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New Martenson Report: Oil - The Coming Supply Crunch (Part II)

Monday, April 13, 2009, 9:42 AM

In this Martenson Report for subscribers, I continue with Part II of our discussion on what the next oil supply crunch will mean and steps you might take today to lessen the impact.

Oil - The Coming Supply Crunch (Part II)

Here's a snippet:


Executive Summary

  • Explaining Oil Pricing - oil prices are "set at the margin"
  • Oil Storage - When it's pumped out of the ground it has to go somewhere
  • Oil Price Behavior - slight supply and demand imbalances drive prices
  • The Total Shortfall - too little oil to support a robust recovery
  • Nothing Fails Like Success - the worst thing would be a rapid economic recovery
  • Timing - when will Oil Shock III arrive?
  • What should you do?
  • Investments, food, selecting a community, and an abbreviated buy list

In Part I of this report, I laid out the case that the
combination of declines in the production output of existing oilfields and a
lack of investment in new oil fields would lay the foundation for Oil Shock
III.

This report will examine Oil Shock III by painting a number
of possible scenarios, and then discuss steps you might take to weather the
storm, when it arrives. I will help you
translate current news and future projections into actionable information. My goal is to help you better understand what
is going on and what you can personally do about it.

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43 Comments

Davos's picture
Davos
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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Hello Chris:

As usual another awesome read. Thank you.

We purchased 3/4 of a cow with 2 friends. It it a sizable investment "your meat weighted 595 at $1.50 pd. That comes to $892.50." that I'd hate to see spoil. I do have a generator but it runs on fuel. I recall reading somewhere that most of our electricity comes from oil and coal.

I also recall reading on the blogs that you have a solar array.

Do you have any photos of it? Any details of it? Any dumbed down electrical explanations of it? We can heat with wood, and we do, and we can draw well water with the generator and we can collect rain water and we have 500 gallons (topped off) of propane. I'd just need to run 1 freezer and one freezer/frig (assuming I don't have to buy a second freezer for my dead cow.

Thanks in advance 

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Chris thank you. This is the most thorough set of recommendations for adjusting to the next step in the descent that I've seen yet.

For anyone out there who hasn't subscribed yet, do it now, even if just for a month, and read this report (and the two previous, if you think anyone close to you needs additional convincing).

Off to get DH to read this, so we can talk about our future...

 

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Not getting caught in the stampede ...

Good report - most people don't see it coming and we certainly want to stay ahead of the stampede on this!  It'll be like a herd of elephants all trying to get out the elevator at the same time.

We've been constantly updating our zero energy living just for all the reasons you outlined in this report and more. We figured there would be an energy shortage and a "mini-ice-age" sometime in our future. We were going for high food out-put with low energy input. Though we started our journey to energy independance over 2 years ago, we have only made a dent in our energy use because even our own food production is so energy intense!

Travel to family functions, doctor appointments and school/work are still our highest energy use, heating came next and electrical demands are soon to be met with home made wind turbines and few sets of solar pannels.

Canning, freezing and drying food all takes huge amounts of energy. We finally settled on a solar food dryer with wood backup heat. Our goal is to put away 2 years of dried food a year incase we become ill, the weather doesn't cooperate or money got tight.  We'll be converting an old wet cellar into a root cellar sometime soon too. Raising feed for our animals is also on our list this year as we plan to keep chickens year-round and our dairy goats have multiplied so growing enough feed & hay will be worth all the eggs, milk, yougurt and cheese.

For our woodlot we are planting hybred poplars which are ready to cut in 3-4 years to the right diameter that means we no longer need a wood splitter.  They re-grow after cutting so they won't need to be re-planted. The wood lot is also for sheltering the young orchard so it is doing double duty. Once those are in we are doing a permaculture of strawberries understorying the trees and of course, no mow grass for pathways. I'm looking forward to strolling through the orchards an picking a fresh apple. . . by then I'll have forgotten about al the hard work it was to plant it!

Warm Regards-

EGP

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Hello EGP:

I'd be interested in hearing more about chicken food. We have about 30 hens and 2 roosters. I'm going through about 50#'s every 3-5 days depending on how many table scraps go to them and what makes it to compost.

I only have 3 acres to play with. About 1 is wooded and 1.5 will have sheep soon. Garden, greenhouse and mini lean to barn take up the rest.

Thanks in advance 

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...
Quote:

I also recall reading on the blogs that you have a solar array. Do you have any photos of it? Any details of it?

When I drove up to Montague back in early March for Chris's seminar, I can remember seeing several houses with solar panels just outside or close to Montague. The first thing that came to my mind was Chris was behind it! I knew I was getting close at that point. Laughing

Thanks for another great report Chris. After quite a bit of thought, last week I put my condo on the market. I had come to the conclusion that it doesn't meet a lot of what Chris mentioned in the latest report; water, food, land, rural area, community, etc. I can't believe how hard it was to go actually go through the motions of calling my realtor, but I did it! I wonder what people will think when they see my cabinets and closests full of canned goods and toilet paper? Smile

I'm looking at either land or a rural home with some land that is close to the remaining farms here in CT. One other thing that I've thought long and hard about is being closer to my family. Being of Italian descent, Italians are fantastic gardeners and are very resourceful. I plan to spend as much time as I can this spring/summer around my family's gardens to soak in as much knowledge as I can. While I will be farther away from work once I move(I can still carpool and/or use the train), I think the short term pain will be more than made up for in the long run with a more sustainable as well as enjoyable lifestyle. Hopefully my actions and first steps may inspire someone else here who is on the fence on where to live.

Joe

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Hello,

I'm a big fan of the SimpsonsCool In this cartoon there are two very
good characters: Homer (a bad boy) and Flanders (a good one). They -
neighbors. Homer is a pretty stupid guy, thinking only about beer and
beef. Flanders is a clever man who always cares about future. Flanders
is always well prepared for emergency. Homer - never. But as emergency
comes, Homer always goes to Flanders and "Flanders, I have no food! I
know, you have. So give me your food!!!". What I want to say? It's not
enough to be prepared for a crunch by yourself, if your neighbors
aren't prepared at all. Why? Coz they simply will force you to give all
or at best part of your goods saved for bad times. So if you have
electricity but others don’t, in tough times, to my mind, it's too
naive to think that others will not claim that you from you.

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Davos,

Can you smoke part of it? You might not want it all smoked but even some would cut down your freezer load. I don't consider smoking to be the healthiest way of preserving stuff but several sharp pharmacist folks (Graedons) used to say that if you took a couple of vitamin c while eating smoked stuff, you acidified your stomach even more and prevented nitrosamine (carcinogenic chemical) formation. That's what I do on the occasions when I eat smoked food.

 

GLTA.

 

SG

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Davos,

As well as the smoking the meat, you might also consider canning a portion.  Major pain in the arse, but another option.

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Hello SG and Worker Bee:

I haven't built a smoker yet, have a good book about it and a client showed me how to make a small one as well. We can extra stuff from the garden.

We have been down the store bought canned food and tried dried food and MRE's. I like to eat so what can I say. As bad as red meat is I like it.

As a precaution I'm going to read up on solar. I have some books on it. Not to knock the authors but I think there has got to be an easier way to explain this. Take care 

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Davos,

Real quick, dumb question from a chicken newbie (two in-city hens are all we have):

When you want the chickens to breed, do you put the roosters and a few hens together for a bit and then separate out those eggs and then separate the hens and roosters again or what?  I guess what I'm wondering is how you get a new crop of chicks without worring that you'll crack open an egg for breakfast and find a chick inside.  Yuk!  I suppose I could read a book or check out a chicken website (but then I wouldn't get to make a post!)

- LYS

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

LYS-

I won't poach (get it) the egg question, except to say there is a highly technical device for determining the fertilization status of the external embryo, which I like to call the "Highly Technical Device for Determining the Fertilization Status of the External Embryo, HTDDFSEE", or candle for short.

Cheers!

Rog

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Great report Chris, this summarizes the enormous challenge I began researching and preparing for the moment I stumbled across the movie A Crude Awakening last summer.

In an earlier post I shared some graphs illustrating the marginal pricing effect:

http://www.peakprosperity.com/forum/oil-supply-ratedemand-price-curve/9975

I've already been working on many of the things you suggest.  A lot can be carried with a bike trailer, low gears help a lot if you live in a hilly area.  I decided to keep my trailer though my kids are outgrowing it. 

Ultimately, rather than worrying about having the most efficient vehicle I'm preparing to just drive a whole lot less.

As I work to expand my garden, I suggest to everyone as new to it as me start small and start now so you have time to mistakes and learn before it really counts.  You can learn and do a lot with just a few containers on your deck.

On the timing of supply and demand cross-over, is that based more on a return to economic growth and increased demand or to supply destruction as existing supplies decline and less investment is made in developing new sources. 

Tom

 

 

 

 

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Ok all, I am looking for some input.

I am active duty USAF and have no real home. In other words, I have lived here in England since 2005, but coming up in 2011 there is a high probability (98%) My family and I will be forced to move...somewhere.

With that said we have already done many things to better prepare as many others here such as planting a garden, building up a food storage, PM's, adjusting investments accordingly...you all get the point I'm sure.

Having said that, this brings me to my question. Knowing that you don't really have a home how does one prep on the major scale? Don't get me wrong, I don't feel unprepared by any means if that makes sense, but taking for example Dr. Martensons great recommendations (almost all of which I considered, even got pricing on solar panels, but stopped short under the unknown of whether or not I will be here).

Going down his main 5.

I was priced out of the hybrid's when I got my car (2007 Ford Fusion), I don't regret buying it, but to prepare I have bought a few cases of oil when it went on sale. I am also looking to get some filters and other parts just to have on the side.      Does anyone know any tricks for storing extra fuel, or what companies allow you to buy fuel cards and top them up with gallons (I know I am in England, but would consider topping up ahead of a return to the states).

As for going solar(water). Is there  a portable version? I don't like the wording there....I just mean something that can possibly be set up with out construction workers mounting it to my house here? That way when I have to move I can bring it??

Insulation is not really an issue. I have been working on that since I bought the house as well as changing all lighting to low wattage bulbs.

I am very interested in wood-burning, and know I can do it here. This is one I will probably have to look locally though.

 

If anyone has any input that would be awesome. I don't feel ill-prepared, but am looking to solicite ideas as to what others in my position would consider, or maybe I am already doing everything someone in my position can do.

Anyway, thanks for the input.

Mike

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

I think I saw that in a cartoon once when I was 8 years old.  Didn't realize it was real.  Cool.  Must stock up on candles an matches.

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Hello Lemonyellowschwin:

We have 2 roosters (had 10 originally because we were so chicken stupid I thought you needed them (roosters) to get eggs - this is one thing I did without reading - never again will I not read and then do something).

Marsh got upset with how they were going after the hens. 

We ate 8 roosters.

They really do fly headless, land a heck of a lot better than I did 1/2 the time - and I had a head on my shoulders.

We have 2 roosters left for about 30 hens.Chirpy and Runner.

If Runner pecks me one more time he may be dinner soon. 

Chirpy is a pig, I doubt very much there is one hen with an unfertilized egg out there - ever. The guy has a serious obsession. Feel bad for the hens even after taking the axe to 8 roosters. Runner I wonder about, think he might like roosters over hens, or maybe like eating there is a pecking order here with chickens.

You could quarantine them but we didn't. We only quarantine them inf they get hurt so the others don't peck at the injury.

We purchased a small cheap incubator from http://www.strombergschickens.com/products/basic_incubators.php for about 20 bucks and have 2 eggs in it now. It takes about 23 days for them to hatch, I'll let you know in about 15 days how we make out. There is a way to tell if they are male or female upon hatching or soon there after in the chicken book we finally got.

Marsh read it, I was too busy reading about the economy last summer. She is the chicken guru, I just help the kids clean the lower level of the greenhouse and gather eggs and help feed and water them. I built my little guy an egg stand out of stone and put a small fridge in it and he puts the money toward his college fund. (After converting it to grams of gold). He yields about 18 - 20 eggs a day now. It is the honor system (well mostly we have CCTV security cameras all over and on the entrance.)

eggs.jpg

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...
Davos wrote:

If Runner pecks me one more time he may be dinner soon. 

I feel your pain, I just about broke my left arm Friday nite as I slipped on the steps to our coop as I got rushed by one of my Cornish crosses.

We have sex-link, Rhode island reds, Cornish, and plan to get some Guinea foul this June because I hear they take care of snakes in the garden. What are you raising? Brown or white eggs?

We also just released 6 (now 4 are left) Mallard Ducks into the pond. I hear they have good eating eggs to, but have yet to try one.

Best,

Rog

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Hello Rog:

We have about 9 white Leghorns, 1 silver Leghorn hen and rooster, 9 RI Reds, 2 Americanos, 3 Black Stars, 3 Red Stars, 1 Jumbo Cornish X Rocks (3 died of heart attacks before slaughter, I hope this one makes it to the slaughter cone and dinner table and doesn't become hawk meat) and a few others...

We get white, brown, and tinted green eggs, oh, and light tinted brown.

Neat about the Guinea's eating snakes. Our "free" range is enclosed in galvanized hardware mesh. We have a LARGE population of hawks so I'm afraid to let them in the garden. We do have snakes. Mountain Rattlers, various Black Snakes and Copper Heads. The electric fence keeps the bear out, snakes (all but black ones) are left up to the shotgun.

Take care 

PS I hope your arm heals well and soon 

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How to Invest in Oil

Can anyone point me to information on the best way to invest to capitalize upon the coming oil shock?  Some securities that come to mind: SLB, HAL, COS, USO, and of course the big oil companies like Exxon-Mobile.

I suppose a reasonable approach would be to diversify into a variety of things tied to oil, like:

- Oil services providers like SLB and HAL

- Oil companies themselves, like XOM and COS

- Oil ETFs or ETNs, like USO

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Well, thanks for the well wishes. I'd post a pic but who wants to see a swollen old purple arm?

That's a really nice assortment. Are you closing in on just a couple of breeds, or are you going to maintain the variety? What do you think are the best birsd you have if you were to only have a couple?

I have a friend that used to have rattlers until he got the guinea's. The only problem is that if your neighbors have them, once they hear the calls from the other flock, you will either have none or twice as many as they do what it takes to get together.

If you are worried about hawks, I think you can use a livestock guard dog like a great Pyrenees to find for your flock when you are not there. Typically you see them with goats or sheep, but they work for chickens too, and they sleep outside so you don't have to treat them like a typical pet - and everything that comes with that.

I think it might have been a raccoon that got my first 2 ducks - but the last 4 went to school on the first 2 and now have been OK for 2 weeks outside unprotected.

Best,

Rog

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Re: How to Invest in Oil
SteveR wrote:

Can anyone point me to information on the best way to invest to capitalize upon the coming oil shock?  Some securities that come to mind: SLB, HAL, COS, USO, and of course the big oil companies like Exxon-Mobile.

I suppose a reasonable approach would be to diversify into a variety of things tied to oil, like:

- Oil services providers like SLB and HAL

- Oil companies themselves, like XOM and COS

- Oil ETFs or ETNs, like USO

Steve,

While I do not have any specific stock advice, I would ask if you are fully prepared with all of the items pointed out via these reports and elsewhere on the site. It would seem to me (and I have absolutely put my money where my mouth is) that investing in the infrastructure to support your family or yourself in a post peak world should take precedence over a potentially risky stock position which results in fiat currency gains that may or may not prove useful in the future.

However, you may be ready for the gas in your tank to be the last gas you ever buy again and still have spare money, so game on!

Cheers,

Rog

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Dang, that looks like a sweet setup Davos.  I'm jealous.  But if you keep your roosters and hens together I still don't understand how you tell which eggs are fertilized and which are not.  Do you check every one with a light or a candle or something?

In Seattle we can have up to three hens per the local ordinance.  We have a neighbor who has 12.  She gives eggs to her immediate neighbors as bribes so she doesn't get turned in.

I'm continually amazed at how valuable chickens are.  To think that they turn scraps and worms and grass into tasty little treasures.  It's really very cool.  I wish we could keep more.  Plus they're lots of fun to watch.

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Yes, I read of coming shortages everywhere. Shortages of oil. Shortages of water. Shortages of food. Shortage of jobs.

I have one simple response to all this: money gets you to the front of the line. A cache of gold/silver is an absolute must. It will buy you almost anything when there is a shortage of money. Yes I foresee a bad collapse.  But a total shutdown Mad Max economy? I just don't see it and I know of no historical analogs.

I studied the idea of being completely sulf-sufficient long ago from others who tried it. It turns out that unless you know how to live like the TV series Surviver Man, you need money to buy things you can't make for yourself or do for yourself, like medical care. I don't deny the shortages, but I see no point to agonizing over things of we have no control.

Whatever life style you choose, without money in the form of gold/silver, your plans are wothless. You probably won't want to make direct purchases with gold/silver. When that inevitable day comes when the dollar is worthless, I'm betting that government will issue some other currency that you can exchange for as needed. If not, I will always have something tangible to barter with.

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Re: How to Invest in Oil

"investing in the infrastructure to support your family or yourself in a
post peak world should take precedence over a potentially risky stock
position which results in fiat currency gains that may or may not prove
useful in the future."

DEAD RIGHT!

An oil company is only worth what lts reserves are worth, and ALL reserves are going down, which is why oil companies are buying each other out....  the smaller they are the less competitive they can be, so the Exxons of this world buy the little ones.  That increases the majors' reserves size, at least temporarily.  I believe it's the ONLY reason their stocks are still worth what they are worth....

Oil companies only have one future: winding up.

So get out of debt, buy an acre or two, learn Permaculture, buy some tools, learn how to use them, and teach your kids how to use them.

ONLY investment worth considering; we don't even have cash in the bank...

Mike 

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...
Lemonyellowschwin wrote:

But if you keep your roosters and hens together I still don't understand how you tell which eggs are fertilized and which are not.  Do you check every one with a light or a candle or something?

LYS,

Now that we have fully hijacked this thread, I'll post this and vanish so I don't waste anyone else's time looking up the oil crunch and finding egg candling!

Cheers,

Rog

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Hello Lemonyellowschwin:

Nope, we don't candle. So far we have been okay - no bloody eggs. With Chirpy out there I'm pretty positive all the eggs are fertile. As far as offspring we will have "muts". One client we have raised chickens, if I recall she told me that the little white thing attached to the yoke of the egg means they are fertile. Another friend who is really big into food and nutrition told me that the real egg conisors (SP - I know) only like to eat fertile eggs as they taste better. 

I'm not a discriminate eater. If it is mostly dead and pretty fresh its food.

They are relaxing to hear and watch and nothing is better than going down to the greenhouse/hen house in the morning and getting eggs to make an omelet with, especially when the garden is producing.

Hello Rog:

I really think  the white Leghorn is the best to have if I could only get one. The hens aren't fat so I doubt they eat as much as other breeds and they are egg laying machines. I've only had one die. Second would be the RI Red if one wanted brown eggs.

But I'm no egg expert, this is a learning experience for us. After reading the butchering book on how to feather we spent an entire day doing the slaughtered birds and then that night I found a YouTube on how to skin them so you don't have to feather them. 

I'll have to check into the dog. We will have sheep soon. One client has a Great Dane, I really like them a lot, don't know if I could afford the food though Wink 

Take care 

 

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

PS Back to oil:

I watched "A Crude Awakening," from the sound of it many others here have seen it as well. It is on NetFlix, can be streamed.

To read Chris's article and to listen to FSN and to look at the numbers and realize that we will feel the effects sooner is stunning. There was a clip I'm trying to find on how banks were taking delivery last summer. I have been meaning to see who that played into demand.

Take care and sorry not to have started a chicken thread. 

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Hello LYS....  thank you for the giggle!

Seriously though, you only need ONE rooster.

Your hen(s) need to get 'clucky' before they're happy to 'breed'.  Most of the time they will just lay an egg, and leave it there.  When they get clucky they sit on them, they have to be kept nice and warm for the babies to develop in the eggs.

If your hen sits on eggs, leave them there, they are the ones you don't eat!  Breeding chicks isn't management on YOUR part, the birds know what to do, they've been doing it for eons!

A quick way to check whether an egg is off or not is to immerse it in water.  If it floats, chuck it out.

Mike 

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

#204: Timing and the Post Carbon Manifesto

MuseLetter #204 / April 2009

by Richard Heinberg

Download printable pdf version here (PDF, 244 KB)

This month's issue is a compilation of two pieces. The piece
"Timing" is a commentary on the timing of global economic collapse and
the fraught nature of accurately predicting when this will occur. This
is followed by the new Post Carbon Manifesto which is being released
this week. The manifesto sets out the new direction of Post Carbon
Institute and its role in helping individuals, families, businesses,
communities, and governments understand, prepare for, and manage the
transition to a post-carbon world.

Timing

The
general picture is clear enough. A combination of peak oil, climate
change, and the bursting of the mother of all economic bubbles will
result in a collapse of the global economy, perhaps of civilization
itself. If we are still to avert the worst of a crisis that could
eventuate in untold death, destruction, and tragedy, we need to
restructure the world's energy systems and money systems immediately.

This
message (in one form or another) is issuing from scores of independent
writers, environmental organizations, and economic analysts. Indeed,
even before anyone had ever heard of a Credit Default Swap, going all
the way back to the early 1970s if not earlier, similar warnings were
periodically heard.

But forecasting global catastrophe can be a tricky business, because everyone wants to know just when it
will happen. And there's the rub. As a card-carrying member of the
Cassandra Club, I've found this a perennial briarpatch. There have been
so many variables at play that about all one could say with absolute
confidence is that industrial civilization will run out of rope
"sometime in the first two or three decades of the 21st
century." But most people consider that too vague, and institutional
leaders have shown repeatedly that they are likely to respond only to
definite warnings about fairly imminent catastrophe.  <MORE>

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Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Not to beat a dead horse but:

Here they are making road repair the job creator and seems to me that this is going to play into the demand of oil:

On average, about 5,500 barrels of liquid asphalt are needed per mile of paving, said Adan Carrillo, spokesman for the Utah Department of Transportation. http://www.newsminer.com/news/2008/nov/09/asphalt-shortage-delays-road-repairs-nationwide/

Yet here I see:


Illinois snags chunk of fed stimulus work

By: Paul Merrion April 13, 2009

(Crain’s) — Illinois is getting a jump on the federal stimulus program, claiming more than 12% of the road and bridge projects approved so far by the U.S. Department of Transportation. 

http://www.chicagobusiness.com/cgi-bin/news.pl?id=33663&seenIt=1

Common sense to adminstration, come in please.....Over?

Why do I for-see them shooting themselves in the foot with this rocket science? High oil prices will only idle the economy and or any recovery they manage to stimulate. Why do I think it would take less than 5,500 barrels of liquid asphalt to make solar panels. 

Seems to me as smart as making ethonal the answer to a fuel shortage. 

 

 

Nichoman's picture
Nichoman
Status: Gold Member (Offline)
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Posts: 422
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Will add a differing slant to report above.  

Two items...

1.)  Marginal Available Oil Supply Data.  This brings to question confidence of timing of next upward leg (enough data  suggests almost all supply estimates are too high).  Add a.) Burgeoning Supply Destruction; and b.) Actual versus forecast world outputs past 5 years.  One can make an argument (like Simmons, Hirsch, etc.) of things happening faster and prices rising faster and higher than Chris outlines.  My best estimate of weighting 3 factors above toward a forecast using near neutral change in demand...offer at least 50 percent chance we will be much higher than $50/barrel within a year.  Past verification of data in past 7-10 years..offer suggests breaking $147/barrel well within 18 months also quite plausible

2.)  Complex...Non-linear Interaction(s) With Economies and Financial Sectors.   We should agree there is enough data and reports showing energy costs do highly impact our economy and also our past and current financial situation.  If we consider the myriad of financial instruments available are linear, exponential, first...second order derivatives, to growth.  Wouldn't this support based on past 8-12 months if current financial collapse...impacts several multiples, if not easily a magnitude more worse in many/most areas?  Add greater societal instabilities...defunct or nearly defunct governments at multiple levels. 

Were wrestling with a certain amount of subjective reasoning here, yet...the primary drivers on this subject are sooner/faster (a la Matt Simmons), so  for planning purposes, isn't sooner better than later (i.e. not waiting until 2011) regarding the 5 recommendations?  I propose besides closely monitoring events...a compressed timeline of 6-12+ months sooner is wise (NLT spring 2010) before TSHTF.   

Add Hirsch calculations, plus inflation/hyperinflation inefficiencies...$10+/gallon (in todays dollars) within a few years is easily reachable as a scenario.

Essentially, more concerned this report is too conservative versus too aggressive. 

Some thoughts.

 

Nichoman

suesullivan's picture
suesullivan
Status: Gold Member (Offline)
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Posts: 305
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

So, this one's really thrown me for a loop. Maybe its because I'm off-kilter because a fox jumped into the yard, walked into the garage (I left the door open overnight-- crud)  and killed one of our pullets and punctured another pretty thoroughly over the weekend. Whatever accounts for my fragile state, I'm feeling overwhelmed by the realization that the next oil shock is so near. I've been able to hold my breath on the financial crisis and hope that somehow, we'll find a soft landing, but there's simply no getting around the reality of a rapidly and jaggedly declining oil supply. Chris has done an excellent job of making it unavoidably clear.

So, I have two questions. First, do I really have to move my family out of Colorado to ensure a stable water supply? Is anyone who is preparing for a post-peak oil world staying in a climate with 15 inches of rain a year (or less?) We're on a quarter acre right now and planting and learning madly right now, turning as much of our yard into intensive beds and perennial food plantings as possible. We could look for more land here and begin contouring and planting it for a food forest, but not moving onto it yet, thus not upending the kids' lives quite so soon, but I don't know if it makes sense to do that in a low-rainfall area.

And secondly, DH is asking me if we should be thinking about retraining, one or both of us now.

As attractive as the idea of a permaculture-based homestead is to me, he's right that we will need an income stream until and unless civilization falls apart to the degree of World Made By Hand. I was once a journalist and retrained five years ago as a massage therapist. While the work that I do is therapeutic, it is dispensible in times of severe economic contraction, I fear, not to mention that I have trouble balancing the needs of children, homestead and clients and ended up pretty well drained when I closed my practice to move to Colorado. DH is an art director for a magazine an hour away and while there's some room to telecommute, neither of us know know how long a holistic health magazine that relies solely on advertising will last. So, what jobs do people see as being useful, plentiful and viable in the long contraction that we're headed for? Where, within the confines of this contracting economy, will there be decent work to do? I'm willing to retrain again, though I'm not thinking it makes sense to spend tens of thousands of dollars to do so, or more than a year or so of coursework...

Any thoughts would be greatly appreciated,
Sue

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Ray, you could come to the front of the line here with all the money in the world, but if I needed honey and someone else had the need for some of our goat's milk, I'd trade with them well before I'd trade with you....

Mike 

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Davos
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Posts: 3620
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Hello SueSullivan:

Sorry about the pullets.

Chris sent me this I'm posting it on the blog of the 15th, it is pretty amazing, though we have a well I like this for power outages. It could help you with your water question http://www.thefarm.org/charities/i4at/surv/sstill.htm

I'm probably the most pessimistic person when it comes to the economy but although I am preparing my family for the worst I am very confident we will get through this mess. It wouldn't surprise me if we see some new technology come out of this - automotive wise especially. Some garage/basement tinkerer could think up a car that won't run on gas. Everything with the economy could change overnight.

Even if/when a full fledged depression hits (barring any new technology) I think it will certainly lead to more sustainable living for all and hopefully an end to a bloated govt. and bubble economics and glutten like consumption.

Also, once oil shoots up again it will likly idle the economy which will once again drive oil prices crashing. Right now I think this cycle will prohibit consumption - of course, if wages go up and consumers can afford expensive gas at the tank in built into petrochemically produces goods then all bets are off.

But I myself believe that the last run-up in oil proces was the straw that broke the camels back of the consumer and sparked quote (asset) deflation unquote.

Take care 

 

Ray Hewitt's picture
Ray Hewitt
Status: Gold Member (Offline)
Joined: Apr 5 2008
Posts: 458
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Matrix

Some scenarios:

If it got that bad, you might have to kill the goat for meat.

I could offer you enough gold for your goat's milk to entice you to go without honey.

Your goat(s) produce enough milk to sell to a buyer with honey and a buyer with gold.

I don't foresee a barter economy where gold and silver have no value. I know of no historical analogy. No matter how independent you think you are, you are going to need money.

Jarhett's picture
Jarhett
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Posts: 132
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Ray/Mike,

Maybe this can help

 

Gold and Economic Freedom

by Alan Greenspan

Published in Ayn Rand's "Objectivist" newsletter in 1966, and reprinted
in her book, Capitalism: The Unknown Ideal, in 1967.

An almost hysterical antagonism toward the gold standard is one issue
which unites statists of all persuasions. They seem to sense — perhaps
more clearly and subtly than many consistent defenders of laissez-faire —
that gold and economic freedom are inseparable, that the gold standard is an
instrument of laissez-faire and that each implies and requires the other.

In order to understand the source of their antagonism, it is necessary
first to understand the specific role of gold in a free society.

Money is the common denominator of all economic transactions. It is that
commodity which serves as a medium of exchange, is universally acceptable to
all participants in an exchange economy as payment for their goods or services,
and can, therefore, be used as a standard of market value and as a store of
value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of
labor economy. If men did not have some commodity of objective value which was
generally acceptable as money, they would have to resort to primitive barter or
be forced to live on self-sufficient farms and forgo the inestimable advantages
of specialization. If men had no means to store value, i.e., to save, neither
long-range planning nor exchange would be possible.

What medium of exchange will be acceptable to all participants in an
economy is not determined arbitrarily. First, the medium of exchange should be
durable. In a primitive society of meager wealth, wheat might be sufficiently
durable to serve as a medium, since all exchanges would occur only during and
immediately after the harvest, leaving no value-surplus to store. But where
store-of-value considerations are important, as they are in richer, more
civilized societies, the medium of exchange must be a durable commodity,
usually a metal. A metal is generally chosen because it is homogeneous and
divisible: every unit is the same as every other and it can be blended or
formed in any quantity. Precious jewels, for example, are neither homogeneous
nor divisible. More important, the commodity chosen as a medium must be a
luxury. Human desires for luxuries are unlimited and, therefore, luxury goods
are always in demand and will always be acceptable. Wheat is a luxury in
underfed civilizations, but not in a prosperous society. Cigarettes ordinarily
would not serve as money, but they did in post-World War II Europe where they
were considered a luxury. The term "luxury good" implies scarcity and high unit
value. Having a high unit value, such a good is easily portable; for instance,
an ounce of gold is worth a half-ton of pig iron.

In the early stages of a developing money economy, several media of
exchange might be used, since a wide variety of commodities would fulfill the
foregoing conditions. However, one of the commodities will gradually displace
all others, by being more widely acceptable. Preferences on what to hold as a
store of value will shift to the most widely acceptable commodity, which, in
turn, will make it still more acceptable. The shift is progressive until that
commodity becomes the sole medium of exchange. The use of a single medium is
highly advantageous for the same reasons that a money economy is superior to a
barter economy: it makes exchanges possible on an incalculably wider scale.

Whether the single medium is gold, silver, seashells, cattle, or tobacco
is optional, depending on the context and development of a given economy. In
fact, all have been employed, at various times, as media of exchange. Even in
the present century, two major commodities, gold and silver, have been used as
international media of exchange, with gold becoming the predominant one. Gold,
having both artistic and functional uses and being relatively scarce, has
significant advantages over all other media of exchange. Since the beginning of
World War I, it has been virtually the sole international standard of exchange.
If all goods and services were to be paid for in gold, large payments would be
difficult to execute and this would tend to limit the extent of a society's
divisions of labor and specialization. Thus a logical extension of the creation
of a medium of exchange is the development of a banking system and credit
instruments (bank notes and deposits) which act as a substitute for, but are
convertible into, gold.

A free banking system based on gold is able to extend credit and thus to
create bank notes (currency) and deposits, according to the production
requirements of the economy. Individual owners of gold are induced, by payments
of interest, to deposit their gold in a bank (against which they can draw
checks). But since it is rarely the case that all depositors want to withdraw
all their gold at the same time, the banker need keep only a fraction of his
total deposits in gold as reserves. This enables the banker to loan out more
than the amount of his gold deposits (which means that he holds claims to gold
rather than gold as security of his deposits). But the amount of loans which he
can afford to make is not arbitrary: he has to gauge it in relation to his
reserves and to the status of his investments.

When banks loan money to finance productive and profitable endeavors,
the loans are paid off rapidly and bank credit continues to be generally
available. But when the business ventures financed by bank credit are less
profitable and slow to pay off, bankers soon find that their loans outstanding
are excessive relative to their gold reserves, and they begin to curtail new
lending, usually by charging higher interest rates. This tends to restrict the
financing of new ventures and requires the existing borrowers to improve their
profitability before they can obtain credit for further expansion. Thus, under
the gold standard, a free banking system stands as the protector of an
economy's stability and balanced growth. When gold is accepted as the medium of
exchange by most or all nations, an unhampered free international gold standard
serves to foster a world-wide division of labor and the broadest international
trade. Even though the units of exchange (the dollar, the pound, the franc,
etc.) differ from country to country, when all are defined in terms of gold the
economies of the different countries act as one — so long as there are no
restraints on trade or on the movement of capital. Credit, interest rates, and
prices tend to follow similar patterns in all countries. For example, if banks
in one country extend credit too liberally, interest rates in that country will
tend to fall, inducing depositors to shift their gold to higher-interest paying
banks in other countries. This will immediately cause a shortage of bank
reserves in the "easy money" country, inducing tighter credit standards and a
return to competitively higher interest rates again.

A fully free banking system and fully consistent gold standard have not
as yet been achieved. But prior to World War I, the banking system in the
United States (and in most of the world) was based on gold and even though
governments intervened occasionally, banking was more free than controlled.
Periodically, as a result of overly rapid credit expansion, banks became loaned
up to the limit of their gold reserves, interest rates rose sharply, new credit
was cut off, and the economy went into a sharp, but short-lived recession.
(Compared with the depressions of 1920 and 1932, the pre-World War I business
declines were mild indeed.) It was limited gold reserves that stopped the
unbalanced expansions of business activity, before they could develop into the
post-World War I type of disaster. The readjustment periods were short and the
economies quickly reestablished a sound basis to resume expansion.

But the process of cure was misdiagnosed as the disease: if shortage of
bank reserves was causing a business decline — argued economic
interventionists — why not find a way of supplying increased reserves to
the banks so they never need be short! If banks can continue to loan money
indefinitely — it was claimed — there need never be any slumps in
business. And so the Federal Reserve System was organized in 1913. It consisted
of twelve regional Federal Reserve banks nominally owned by private bankers,
but in fact government sponsored, controlled, and supported. Credit extended by
these banks is in practice (though not legally) backed by the taxing power of
the federal government. Technically, we remained on the gold standard;
individuals were still free to own gold, and gold continued to be used as bank
reserves. But now, in addition to gold, credit extended by the Federal Reserve
banks ("paper reserves") could serve as legal tender to pay depositors.

When business in the United States underwent a mild contraction in 1927,
the Federal Reserve created more paper reserves in the hope of forestalling any
possible bank reserve shortage. More disastrous, however, was the Federal
Reserve's attempt to assist Great Britain who had been losing gold to us
because the Bank of England refused to allow interest rates to rise when market
forces dictated (it was politically unpalatable). The reasoning of the
authorities involved was as follows: if the Federal Reserve pumped excessive
paper reserves into American banks, interest rates in the United States would
fall to a level comparable with those in Great Britain; this would act to stop
Britain's gold loss and avoid the political embarrassment of having to raise
interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly
destroyed the economies of the world, in the process. The excess credit which
the Fed pumped into the economy spilled over into the stock market, triggering
a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to
sop up the excess reserves and finally succeeded in braking the boom. But it
was too late: by 1929 the speculative imbalances had become so overwhelming
that the attempt precipitated a sharp retrenching and a consequent demoralizing
of business confidence. As a result, the American economy collapsed. Great
Britain fared even worse, and rather than absorb the full consequences of her
previous folly, she abandoned the gold standard completely in 1931, tearing
asunder what remained of the fabric of confidence and inducing a world-wide
series of bank failures. The world economies plunged into the Great Depression
of the 1930's.

With a logic reminiscent of a generation earlier, statists argued that
the gold standard was largely to blame for the credit debacle which led to the
Great Depression. If the gold standard had not existed, they argued, Britain's
abandonment of gold payments in 1931 would not have caused the failure of banks
all over the world. (The irony was that since 1913, we had been, not on a gold
standard, but on what may be termed "a mixed gold standard"; yet it is gold
that took the blame.) But the opposition to the gold standard in any form
— from a growing number of welfare-state advocates — was prompted by
a much subtler insight: the realization that the gold standard is incompatible
with chronic deficit spending (the hallmark of the welfare state). Stripped of
its academic jargon, the welfare state is nothing more than a mechanism by
which governments confiscate the wealth of the productive members of a society
to support a wide variety of welfare schemes. A substantial part of the
confiscation is effected by taxation. But the welfare statists were quick to
recognize that if they wished to retain political power, the amount of taxation
had to be limited and they had to resort to programs of massive deficit
spending, i.e., they had to borrow money, by issuing government bonds, to
finance welfare expenditures on a large scale.

Under a gold standard, the amount of credit that an economy can support
is determined by the economy's tangible assets, since every credit instrument
is ultimately a claim on some tangible asset. But government bonds are not
backed by tangible wealth, only by the government's promise to pay out of
future tax revenues, and cannot easily be absorbed by the financial markets. A
large volume of new government bonds can be sold to the public only at
progressively higher interest rates. Thus, government deficit spending under a
gold standard is severely limited. The abandonment of the gold standard made it
possible for the welfare statists to use the banking system as a means to an
unlimited expansion of credit. They have created paper reserves in the form of
government bonds which — through a complex series of steps — the
banks accept in place of tangible assets and treat as if they were an actual
deposit, i.e., as the equivalent of what was formerly a deposit of gold. The
holder of a government bond or of a bank deposit created by paper reserves
believes that he has a valid claim on a real asset. But the fact is that there
are now more claims outstanding than real assets. The law of supply and demand
is not to be conned. As the supply of money (of claims) increases relative to
the supply of tangible assets in the economy, prices must eventually rise. Thus
the earnings saved by the productive members of the society lose value in terms
of goods. When the economy's books are finally balanced, one finds that this
loss in value represents the goods purchased by the government for welfare or
other purposes with the money proceeds of the government bonds financed by bank
credit expansion.

In the absence of the gold standard, there is no way to protect savings
from confiscation through inflation. There is no safe store of value. If there
were, the government would have to make its holding illegal, as was done in the
case of gold. If everyone decided, for example, to convert all his bank
deposits to silver or copper or any other good, and thereafter declined to
accept checks as payment for goods, bank deposits would lose their purchasing
power and government-created bank credit would be worthless as a claim on
goods. The financial policy of the welfare state requires that there be no way
for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold.
Deficit spending is simply a scheme for the confiscation of wealth. Gold stands
in the way of this insidious process. It stands as a protector of property
rights. If one grasps this, one has no difficulty in understanding the
statists' antagonism toward the gold standard.

 

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Hello Jarhett:

Super read!

I read in the "I.O.U.S.A." book that Ron Paul has that article autographed by Easy Al who told Paul that he still believes in the article.

Take care 

EndGamePlayer's picture
EndGamePlayer
Status: Platinum Member (Offline)
Joined: Sep 2 2008
Posts: 546
Oil - The Coming Supply Crunch ...

Hi Davos-

You must have some happy roosters!  Last year I grew a mix of sunflowers, millet, amaranth, thistle and beans and knocked them down and dried them. They ate that until I ran out in Feb (then I broke down and bought store scratch). This year I will grow a larger area for our 8 hens and rooster and store it in a bin the horse can't get into (she's smart).

My guess - grow it like a flower border since so much is flowering. my guess is for 32 birds - grow as much as you can!

capesurvivor's picture
capesurvivor
Status: Platinum Member (Offline)
Joined: Sep 12 2008
Posts: 963
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

That's a great gadget, Davos.

Wonder if it would take sea water.

I've seen mini-purifier/distillers made from 1 liter pepsi bottles somewhere.. .

 

SG

greendoc's picture
greendoc
Status: Silver Member (Offline)
Joined: Sep 23 2008
Posts: 131
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

 I took the liberty of starting a chicken thread......

http://www.peakprosperity.com/forum/definitive-chicken-thread/16424

James Wandler's picture
James Wandler
Status: Martenson Brigade Member (Offline)
Joined: Aug 11 2008
Posts: 219
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Brilliant report Chris.

I agree with suesullivan's recommendation above - I recommend anyone currently not a subscriber to become one, even for one month, because this report is very valuable.  Since subscription revenue is the primary way that the site runs, and it does run on money, I hope that you renew your subscription to keep the excellent and timely advice coming.

What's more, if you are unsure about attending Lowesville or not - go.  I can't put into words just how valuable that experience will be.  I went to Rowe and it was incredible.  If I wasn't coincidentally in the midst of carrying out the exact advice in Chris' report I would be going as well.  What could I gain by going a second time?  Most importantly, the ability to better conduct my own presentations of Chris and Becca's material in my own community and take a leadership role to encourage those around me to prepare.

Here's my quick interpretation of why Rowe was so amazing.... 

Consider how this site works: people post something interesting on a forum, your read it, maybe you add your thoughts, or watch the discussion develop.  Works pretty well. 

Now imagine that some really dedicated people, including many people that never post on this site but are fully engaged with the website, will all be working in a "forum" live.  What does this mean? 

Lightning in a bottle. 

First off, Chris and Becca break the ice and start engaging people.  Now picture people responding - but this is live so here's how it will go on a particular topic:

...lots of people will have things to say...

...as they say them everyone in the room is considering how that person's thoughts relates to them...

...this sparks new thoughts throughout the room instantly...

...leading immediately to new discussion...

...if you could picture the interplay of thoughts amongst the participants it would look like lightning....

...and the energy between the participants builds throughout the weekend...

Chris and Becca joked about Rowe in a podcast that the event could have carried on without them...hard to believe but this is actually true.  Chris and Becca are the catalysts that facilitate the lightning...and Becca does her best to try and control it.

Why go?  To meet like minded people dealing with these issues in their own way - maybe even leading to some connections after the weekend.  But the single best reason to go is to understand what this material is all about and being able to use the Presentation DVD to conduct your own screenings in your own community.  As Chris has said (I'm paraphrasing):  "The next 20 years are going to be completely unlike the last 20 years but one thing is for certain: we are all are going to go through this together."

I see Chris has updated the post to say that April 19th to be the last day to sign up...please don't miss out.

Cheers,

James 

markarsenal's picture
markarsenal
Status: Bronze Member (Offline)
Joined: Nov 1 2008
Posts: 28
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

Great post, Chris. A true vindication for the steps I've been taking to prepare and a wonderful, comprehensive entry. This alone is a full return on my subscription investment. Thanks!

maveri's picture
maveri
Status: Silver Member (Offline)
Joined: Nov 20 2008
Posts: 159
Re: New Martenson Report: Oil - The Coming Supply Crunch ...
James705ca wrote:

Brilliant report Chris.

I agree with suesullivan's recommendation above - I recommend anyone currently not a subscriber to become one, even for one month, because this report is very valuable.  Since subscription revenue is the primary way that the site runs, and it does run on money, I hope that you renew your subscription to keep the excellent and timely advice coming.

...

How much of a downturn we will see in Australia I think will be interesting - I am not predicting some of the social breakdown being tauted for the US though.

However, Australia is a very dry country and we are still under water restrictions of soughts here.

Sydney is building a de-salination plant at present (not sure when it's due to come online) but Australians are quite well versed in seeing water as a precious resource.

Oil - well, that's another matter. Distances in Australia are vast but over the last 5 years there has been a real shift from the big family 6 and 8 cylinder motor vehicles to smaller more fuel efficent vehicles - so in that regard, I think any further social changes will be embraced quite quickly as people have been moving in that direction anyhow (in fact, as oil prices dropped, the return to the big vehicles just didn't happen).

Even so - I subscribe not so much for the benefit I gain but for the fact that this message needs to get out there and supporting this site is important.

James Wandler's picture
James Wandler
Status: Martenson Brigade Member (Offline)
Joined: Aug 11 2008
Posts: 219
Re: New Martenson Report: Oil - The Coming Supply Crunch ...

maveri,

I recommend that you read the chapter on Australia in Jared Diamond's book Collapse: How Societies Choose to Fail or Succeed.  Australia has severe issues to contend with I'm afraid and water and desalization of soil is right at the heart of them.  Rivers of salt destroying downstream farmland is what scared me most.  However Jared outlines some steps that can be taken to address the issues and I'm sure that permaculture will give huge benefits as well.

Cheers,

James

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