out your neighborhood and have you taught your children this skill? Learn to people watch and learn body language.
  • Do have the skills to grow food, give first aid, food preservation, homeopathic medicine and urban farming?
  • Can you tolerate being cold, hungry, uncomfortable, anxious and sad.  Many people today can't fathom the idea that life can be anything but pleasant, easy and happy.  Those with grit will survive.  There is a saying up here in Alaska, it's where "The Strong Stumble and The Weak Die". Get into shape, figure out how you will take care of your family during an emergency and don't look for an "Easy Button" there isn't one.  
  • Be different, prepare different, think different, because main stream Mr. And Mrs. Middle Class are in for a rude awakening some day. Don't wait for confirmation from someone else get busy today.
  • There is a lot of help and resource info on this site, just go to the "Prepare" tab and dig in.
  • Do or do not - stop thinking about preparing, when your kids look you in the eye and say "what are we going to do?" Will you have a good answer, will you have prepared for them or will you watch them be miserable?
  • I guess the "right" preparation would be to do the best you can for your family to prepare for an emergency with the time, money and resources you have at your disposal. To not prepare for ones family is, in my opinion, selfish and foolish.

AKGrannyWGrit

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1063
Right preparation2

Hi Aggrivated and AKGranny,

Good questions. Each of us periodically pauses and looks at our situation and measures it up against what we imagine could happen.  It is a work in progress.

Though my own crystal ball is in the shop for repairs, we have are our imaginations, stories, and basic principles (like "a person must have water").  I imagine that the shrinking economic pie will lead to international conflict. I'll vote for an EMP, cyber attacks or a catastrophic disruption of the global oil distribution network at some point.  :-)

Basic living situation:  What makes most sense for me is a town with surrounding farmland.  This combines walk-ability (and bicycle-ability, horse-ability) and enough local people to form your "team."  Surrounding farms have livestock and crops growing in the fields nearby.  Without trucking, everyone will eat locally, all the time.

Adequate rainfall.  If no water is coming through the tap, how will you get your water for bathing, drinking, washing clothes?  If you are not on a river or dependable year round stream, then you'll need a well (expensive!) or rainwater collection and storage systems (reasonable price if you have the rainfall.)

Shelter from the elements:  a house, firewood, wood burning stove during the winter.  Summer shade, airflow (fan?), the ability to cool off in a shower, swimming pool or bath.

--------------------------------

For me, the most difficult is the potential for radical changes in human relationships.  We need enough people, but not too many.  And all the rules will be different.

Sudden transformation of social organization to more primitive structures seems likely as we are knocked down Maslow's hierarchy.  Many predict this. For example, a person who feels that they should have the right to chose who they have sexual relationships with may have to defend that right themselves.  (Society will not offer that protection.)  Similarly, property rights might have to be scaled back to what can be defended and controlled by your team.

I had a pet cat that grew up in a our home with several other cats, dogs (and two white rats) where all the people and animals could be found lounging together on the sofa.  We were one big inter-specie happy family.  One day, a neighbor's dog saw our cat in our yard and tore across the street biting her by the neck killing her instantly.  She just did not realize that the rules of relationship with the neighbor's dog were completely different than with the dogs at our house.  This was heartbreaking for our family. But we talked about how this works with the kids and tried to learn from it.  Similarly, the pages of post- apocalyptic novels are littered with the bodies of those who couldn't catch on quickly enough to the changed rules.

Relationship with the unprepared.  Jeremy's Run:  LA Dark, is a sudden, total collapse story set in one of the most unsustainable places on earth, Los Angeles.  Overwhelming numbers of unprepared caused utter chaos.

In contrast, it seems to me, that in a small suburban neighborhood, a few unprepared neighbors can be recruited and integrated into a well prepared persons "team" as allies.  "I'll share some rice and beans with you and help you till your front lawn into a garden plot if you will help me chop and stack firewood."  The limitation to team recruitment seems to me to be how much survival food you have stored.

Relationship with the entitled:  Get rid of them immediately.  They will become enraged when you fail to give them "their fair share" of your food and they will take it by force in righteous indignation.

Recognizing that others may have chosen a different path than you.  We might think something like "I would never do that!" or "I chose the path of love (reason, civilization) and will not condone violence."   Just be aware that others will chose differently.  Killing a home owner and moving into their home is an adaptation pattern tested in nature.  I cannot image this would not be a common pattern among humans should a high level collapse materialize.

Aggrivated asked:

The concerns I posted above are based on a growing sense that this place works because the well being of a large part of this city depends on government support. For instance, I walk through an area of about 800 apartments that are all section 8.  What happens when the funds dry up?  The more we discuss on this site the future with less energy and a reduced or collapsed economy, the more I get the feeling that the walls of my castle are weak to non existent.

Any large block of apartments where the occupants did not have adequate food, water and heat sounds like a very dangerous place.

So there are my, perhaps, overly vivid morning thoughts on preparation.  :-)

Time2help's picture
Time2help
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Posts: 1972
Preparation H

Best preparation you can do is to mentally prepare yourself for anything and everything. As much as you can. And then try not to take it all too seriously ;-)

darturtle's picture
darturtle
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Joined: Nov 24 2014
Posts: 29
Nuke! Nuke! Yes Nuclear

Money cannot manufacture resources, of course!

People can turn coal into oil by lignification technologies. People can also turn hydrocarbons to gasoline or natural gas as Japan demonstrated turning giant seaweed into nature gas. Of course, you need to input energy. It doesn't make sense to burn 2 gallon of gas to get 1 gallon. However, if you use nuke, it turns good. Use energy generated from nuclear reactors to turn haydrocarbon into usable fuel is feasible and commercially viable as long as crude oil price is above certain level. As I read, disqualification of coal is cheaper than most US shale gas.

China is working hard on nuclear energy and coal liquidification. US should take note and do more R&D on nuke energy. 

alan2102's picture
alan2102
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Posts: 20
"Make work"?!?

C H Smith: "So where do all these materials come from,"

Um, maybe the same place that existing siding, paint, etc., came from? Or are we at Peak Paint and Peak Siding, too?

Smith: "and who pays for the labor to install all this stuff when the yield is near-zero?"

Rifken is surely not suggesting unpaid labor. When he talks about cheap or free energy he is no doubt talking about the marginal cost of energy, not about the initial build-out, ongoing build-out and maintenance. A device delivering free energy still must be built, hence the energy is not truly free -- only free (no marginal cost) after the initial investment. Or, if you prefer, you could call it "very high EROEI".

I have not read Rifkin's book and I am not defending his thesis. I'm only saying that your arguments against it are full of holes.

Smith: "Many people are nostalgic for the Make Work projects of the 1930s--let's just have the federal govt. install electricity-producing roofing and panels on every structure in America."

"Make work"? "MAKE WORK"?!  What a horridly inappropriate way to describe the wonderful infrastructure projects of the 1930s. The entire country is peppered with roads, bridges, parks, schools, and numerous other structures built by these programs -- still very much in use after all these years. "Make work" projects are by definition just busy-work of no value, something to keep the idle occupied -- but that is a vile and shameful way to refer to highly-successful programs that built vast infrastructure that the country badly needed. The same thing is desperately needed today, what with the country's crumbling infrastructure.

So yes, we -- intelligent and realistic people -- are very much "nostalgic" for the programs of the 1930s. Aren't you? If you are not, then what do YOU suggest for dealing with the country's infrastructure crisis?  And by "crisis" I refer just to maintenance of existing structure.  There is another (and almost as large) desperate need for a crash renewable energy build-out, and by "renewable energy" I'm talking proven and highly-scalable, highly-cost-effective technologies that are being built out as we speak, no pie in the sky. Yes, absolutely the federal government should be involved in this, not because it can't or won't happen eventually anyway for economic reasons, (indeed it IS happening), but because for the sake of the climate it must happen faster than it would happen organically.

Sorry, Charles, but this reply of yours does not reflect your usual intelligence and insight.

..............................

PS: If you want to criticize the fedgov programs of the 1930s, you have firm  human rights ground to stand on. Those programs underpaid workers and violated their rights. My words of defense, above, were addressing your "make work" slur -- a shameful lie. Those programs were highly successful in accomplishing needed things. The WAY they did it, however, stands to be criticized, and I am more than open to that.

sjpandolph's picture
sjpandolph
Status: Member (Offline)
Joined: Jun 24 2009
Posts: 11
scientism

The last few minutes of the discussion were very important. I agree that scientism has become a new religion. Scientists like Newton became the stars of the enlightenment, but they seldom felt their knowledge would replace religion. In fact many thought it bolstered their faith. Over the past century, as technology has progressed, many people have misinterpreted this as a sign of understanding. The opposite has happened. For every questioned "answered" ten new questions pop up. Any true scientist would affirm that there is a great mystery in how things work, especially the human body. The question I have is: how do we relate that to the next generation? I attempt to do so as I practice medicine. My patients are often dismayed to find that no knows the answer to their questions. I often remind them that they are not machines and cannot be fixed as such. It is imperative that we respect the environment as it is equally complex and will have a profound effect on our health. We need to stop our faith in scientism and its false promises.

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