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Gail Tverberg: The Coming Energy Depression

The math is straightforward, but cruel
Sunday, January 7, 2018, 4:52 PM

As most PeakProsperity.com readers know, we fully agree with the statement: Energy is THE master resource.

Without it, nothing can get done.

Energy analyst and professional actuary Gail Tverberg returns to the podcast this week to revisit the global energy outlook. And fair warning, Gail warns it's quite grim.

To her, it's a simple math problem. We have too many people placing too much demand on the world's depleting energy resources. The cost of energy is rising, which we are compensating for in the short term by using financial gimmicks to make "affordable" -- when all we're really doing is creating future promises that cannot possibly be repaid.

The increasing cost of energy is manifesting in higher prices (for everything, not just fuels) and lower real wages, a divergence she sees only worsening from here. This path leads to another Great Depression-style crisis from which she does not see a clear path out of:

What we really live on is what we pull out of the ground each year, in terms of oil or coal or natural gas or whatever. So what we have is just what we pull out.

Now, you accurately point out that we're making too many claims on the future using debt. We're actually doing this via a couple of different ways, which are pretty much equivalent. One of them is by issuing equity. This has the equivalent effect as using debt because what you're saying is I'll pay you dividends, and you're going to get a higher price in the future. This is simply different kind of claim on the future. Another way to borrow from the future is through government promises. While debt is the one that most people focus on, shares of stock and government promises have the same effect. They all are promising more and more future stuff. So unless we truly have more stuff in the future, we won't be able to make good on these promises.

But oil prices higher than $20 per barrel are putting too much pressure on the economy. The cost of everything goes up at the same time. You use oil to get your metals out because you're using that in your extraction process. Also, the same things that cause oil prices to rise cause natural gas prices and coal prices to rise, too.

So what happens is everything has to go up in cost at the same time. Though people's wages are the one thing that don't. So what happens is they get squeezed. They get squeezed badly, and they start defaulting on their loans; auto loans and student loans first. We probably will soon see more business loans default, too. But it's also the individuals who are getting squeezed the worst. This will only worsen as oil prices rise and as other prices rise, too.

The crisis we're likely to face is going to look like the Great Depression. It's going to look like people being laid off from their obs. It's going to look like banks closing. And it's going to be that kind of crisis.

We simply don't have nearly enough affordable energy to support today's population. This should be very disturbing to every one of us. Apart from taking increasingly desperate short-term measures to put the crisis it off a little bit, it's hard to see a solution.

Click the play button below to listen to Chris' interview with Gail Tverberg (63m:24s).

Transcript: 

Chris: Welcome, everybody, to the very first Peak Prosperity podcast of 2018. I am your host, Chris Martenson. It is January 3, 2018. Now, before I begin, I need to note that 2018 marks the 10th year anniversary of the Crash Course, the very first chapter of the online video series called the Crash Course. That went up in May of 2018, and as Adam and I have already mentioned, there will be a Peak Prosperity seminar in May of 2018 to mark that anniversary. That will be out, as we talked about, in Sebastopol, California. But, wow, ten years in, and there are certainly many successes along the way, but also some notable failures. Perhaps none larger than I personally take - the loss of focus on oil that society at large has undergone, lured by this false promise of shale oil, which to me is a flash in the pan, low net energy enterprise.

Many people have wrongly turned their attention away from energy and the role of energy in creating everything that we either hold dear or take for granted. No energy, no anything else. That's the formula. Said differently, without primary wealth you can't have any secondary wealth. And without secondary wealth, all the stocks, bonds, currency and derivatives, all of those expressions of tertiary wealth have no value. But, even as people were not paying attention to oil, the biggest news of our lifetimes was rather quietly snuck out and it's this: oil discoveries have been abysmal in each of the past four years. 2014 was bad. 2015 worse. 2016 was abysmal, and 2017 we now know was the lowest of them all. Now, those lack of discoveries sets the stage for future oil shortages that will absolutely, positively create massive damage to the tottering tower of tertiary derivative claims upon which so many unmet promises and dreams are perched.

And that's why we're starting out 2018 on the all-important topic of energy. Oil energy specifically, and how energy and the economy, debt financial markets, all the rest of those items, how those all interact. And who better to discuss this with us than Gail Tverberg? Gail has been on the program before several times. It's time to welcome her back. Gail is a professional actuary who applies her risk assessment expertise to finite world issues: oil depletion, natural gas depletion, water shortages and climate change. Now, for years Gail authored some of the most informed analysis on the global net energy predicament in her post at theoildrum.com published under the pen name Gail the Actuary. And today she runs the very popular blog ourfiniteworld.com, and there you will find both really hyper intelligent articles and intelligent comments as well. Gail, thank you so much for being back on the program with us.

Gail: Well, thank you for inviting me. Happy New Year.

Chris: Thank you. Happy New Year to you. Now, in my introduction, I made the assertion that the lack of oil discoveries is really big and really underreported news. Do you agree?

Gail: Well, yes, and no. I think it's hardly – you know, we've got an awfully lot of discovered unconventional oil that if we could get the price up high enough we could get out. But it's the fact you can't get the price up high enough that means that the stuff stays in the ground. So, if you look at the forecast of all of these other agencies, they're looking at it from a point of view of we already know about a lot of unconventional oil. If we could just get it out, all we have to do is get the price up higher, or at least that's their view of it. And so, if we could get the price up higher we could get the unconventional oil out, and we could probably get more even of the conventional oil out because we could use secondary and tertiary techniques. So I tended not to focus quite as much on that.

Chris: Now, the reason I'm focusing on it is because you have to find it before you can pump it, and the types of projects that have not been prosecuted, if that's reflected in those low discovery numbers, are the big, long running and long lag time sorts of projects: the deep water, the ultra-deep water, the very expensive capital intensive things that we might do in tar sands or in Orinoco Belt or the infill drilling that's required out in the North Sea, those sorts of things. Now those tend to be fairly high flow rates sorts of phenomenon and projects that can be run. So, I think we're in agreement around the idea that since those projects will not be coming online, the only way we're going to coax more out of the existing oil that we know about, in particular the shale oil, is much higher oil prices.

So, in your mind, what's the intersection of higher oil prices and the largest amount of debt that the world has ever seen? In my view, I love something that Jim Puplava said many years ago, which is that the price of oil is the new Fed funds rate, meaning that a big hike in the price of oil will operate in the same way that a hike in interest rates used to operate, which is it will slow down economic expansion. We might think about this more simply as the top selling cars in the United States these past four years have been the F 150 truck, the Silverado, and the Tahoe. Now, these are all big, giant gas burning vehicles. These have been purchased by people, in many cases, who live in exurbs, say, very far from where they work, and so of course, a price hike in oil leading to a price hike in gasoline in going to be very difficult for those people to endure. It will translate into a loss of purchasing power for other things as they spend that money on gasoline instead, and that's how it operates. So would you agree that the future has an oil – needs to see higher oil prices in order to remedy that discovery shortfall? And if so, I want to talk about what those higher oil prices will mean, given the level of debt we have in the world today.

Gail: Well, I agree with you that as soon as you start getting higher oil prices, that definitely puts pressure on the economy, and I think if you look at it, it's not – everything goes up at the same time. You use oil to get your metals out because you're using that in your extraction process. And you're also – the same things that cause oil prices to rise cause natural gas prices and coal prices to rise, too.

So what happens is everything has to go up at the same time. And people's wages are the things that don’t go up. So what happens is they get squeezed, and they get squeezed badly, and they tend to default on their loans. Auto loans are probably one of the first ones, so the student loans – we probably should be seeing more of the business loan defaults, too. But it's also the individuals who are getting squeezed. And I think we can expect to see more defaults as oil prices rise and as other prices rise.

Chris: One way that I look at this is 2008, right, and popularly in the United States press at least, we say oh, that was a housing bubble that burst, and there were these credit default swaps and other derivative things like CDOs and whatnots, and that was the problem. But when I look at why Greece toppled and failed, Greece didn’t have any exposure the US housing industry. What Greece had exposure to was the fact that it's a 100 percent oil importing nation, and in July of 2008 oil went to $147 a barrel. This created an enormous balance of payments problem for Greece, and suddenly Greece was exposed as a country that was insolvent fundamentally. And that led to the whole Greek crisis, which they are still fully enmeshed in.

Here we are a full decade after the onset of that, and Greece is in what I would call a capital "D" depression with no end in sight. They’ve had extraordinary austerity imposed upon them by Brussels, which is a whole different discussion, but fundamentally, when I look at that I say, here's a textbook example of what happens when you're even an entire nation, you produce no oil of your own, and you get exposed to a big oil price shock, and the rest is what happens when we see debt and oil prices combine.

Gail: Right. A different way of thinking about is it's very much dependent on tourism. Tourism depends on people flying by airplane and those airplane tickets cost a whole lot more when the price of oil goes up, or the price of boats, also the cost of running them, operating them goes up when the price of oil goes up. So, Greece was very much exposed to rising oil prices because it is such an oil dependent nation. It also has all these little tiny islands, and those islands it's hard to generate electricity except using oil. And that's another thing that tends to raise their prices. Anyhow, but that's part of the reason why Greece is in such a fix.

Chris: Well, absolutely, and that would be sort of my prediction going in. Now, we're going to see this again, and it's my view that these aren't just the worst oil discoveries. It's not like the headline for 2017 said, wow, we haven't discovered this small amount of oil since 1940. But the truth is, in my data series, Gail, I cannot find any four-year period – I couldn't find any three-year period – but four really cements this – that is this low in the entire history of my oil database which goes back to the '20s. So this is the worse four-year period of discovery, and so we have to believe one of two things is true; oil companies have been wasting a lot of money in trying to discover oil, and turns out that was an unnecessary enterprise that they, for many, many decades running, just were wasting money on, or it does matter.

And so, when it does matter, we're going to see oil shortages in the future, and under that scenario we will see oil price spikes. And this is why it's so important to talk about energy and the economy because of that linkage. I know it gets a little – it's tricky with the prices and all of that, and how much debt there is, all that, but let's just back up for a second. You do a lot of research and develop charts showing what appears to be a very tight linkage going to the economy and energy or GDP growth and energy consumption. What's the relationship there as you’ve determined it?

Gail: Well, I think of the situation being kind of like a bicycle. You have a front wheel and a back wheel, and actually you probably have the frame as well. And the debt is the front wheel. It's what makes it – pulls it forward. It makes it go. And the frame is all of these technologies that allow you to use this energy. And the back wheel is the actual energy itself. And in order for the economy to keep rolling along, you need to have this whole bicycle operating properly. And once – if you don’t have enough debt pulling the bicycle forward, the bicycle tends to fall over just as your bicycle would fall over if you stopped – if you slowed it down too much.

But it needs the real energy for the back wheel as well. And it needs additional technology. And of course, it needs the buyers for all of these goods and services, and they have to be – have enough money to be able to afford things. And usually the way you get that income down to the buyers is through debt. The businesses borrow some money, and they use that to hire workers. Our governments borrow money, and they use that to pay Social Security payments and such things. And it's this debt that enables this whole process.

Chris: Well, I want to get to debt in just a second. The charts, as I see them, on one axis we have GDP growth. On another axis there's energy consumption. And it's not like this is a scatter plot where we have to squint at it and say we think we see some sort of relationship. These two things come together into a series of dots that you can draw a darn straight line through, and it's a very, very high degree of linkage between the two, meaning that however many more units of GDP you're going to get, you can see that it requires a few more units of energy consumption. So it's a really – I've not come across, Gail, in my economic research yet, any tighter data series than this one. It seems pretty robust. It goes back many, many decades, and it simply says that economic growth requires growth in energy consumption. Would you agree?

Gail: Yes. Very much so.

Chris: So that's something that I'm interested in. Before we get to the, I think, the really interesting part which is what this means going forward - and we have to understand that in terms of per capita energy consumption, and then we'll get to debt as well. So bookmarks on both of those. There's this idea of decoupling. I read about it all the time, and I want to know if you have any evidence of decoupling which is this – decoupling is the idea that as we get more efficient or we increase productivity in economic parlance, that we will end up with more units of economic output for a given unit of energy consumption.

And if we were talking about this chart which has a really straight line, dots between energy and economic growth, decoupling would say we would see some wobble in that line. That over time it would, depending on how we oriented our axis, we would see us getting more units of GDP for a given unit of energy. That is, the line wouldn't be straight any more, it would begin to flatten, whichever direction you’ve drawn your axis in your brain. But that's what we would see. We would see this decoupling. Gail, do you have any evidence of decoupling in your data yet?

Gail: Well, we've got a couple of places where things looked like they got better temporarily. We'll say in the 1970s, you know, we went to some smaller cars, we took our oil-fired furnaces, and we replaced them with something else, at least more efficient furnaces. So there was some places where we used a huge amount of debt, and we managed to get a little bit of what could be interpreted as decoupling.

But what I've noticed, when we get something that looks flat, it's not a good situation. The flat per capita energy use is something that happened between about 1920 and 1945. Well, that wasn't a real good period of time. You had the Depression. This is what you get with flats per capita energy. We had, later on, there was a flat period which indirectly resulted from the greater efficiency of these automobiles and such things, so we really didn't need quite as much oil. But that was when the Soviet Union collapsed.

So there's indirect effects. Part of the world economy ends up collapsing, or at least that's what's happened. We've had different kinds of collapses, not really a complete collapse in terms of the Depression, but we had the collapse of the Soviet Union. So this is the kind of thing you get when you have flat energy per capita. If it actually goes down, this is not a good sign.

Chris: So let's talk about why energy per capita, if that's going down, that's not a good sign. And by the way, one of the charts that I've got that I've been talking about for a while that I think is really relevant and important – there's a mystery out there. Here's a mystery, an economic mystery which is, gosh, today it seems like people have a hard time getting by on minimum wage. In fact, it's impossible as far as I'm concerned. In fact, two wage earners earning minimum wage, not enough to support a household in a lot of communities and most major cities. And so we've gone from a situation in the 70s where we had this so called traditional nuclear family in the United States with one breadwinner supporting a household, and now it seems like even two breadwinners not quite enough. Gosh, such an economic mystery. Is it related to globalization, what is it?

Well, in my view you could do worse than to pull up a chart that shows per capita oil production in the United States, and discover that that peaked somewhere around 1970s, and it started to trundle down ever since. And it's only recently come back with shale oil, but that's not a high net energy oil as the original discoveries we were living off of back many decades ago. So, to me, it's an explanatory factor that says, wow, this per capita energy that we're developing as a nation, that somehow factored through very – in a lot of complex ways into the general prosperity of the nation. And there was enough that it could be shared broadly with this thing called the middle class. And that ever since that time, what we've seen is just a general sort of a steady erosion of that middle-class standard, certainly a hollowing out. And along the way, coincident with that, was the Federal Reserve couldn't figure out anything else to do besides continually drop interest rates lower, lower, lower, lower, across the entire 35-year timeframe to zero because we need more debt. We need that front wheel of the bicycle you said. We need more debt.

And all of that sort of comes together in this moment in time. Here we are in 2018 which is why I think this is really actually – I know it's complex and there's a lot of moving parts – but it's probably, nah, it's the most important thing that needs to be talked about and discussed because for me, let me back up to my introduction. Energy is everything. Everything else is a derivative of that. All the complexity, all the debt, the derivatives, bitcoin, new technology, all that stuff. None of that matters if you don't have energy.

And so we're here at this point in time where energy per capita is really probably an easier and maybe has more explanatory power. It's a better way of looking at this all than saying, tell us about the net energy of a situation because how much net energy shale is producing versus coal versus all that stuff. It's interesting, it's good, but maybe we could get a better glimpse at things by understanding that it's the number of people we have, and the amount of energy they have available to them that, in very complex ways, combines into what we might call our general experience economically, financially and all of that in the world. Is that – am I close to how you're looking at it, or is there more I need to understand here?

Gail: Yeah. I think you're right. And you know, the straight-line correlation you see is a straight line with total energy. It's not with oil, it's with total energy. And so, if somebody says, great, we closed down all this coal, you got to say okay, but what are we going to replace it with? You know, this is not a great outcome. It's pretty much equivalent to not discovering oil. Maybe it's worse because even if you voluntarily shut it down, the economy needs energy to grow. To get jobs we need energy. They depend on energy. Your employer wouldn't be able to hire people if they did not have fairly inexpensive energy. So I think this is the thing that people sometimes miss.

Chris: Yeah. And so, not just people but economists. I don’t know of any mainstream economists that have really factored in the idea of energy at all at this point. They just have this assumption that the lowest people – oh look, there's all this shale oil. But, of course, once you peel back the shale oil story you discover a number of kind of uncomfortable things, including the data that in no year running since 2008, which encompasses a very wide range of both financial conditions and oil price circumstances with oil over 100 and under 30 and everything in between, and under none of those years has the shale oil industry returned positive, free cash flow. In every possible regime, it's been a money burning enterprise. And that's okay, as long as there's more and more debt that's willing to be thrown into that, and you’ve got enough liquidity so that people don’t what else to do with it and, so they’ll support the equity issuances of these companies. But anyway, hundreds of billions of dollars have been thrown at this, and none have been returned yet.

So I think that's a really false promise at this point in time. I think there will be a lot of discovery around the idea that a money burning enterprise is not a healthy one at heart. I think shale could be a money generating enterprise, Gail, but at prices that are a lot higher than this. And then we have to broaden the understanding of that shale oil a between further to understand that it's also publicly subsidized in the sense that in Texas, for instance, I know in 2015 they gathered around 1.2 billion in severance taxes, and suffered about four billion dollars of road and bridge damage from all the trucks driving around given the fracking and whatnot. So the public subsidized that industry in that one year to the tune of a little over $2 billion. So once we factor in the total cash flow of shale, I think it's an energy and money positive adventure at oil prices that are twice what todays are. And it's around $60 today. So that's my personal analysis.

Gail: Well, it wasn’t positive cashflow before when the price was close to double what it is today. So I think we probably are causing – we have to cross our fingers. What they’ve been pulling out right now it the easiest-to-get-out oil. And so, by the time it goes back to double this amount, assuming it could, they're going to be working on oil that's that much harder to get out. So it's not all that clear that it would make money at double the current prices.

Chris: Yeah. And in fact, it's the reason they’ve been negative cash flow through every regime is because as the price of oil goes up, oops, so does the cost of getting it out of the ground because of normal economic pressures such as supply shortfalls of workers, and sand costs go up, and as the price of oil goes up all derivatives of oil go up which includes the steel used to produce – needed to produce the piping and all that stuff. So you're right. It's an open question mark as to whether if oil actually goes up in price, whether or not this will actually be a money-making enterprise. It might be that it's not. It might be that there's no combination of factors that will allow shale to actually be a money-making enterprise.

And so that bring us to something we bookmarked, which is this idea of debt. This front wheel of the bicycle, as you said. Now, our economy, it's intricately wedded to the form of money we've adopted, and that money is debt based. Every unit of currency. Be that a euro, a yuan, a yen, dollar, doesn't matter. All of them are loaned into existence. And therefore, what we can say is that all of our money is backed by debt. Debt is, therefore, it's a claim on future money. We borrow money today, then we back it with debt, and then we pay that back later. So, Gail, those claims on the future have been compounding in a faster rate than the economy for nearly five decades. And zero mainstream economists see any problem with that. Do you?

Gail: Well, what we really live on is what we pull out of the ground each year in terms of oil or coal or natural gas or whatever. So what we have is just what we pull out. Now, you point out that what we're doing is we're making claims on the future from debt. We could do it a couple of different ways, which are pretty much equivalent. One of them is that we could sell shares of stock. Now, this isn't what we call debt, but it has the equivalent effect because what you're saying is I'll pay you dividends, and you're going to get a higher price in the future, and somehow or another this is different kind of claim on the future.

And there's a second way beside the debt, and that's government promises. You know, you can say, when you retire we're going to give you Medicare, we're going to give you Social Security. we're going to do all these good things for you. But we don’t actually set it up so it's a liability on our balance sheet. So while it's a promise, there's no debt associated with it because tomorrow Congress could vote and say well, we decided to get rid of Social Security and Medicare, and so there's no liability there. So there's a lot of ways that the same thing results. I know debt is the one that people look at and say oh, that is just terrible. But in fact, shares of stock and government promises are the same things. They all have, in fact, are promising more and more future stuff which unless we really have more future stuff we cannot actually make good on these promises.

Chris: Well, thank you for making that point – both those points – because I support them just wholeheartedly. One is real wealth is the stuff we pull out of the ground and whether – and it begins with energy because without energy it's very, very difficult to mine anything or grow anything. So one of the other derivatives of a higher oil price is a higher food prices because of the degree to which fossil fuel energy is so intricately wedded to our current way of farming which involves creating nitrogen through Haber-Bosch process, and then using that nitrogen to put it into soils that have been fundamentally depleted of nitrogen, and then harvesting that, and then bringing that on to a plate, and then flushing the result out into the ocean eventually is the model.

So as we look at this, it's really important to understand the time series in all of this. So yeah, the original source of wealth is the stuff in the ground. Obviously, you can't get more and more and more out forever and ever and ever. That's called infinite growth on a finite planet. Bad model. Doesn't make sense. But what you're noting here is that debt is a claim of the future, yeah, but so is equity. Issuing shares – that's a claim on the future, and so are government promises. And we've been seeing those promises already buckle, and in some cases, fracture under the weight of zero percent interest rates have destroyed pensions. It's really ruined the idea of future compounding and growth. We already see the troubling warning signs there, but when we add it up we really have to say, look at all these – everything's a claim on the future. And we have all these independent, very large things, any one of which is too much already. Too much debt claiming of the future, too much equity claiming of the future, too many promises, combine all that and we have too many claims.

Gail: Even think about health insurance programs. If you have some kind of a program where you could somehow or other make everybody live to be 100, but it's going to cost you $10 million per person, and we're going to charge everybody health insurance premiums for that. The catch is you can't really afford it. You end up with a health insurance program, but it is a promise of future benefits which is not affordable and it, in a way, becomes just like all of these other things – the Medicare and the Social Security. But it becomes a promise of some kind of benefit that's just not payable with what we actually have available.

Chris: So how do you, in your mind when you look at this – a lot of your writing is around this idea of intellectually saying hey, people, here's some data. Look how this data comes forward. This was a really interesting period humans came through. You know, we went from one or two billion to seven and a half billion. We went through all the easy stuff in terms of fossil fuels. We're through the easy stuff. We're down to slightly harder stuff, and we're mixing that in with former easy stuff, so it's a blending process as we kind of blend in higher net energy stuff from the past with this new lower net energy stuff. So as you look at that where we are in this particular part of history, if you had to, Gail, set a dial, sort of an alarm scale, like one is nothing to worry about, ten is oh my gosh, we really have to be doing things differently right now to begin to confront this, where would you set that dial personally?

Gail: I think that once we left $20-barrel oil we had problems. We had to add more and more and more debt, more and more promises to try to cover up the problems. And you know, when we took our eye off the ball, when we started lowering our sights and saying oh, but maybe it's okay if it just sort of – it's not really a substitute for oil, and it's kind of expensive. Well, we could probably get along with that. I think when we didn't stop to realize that $20 a barrel oil in inflation adjusted terms is really all we could live with. And the coal and gas have to be low priced, too. And we've been covering it up with more and more debt and more and more promises. But it was very long ago that we left the what-we-could-afford kind of situation.

Chris: Yeah. And I guess that's been my main critique of the Central Banks, which I think they've got two fingers crossed behind their back. One set of cross fingers is because they're hoping, and the other is because they're lying to us about everything. And so what they're hoping for is that somehow miraculously rapid economic growth would return. And so under this model you just described, once you leave $20 a barrel oil in the past with coal and natural gas being derivatives of that price of oil, that once we left that in the past, the form of growth that we got addicted to during the heyday of high net energy or high per capita energy, that growth was no longer possible.

So we took actual organic growth that was fundamentally based and rooted on the idea of people organizing around extractable, economically extractable resources – energy and then everything else – and we replaced that with using debt as sort of a whipping – a horse whip to keep everything going. So debts been going up like crazy, but you know what we're got? These last ten years, Gail, are the lowest ten-year average global growth economically of the past sixty years. It's a really bad ten-year stretch. And so you're saying maybe we could understand that by just looking at the price of energy.

Gail: It has to be really cheap, and we have to be able to grow it really fast to keep the whole system going. And it's not affordable unless it's down under $20 a barrel. And we lost sight of the fact that you have to keep the cost low enough. I think what happens over time is that the cost of energy products has to go down. We become more and more efficient at using the energy we have. And so the way a world economy can grow is by spending less and less on energy related costs. Food becomes a smaller piece of the total cost of an economy, but so does oil for operating the cars and all of the other energy needs. But this is a long-term pattern – is a lower and lower cost so that other parts of the economy can grow.

Chris: Well now, people like to have hope, and right around now I'm sure some people are thinking hey, this is good news, Gail, because the price of solar has been dropping like crazy, and so has the price of wind power. So when I say alternative energy I'm talking solar and wind. I don’t' want to talk about hydro – separate topic – all of that. So alternative energy, solar and wind, do you see those as really viable replacements at this stage for the fossil fuels that we've been living on?

Gail: No. I think they're close to worthless. People have not stopped to figure out that intermittent electricity doesn't do much for you. In fact, it wrecks your system. It wrecks the pricing system for the electricity. And they haven't stopped to figure out that you really have to make it dispatchable. You really have to make it non intermittent, and fit in with the rest of your electricity production. What it tends to do is push out the types of electricity production that you really need to run your electrical company.

And so what happens is your nuclear power plants say they need subsidies, or they will go out of business. And that's right because you can't pay them negative amounts for the electricity they create. And you get the same problem with coal. I think it even artificially reduces the price of natural gas. So there's really a real problem for the electrical grid, and people have not stopped to figure out that you just cannot run your system on these things, on intermittent electricity.

Chris: Well, as well to that, one of my favorite videos – it a beautiful video – it's a time lapse of a wind tower going up – and what I like to do when I watch this is just see if I can spot any place where fossil fuels might be silently embedded in this. And the first thing you see is these giant CAT D9s show up to sort of level the space. And then the backhoes show up to dig out a spot. And then that spot dug out is where they're going to put in the 100 thousand pounds of steel into a multi-ton concrete base. And of course, concrete is formed from cement, and cement production requires – usually it's either natural gas or coal – it provides the heat that reduces the lime to create the concrete, the cement mix. On and on and on. Every single part of putting that wind tower up was an expression of either diesel, coal or natural gas at some point along the way. And then it produces electricity.

And my observation about that is that's cool, but it's only great if you use the electricity from that wind tower to manufacture entirely all the components for the next wind tower that's going to replace that when, not if, when, it finally becomes obsolete, it falls apart, it's no longer worth maintaining, whatever happens, right. And we don’t have any closed loop system like that, and I don’t see any plans for that at this point. I see people loving the idea that we can start to park these wind towers around and claim, wow, look at the cost of electricity that comes from that. But it's a subsidized, heavily subsidized number that has no actual bearing to the full life cycle replacement cost of that tower if we're using the energy from it to create a sustainable replacement pattern for that tower. It doesn't seem like that's too complex of an idea, but boy, you run across that almost never in print.

Gail: It's the fact that you have to somehow or other subsidize this whole system with other fuels that makes the thing such a problem. You have to have other fuels sitting there idly, and actually getting paid negative very often while – in anticipation of the time that they are needed to put out electricity to balance the wind and solar. And we don't have that built into they system. People say, oh, it's only costing four cents a kilowatt hour for wind or solar or whatever it is. Well, that isn't the cost of the dispatchable electricity. It's just of this electricity not necessarily when you need it. So it becomes a problem given the way the prices are.

Chris: Well, indeed. And the thing that would give me hope that I could say, wow, all right, I could see a path through this possibly – obviously, I don’t see a path that doesn’t require a future of less, right. I don't think 2,500, 3,000 square foot McMansions with one or two people rattling around with 38 very efficient, but each independently phantom load electricity sucking devices, so that what we see is – we can't persist with the same amount of per capita energy consumption. We'll have to make do with less. But the thing that would sort of change this for me to say – to move this from predicament to this is a problem. Predicament is not having any solutions. Problem is okay, we can do this is some form of storage.

And there's not that many opportunities for storing electricity. There's some low probability sorts of things or let me say low circumstance. There's not that many places to put in pumped water storage, and there are not that many places to put in air and cavern sort of solutions. So those will be kind of localized. But generally, we need batteries. And I still don’t see the battery thing coming along. I know people are all excited. Oh, Elon Mush, he put in a 100-megawatt plant down in Australia, but when I look at the battery chemistry, the full life cycle of how many cycles you can run a lithium battery through and how much lithium there is in the world, it just doesn’t seem to me that the chemistry of lithium at this stage is even remotely scalable to what we really need to see. I would be excited, Gail, if we had some new chemistry come along that could really change this. I haven't seen it yet. Are you at all familiar with this area? Do you look at this, and do you have a sense of whether or not that if we came up with the right kind of batteries that that could be a way to get through this?

Gail: Well, basically, I think the whole idea is silly. What happens is that you need to store the solar energy from summer to winter. So how much do you really have to set aside, and how much do you have to lose between summer and winter if you're going to store this stuff? I mean, this is just not going to work. Think about it – you know, the North Pole or the South Pole – you have a problem because it's not – it's just an hour or two difference in the timing. It's a time of year problem. And people don’t realize what a big difference it is.

I know that big battery out in Australia. They said, oh, it could provide the equivalent of the electricity for 30 thousand houses for an hour. Well, it turns out if you actually put the businesses with it that go with the houses, it would include the electricity for 10 thousand houses plus the associated businesses. So we're not talking huge amounts. We're just talking one hour for a smallish city – a smallish town probably. So the size they're talking about and the cost – it's absurd. It's not something you can do.

Chris: Well, and that's if you were willing to run the battery all the way down to zero, I bet, and you never do that with a battery because it destroys its overall lifecycle. A lithium battery run to zero has around 500 cycles in it, and if you run it to only 30 percent of its drawdown you can get up to 5,000 cycles. You would never do that because you would be damaging the battery. And of course, yes, this is the part that I find – when I said there have been some failures out there – and to me I consider it a little bit of a failure that there's not a more widespread general recognition of really how serious this energy predicament is, and that we're going to have to make some fairly serious tradeoffs over time, and we're not there yet.

And I'll give you my local example. I see houses going up in little housing developments, and they're not well insulated, and they're not oriented south, and the glazing of the windows is inappropriate, and all kinds of things which are very simple. Stuff we knew back in the 70s that if we were serious at all about this we would say every house would be facing the right direction to capture what solar is available here in Massachusetts passively. And we'd probably put some active systems on there including solar hot water which is a fantastic energy device over time – huge net energy returns on that as an idea because guess what? The sun heats stuff up brilliantly - making electricity out of it a little more complex, right. And so on and so forth. So it just doesn’t feel to me, Gail, like we're that serious about this yet, but you write a blog, and you go to conferences, maybe you have a different perception of this. Where do you think we really are in this story in terms of awareness of these issues?

Gail: Well, I think that the issue is not that you can suddenly save all of this energy, and it somehow or other will keep your system going. Even if we built all of the handful of new houses that we're building more efficiently, and even if we drove more efficient cars, it wouldn’t do much of anything. But the issue that happens is that we're facing – the crisis we're likely to face is going to look like the Depression. It's going to look like people being laid off from jobs. It's going to look like banks closing. It's probably going to look like low oil prices, low natural gas prices. And it's going to be that kind of a crisis. And even if people have a solar hot water heater, it's not necessarily going to help them that much if they have really no services, if the electricity goes off. I'm not sure what all is connected up, but there gets to be so many things that are interconnected, they may not have any water system that's working, for example.

So it becomes hard to know what you could do. How does this whole thing play out? Can we restrict it so it's only certain parts of the world economy that fall apart and not the whole world economy? But the concern is that what we're facing is not – there may be a spike in oil prices, but the general direction is down, not up. And it's not something that you can build you way out of, I don’t think. If you think about the 1930s, and that's the kind of thing that we're up against, I think.

Chris: So you're talking about a deflationary outcome, and this is a very easy to predict thing. Just economically, when you have too much debt deflation is the normal clearing mechanism for that. But in this story what's different this time is that whole world has gone on an extraordinary debt binge. So the overhang from that is likely to be extreme. As that gets worked through and goes into a deflationary spiral, low oil prices are just going to absolutely destroy the oil industry. Which the already did – we see that in four years of dismal discovery data. At some point, without additional equity and debt flowing into the shale business, we discover that that's a busted business and those companies all stop operating. So that's, I think, the model you're talking about is that they way this "resolves" itself here is by ringing out all the prior excesses. But there's so many in this story, Gail.

We discovered that our farming system was really a subsidized enterprise, and when you pull the subsidies away it collapses to a far lower state of output then it currently is. And we discover that cities are subsidized adventures in their giant resource consuming centers. They don’t produce anything, they consume, and that comes from an understanding that primary wealth and secondary wealth – from the land – those are the resources. That's the stuff that counts. So we've really been subsidizing a lot of things, probably the most important of which is this delusion, and we've been subsidizing it heavily as seen in the great signaling mechanism of the rising equity markets that signal to everybody that everything's okay. We're good. We'll put a few stories about Elon Musk out there and some big batteries and blog and feel good about this.

But the data say that what we've really been doing is borrowing heavily from a future that not only can't be larger, but may well be smaller, and that the sorts of solutions that we've been somewhat half seriously sort of poking toward which might include alternatives or one tiny home development in a giant city region that the zoning people can conceive of allowing, or whatever these things are, they're not serious given this time, the scale, the cost of what we're up against. And so what you see coming is that basically – would this be unfair to characterize it as the second Great Depression? Is that fair?

Gail: Yeah. I think that's the closest analogy we have is the Great Depression. Yes.

Chris: And so, as you mentioned, that's bank closures, entity failures, maybe a couple of sovereign defaults tossed in, a lot of people out of work. Not everybody I assume, but a lot of people, of course, because the frivolous jobs that were unnecessary go away. They no longer can be supported, so we get back down to the basics at that point. And I'm sorry this isn't the most upbeat possible way to start the year, but this is reality. So how do we go about getting people to face that reality? The data seems to work on a relatively few people. What do you think works? How do we get this across to more people going forward?

Gail: Well, if there was something that you could actually do I think it would be - people want a story with a happy ending, even if it's a made up happy ending. And that's why all of this stuff about renewables will save us is so popular is you’ve got to have some kind of a happy ending. And I haven't been able to come up with anything. Depression is just not a good outcome. And you don’t get enough energy from cutting down your forest. This is not a good idea to begin with, but that gets to be the only kind of renewable that really works when you lose the fossil fuels because you can't even maintain your hydroelectric without fossil fuels.

And so you don't have nearly enough energy to support today's population. So this becomes very disturbing. And we can party like it's 1929, but it's hard to come up with something. I'm hoping I'm not seeing something. I would like to think there's something – maybe there are little pieces that can break off that don't do well. The Yemen's of the world, even the Mexico's of the world that are not going to do well, and maybe the rest can kind of hang on for a little bit longer. But apart from putting it off a little bit, it's hard to see a solution.

Chris: Well, that's because predicaments don’t have solutions, the have outcomes. So we're at that stage where we have to manage this, and you and I haven't discussed the ecological side of this, but the data there is disturbing and increasingly disturbing. In fact, accelerating disturbing as we go into this with amphibians collapsing worldwide or reptiles as well or…

Gail: Insects.

Chris: Insects and coral reefs and phytoplankton. I mean, really bottom of the food pyramid kind of stuff which any sane, intact culture would say time out. We need to figure this out and stop doing whatever is causing that because that's not a good idea.

Gail: Well, clearly, one thing we could have done quite a while back is go to pretty much a plant based diet instead of so much animal food because that would reduce our pressure on the world ecosystem. But, of course, it would allow more people to live, so it really wouldn't do anything. It would allow the population to go from 7.5 billion to 9.5 billion or something. But that would be one way. I think that would be a more likely way of reducing pressure on a system then wind turbines and solar panels, for example.

Chris: Well, I'll tell you the way I use this macro data, which I agree, it's a predicament. I don't see any clear way through it. But the way I use it in my own personal life is to begin reducing my own energy dependence, begin growing my own food to begin preparing for the idea that many jobs may disappear, including my own. That is that I'm not taking today for granted, and I'm understanding that how things are currently arranged is unlikely to persist, and that there's a new world coming along, and that however this shakes itself out that in a thousand years there will still be people, there will still be something called an economy. All of that will be true. It will be vastly different from today.

My little waggish comment, Gail, that I tell people is I say, oh, I have every confidence that we're going to go into 100 percent renewable energy. But if you unpack that it really means that we may end up looking like people did in the 1700s which was entirely based on renewable energy. It's just whatever sun lands on your field, that's called the energy you got in that next year. So maybe we're going there, but the reason that I do what I do and think you do what you do is because there is a different path here, that we can understand these things, that we can craft a different narrative, that we could come up with something that we could believe in, but we'd have to begin doing things very, very differently. And if only we lived in a culture which valued making decisions based on available data, I think we'd be doing things very differently than we currently are.

So thank you for doing what you do. And I love your blog. People can find it, again, at ourfiniteworld.com. And Gail, it's wonderful talking with you and starting out the new year here with you. So thank you very much for being of the program. And is there anything else you'd like to tell people about where they can follow you or maybe see you speak any time in the future?

Gail: Just ourfiniteworld.com I think is what I'd suggest.

Chris: Well, fantastic. Well, thank you, Gail, so much for your time today and for the work that you're doing.

Gail: Well, thank you.

About the guest

Gail Tverberg

Gail Tverberg is an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to inadequate supply.

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110 Comments

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
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Posts: 5783
Don't forget about the concrete...
davefairtex wrote:

 Once we get to a point where energy is more scarce, we'll be in one of those catch-22s where we need to change our infrastructure in order to save energy, but we will be hard-pressed to find the energy to do so.

Great points Dave, as usual...and I want to remind everyone that because of the short-sighted, profits-today-count-for-more-than-a-better-tomorrow mentality most of the world, but especially the US, is going to be having to replace ~100% of its existing concrete structures over the next 100 years.

In every single reinforced concrete structure, silently behind the smooth exterior, the concrete is breaking itself apart due to the corroding steel inside.

What all this means is that literally everything you see today that’s made of concrete will need to be replaced within a hundred years of its installation.  Every bridge, every building, every roadway…all of them.

They’re just rotting away from the inside, silently and relentlessly.  When the rot progresses far enough, it leads to something called ‘spalling’, which is when the surface of the concrete crumbles away to reveal the rusted steel beneath.

Once you notice this, you’ll see it everywhere: 

So let’s travel forward just a few short years into the future. There we find hundreds of trillions of dollars more of global debt, even greater sums of unfunded liabilities, much more expensive fossil fuels (as explained in this recent podcast with Art Berman) -- all competing with a crumbling concrete-built environment that will have to be torn down and replaced.

Where the article above concludes that trillions of dollars will need to be be spent just in the US alone to replace its concrete infrastructure, that number will be at least an order of magnitude higher for the entire globe.

And we don’t get much incremental benefit for the cost of replacing a crumbing piece of infrastructure. When you tear down a bridge and replace it you still have one bridge performing the services of one bridge. Sure, you occupy a number of people in the construction and manufacturing trades for a while, but you don’t get any added value beyond that. It’s not the same as putting in a new bridge at a new location to open up a new geographic area for greater economic activity.

You just get your bridge replaced.  One for one: an economically neutral exchange that costs a lot of money.

My larger question here is this: Can all the competing future demands even allow all of the current concrete infrastructure to simply be replaced, let alone expanded?

What if there’s not enough energy for that task, plus the demands of feeding and sheltering and defending ourselves?

It's my strong belief that we’ll regret the short-term mentality that led us to trade durability for lower cost. Furthermore, I contend that competing future demands will prevent us from replacing all of our decaying infrastructure with similar copies.

Either they won’t be replaced at all because we cannot afford to do so (see: Detroit) or we'll have to bite the bullet and begin installing truly durable structures that won’t simply tear themselves apart from the inside in a few short decades. Which will likely be a lot more expensive to build.

(Source)

This was one of the more personally impactful articles I wrote in the last few years.  I learned something and it changed the way I see the world around me.  Now I notice spalling everywhere.  

I see how much of our existing infrastructure is, essentially, disposable.  It's built to be replaced, and soon even by human standards.  It rests upon the assumption that the energy will be there to do this.

According to the EIA cement is the most energy intensive of all manufacturing industries (click on image to be taken to source) and it's production is (of course) intimately linked to economic expansion:

And of course that's just the manufacture of the cement...not the mixing into concrete, transporting and pouring into a new structure.  Those cost extra.

All of these new energy costs all begin to hit about the same time.  You know...in the twenty years between 2008 and 2028.

 We're going to have to make other arrangements, and that especially includes the Chinese who may have a slightly greater focus on electric cars (sorry, but they are still only (45/24,200) = 0.2% of total yearly sales in 2017), but are entirely exposed to cement dynamics with their massive stack of apartment towers poured in place, often very badly.

This all isn't rocket science, just basic math.  Sadly, hard to get across because it runs afoul of treasured belief systems.

Snydeman's picture
Snydeman
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"Rome has grown since its

"Rome has grown since its humble beginnings that it is now overwhelmed by its own greatness."  --Titus Livius (Livy) 59 BC-17AD.

Helix's picture
Helix
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Posts: 79
Hi Chris, and thanks again

Hi Chris, and thanks again for your reply.  I'm in total agreement with you on our debt-based monetary regime.  There is absolutely no question in my mind that this regime will collapse, "first slowly, and then all at once" as some pundits have quipped about a related topic.  I also agree that it's the impossibility of the chart you presented continuing that will be the root cause of the this collapse.

Regarding your musing "how important has access to high net energy BTUs from fossil fuels been to everything we see around us?" Well, it's essential, of course.  Civilizations are built on economic surplus, and the net energy supplied by fossil fuels has enabled us to generate surplus in abundance.  We've been fortunate indeed to live in era when such abundance has been available and has kept pace with growing economies and populations.

MKI's picture
MKI
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Posts: 77
Some more prespective

Comment 1: Look at what Art Berman actually says:

That is absolutely correct. For the shale plays, $50 is the cheapest -- and really we need to be talking about $60-$65 kind of on average for the best of the plays in the core areas. Deepwater is higher. Oil sands can be sort of in that range for existing projects, probably $80 for new projects.

This is chump change, not "moonshot" prices. Amazingly, $150 oil didn't even seem to have extreme effect on driving cutbacks (look at mileage), so we seem to need over $200 oil $5 gas to really make much an impact in use...because we are rich! Remember, oil is 70% transport $ in the US and the US could eliminate half of driving relatively easy, most of that driving is just wasteful living. Because we can and life is so easy. Hardly a crisis.

Sadly in the interview, Art then goes on to speculate on how oil will effect the overall economy, which is way outside his considerable petroleum engineering knowledge. He knows nothing more than you or I about how oil prices effects the general economy. My thoughts? Watch the price of oil for its economic indications. And it's still very, very cheep right now, even at $150. Art got the economy part pretty wrong so far. A little humility would do Art (and all of us) good on economic matters. Since that interview, US companies have been making lots of $ (I'm talking real money, ROIC, not stock prices) and I've made a lot of money following along this growth. So Art got the economic part totally wrong, which is nothing against him, he should just know the limits of his expertise.

Comment #2: It's important to realize oil is merely the most convenient energy resource the US has and that's why we use it. We could either cut back or replace it with ease. But by bother when it's so cheap? This is why we use so much oil, because we can. But it would not hurt the economy to replace it with NG, coal, nuclear, or reduced usage. It would actually help!

Comment #3: Infrastructure rebuild has no reason to damage the US economy, it will only provide a greater transfer of weatth from the rich to the average. This would be good because our economic productivity gains would then shift more to the common man from the rich. Remember, GDP has doubled since 1950 and we lived a pretty good life even back then. We simply don't need as much energy anymore due to technology. We have new technologies in lighting, autos, communications that make life much easier and cheaper with no loss of function. Electricity usage and driving are both falling with no loss of quality of life even today when we are awash in cheap energy.

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Uncletommy
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Somebody did it right!

Aqua Appia; 312 B.C. and still counting. Material engineering verses cheap and fast mechanical engineering is perhaps the new direction we should be taking. A consumer focus has led us to the situation we find ourselves in. Cost vs. value (or do I repeat myself)? Oh, did I mention, done by hand?

davefairtex's picture
davefairtex
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Posts: 5533
rebuilding infrastructure & national wealth

Let's use my favorite accounting statement - the balance sheet - to explain why rebuilding an existing bridge isn't actually a positive thing for the economy.

Imagine for a moment that "The Wealth of America" was contained on a massive balance sheet.  This included not only bridges and roads, but all the nonrenewable resources, like oil, coal, natural gas, and whatnot.

So if you imagine the nation before we arrived; the balance sheet was full of natural resources, and very little fixed investment.  In the 400 years that followed, we "converted" natural nonrenewable wealth into bridges, houses, and what not.  Natural nonrenewable resource dropped, and "fixed investment" increased.  Let's say the balance sheet stayed neutral - it was a transfer from the natural resource section over to the "fixed investment" section.

Now let's knock out a bridge because of rotting rebar, and then rebuild it.  What does that do to the "national wealth" balance sheet?

It drops by the amount of nonrenewable natural resources used to tear down the old bridge, and then rebuild the new bridge.

Same thing with hurricanes.  Destroy a bunch of cars, buy new ones - what is lost?  All the nonrenewables spent to construct them that we will never get back.

That's at a very basic level.  Now let's add a level of complexity.  Normally, we swap non-renewables for stuff that ends up being more valuable, so our national wealth balance sheet grows every year, as we convert non-renewables into more-valuable fixed invesment.  But when we rebuild existing stuff: our balance sheet declines.  Bridge remains a bridge on the balance sheet, but the non-renewables used to replace it are consumed.  Total national wealth drops.

Most people don't put "non-renewables" on their idea of the national wealth balance sheet for the country.  That's why they don't understand its bad to have to rebuild things after hurricanes, or rebuild rotting bridges.

[The real accountants out there will remind me that we should have applied a depreciation schedule to the bridge, so our national wealth balance sheet would reflect the decline in bridge value every single year, and presumably will be at $0 by the time we have to replace it.  But the consumption of the non-renewables when rebuilding the bridge that hits the national wealth balance sheet still remains valid.  And arguably, the poorly-built bridges means our national wealth invisibly declines every year, requiring constant infusions of non-renewables to keep them all operational - again subtracting from total national wealth.]

Or to put it more simply, rotting bridges = bad.  :)

DennisC's picture
DennisC
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Posts: 324
Oh, the Irony

and "poetic justice" perhaps. As Chris mentioned in his post regarding concrete, wouldn't it be a hoot if just as everything was falling apart within a short space of years, the costs (or ability) to repair, let alone rebuild became restrictive or too prohibitive (as in revenue, parts, energy inputs and so on).

I was thinking a few more of these potential engineering professionals might help.

https://engineeringrome.wikispaces.com/

Matt Holbert's picture
Matt Holbert
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Posts: 130
Call me a Luddite...

We have new technologies in lighting, autos, communications that make life much easier and cheaper with no loss of function.

There are tradeoffs that are not on the radar of common (pejorative use) folks. With respect to lighting: 

https://www.cnn.com/2016/06/21/health/led-streetlights-ama/index.html

http://www.skyandtelescope.com/astronomy-news/lost-led-revolution-light-pollution-increasing/

This one is personal. I live near an intersection and the sodium streetlight was just replaced with an LED fixture. As a consequence, there is no more stargazing in the front yard.

Autos: We don't need them. From a sustainable -- for those who are into future life on the planet -- perspective, it is well known that hybrids, for example, are not any better than a well-tuned combustion engined auto. My wife and I live without one and it can be done -- and result in a higher quality of life.

Communications: With the increased use of cell phones we now have a nation of zombies with an addiction. Most of the young women that I see driving down the street are looking into their devices rather than at the road. I would call this a lack of function and that is being kind.

With respect to "Luddites": This is a group of artisans that were forced by "progress" to give up a life of liberty for one of "punching the clock" each day to do mindless tasks. Kirkpatrick Sale, among others, has written about the topic.

Is life "cheaper" with this wonderful new technology? In a word, yes. Were there some technologies that improved life? Yes, but most of them were introduced over a 100 years ago and were done because it was the right thing to do and not to because it enabled one to build a McMansion.

MKI's picture
MKI
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Posts: 77
Matt I generally agree

Matt I generally agree. All our cheap energy isn't adding much value to our lives. Cheap energy and cheap food are like drugs. A good energy crisis would be a healthy thing, force us to move back to town, walk, and get along with their neighbors. Sadly, it's unlikely to happen because we are so energy rich. I live downtown among houses built pre-WWII and pre-common auto and all the homes are all tiny and walkable. Were they any less happy back then?

So why not just change our lifestyles anyway? Walk or bike (our car batteries always die because we never drive), live in a small home (less to clean or heat!), cook from scratch and ditch processed food (yum), hunt and fish (yum), and garden (yum), and live as extended families with lots of kids (much more pleasant and social than a TV or media soaked home)? It's a far better life, a much healthier life. I don't call this being Luddite. I call it plain old common sense.

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Grover
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Posts: 867
Cost VS Value
MKI wrote:

... Amazingly, $150 oil didn't even seem to have extreme effect on driving cutbacks (look at mileage), so we seem to need over $200 oil $5 gas to really make much an impact in use...because we are rich! Remember, oil is 70% transport $ in the US and the US could eliminate half of driving relatively easy, most of that driving is just wasteful living. Because we can and life is so easy. Hardly a crisis.

MKI,

First off, I agree with many of your statements throughout this thread. The US is energy rich, oil at $150 is actually cheap, and we waste an enormous amount of energy because we can (and it is so cheap.) Whenever someone complains to me that gasoline is expensive, I ask them what their car's gas mileage is. Then, I ask them if they would rather push their car that distance for the price of a gallon of gas? That usually shuts them up.

I think that you are missing what I consider to be Gail's main point: Once the price of fuel increases, economic activity slows down. The cost of energy (and the cost of renting money, ie interest rates) is embedded in every product. Businesses are forced to constrain costs in order to maintain profitability. That means that they won't be offering pay increases to their non-elite workers. Meanwhile, costs go up for these workers. The more energy intensive a product is, the more the cost will go up. Workers either consume less or take on more debt to maintain their standard of living.

The choice to add more debt is easier when oil prices first start increasing - especially if interest rates are low (or decreasing) and additional credit is available. What happens if oil prices increase for long enough that available credit dries up? What happens if interest rates are also increasing at the same time? Here's a graph from http://www.artberman.com/saudi-arabias-oil-price-war-is-with-stupid-money/ showing inflation adjusted oil prices along with US Federal Funds interest rates over time. The added annotations are all from Art. It is from about 3 years ago, but still shows some interesting relationships.

Federal Funds Interest Rates & CPI Oil Price 1955-2015

One thing about this chart that catches my eye is that spikes in oil prices generally cause the interest rate to drop. Two notable exceptions was Volcker's 1980s interest rate spike and the rise in '04 - '07 when Greenspan was trying to normalize interest rates. Volcker increased interest rates to sop up the money (inflation) from LBJ's Unified Budget that released the pent up Social Security funds to fund his guns and butter policies a decade and a half earlier. Greenspan dropped rates as the stock market crashed and more in response to the 9/11 "terrorist" attacks. Rates lower than seen in a generation caused folks to "invest" in housing and caused the housing bubble. Home equity loans allowed folks to ameliorate the oil price increases. As a result, the economy continued to hum along in spite of high oil prices ... until it didn't. Then, both oil prices and interest rates dropped to aid the "recovery."

As Art noted, this last economic "recovery" has seen a combination of the lowest interest rates ever along with the longest period of high oil prices ever (at least through 2015.) Then, the fracking scare caused Saudi Arabia to increase production to starve the US frackers out of business. (That was the same tactic used by KSA to drop prices in the 1980s and starve the USSR out of business.) Now, oil prices are creeping up and the federal reserve is trying to normalize interest rates again. Meanwhile, China has announced that they won't buy US bonds anymore while the federal reserve is cautiously starting their QT and Trump's tax cut is to be funded by increased borrowing. Its the combination of higher priced money and energy combined with the ability/desire to take on more debt that impacts economic viability. What could possibly go wrong?

It should be obvious that the earth isn't generating fossil fuels as fast as we remove and consume those fuels. Based solely on that, fossil fuel prices that are strictly based on availability should constantly increase. Yet, we don't see that. Art Berman's chart shows how volatile the price has been over time. There must be something other than available quantity that determines the price. As such, it is faulty logic to use price as an indicator that we're awash in energy.

Deposits need to be found before being exploited. Discoveries peaked long ago. Lately, we've been extracting more oil than we've been finding. How much of the earth has been explored already? What are the chances of finding another Saudi Arabia worth of oil on this earth? Of course, there are ways to increase drilling/extraction efficiencies. The shale oil deposits were discovered long ago. Until fracking technology was developed, it wasn't worth drilling. I'm not convinced that it is "worth" drilling for it at these prices. And yet, the frackers continue to frack.

When considering break-even costs for drilling operations, shouldn't all costs be attributed to the drilling? It isn't just buying the equipment, hiring the manpower, and paying royalties and taxes. We assume that the taxes will cover damage to infrastructure, but running exceedingly heavy equipment over roads not designed/built for such heavy equipment causes lots of damage to occur. Some entity has to pay that cost - either to repair the roads or just live with reduced serviceability. Why shouldn't that be factored into break-even costs?

If a drilling operation isn't drilling, they can't meet payroll or pay off debt. Even if they are losing money by working, they won't be losing it as fast as if they weren't working. What would happen if a "white knight" with very deep pockets financed the operations? When profitability (or bankruptcy) isn't a consideration, drilling operations can continue for a long time. Dave fairtex once posited that financing fracker operations would increase the amount of oil on the market and drive down the market price of petroleum. Since oil producing countries are addicted to oil's revenue, they really can't stop pumping without taking an economic hit. Losing a few $10s of billions wouldn't impact them at all.

Could the federal reserve cause this (or strongly suggest (behind closed doors) that banksters do this?) Jim Puplava stated that oil price was the new federal reserve interest rate. That's a fair assessment since petroleum is the master resource and its cost impacts economic activity the same way as interest rates do. So, my question is how do you know this isn't happening? How can you be so sure that oil's price isn't being manipulated? If a manipulated price doesn't really reflect availability, how smart are we to rely on that indicator?

Grover

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MKI
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Posts: 77
Cost VS Value

Grover,

I understand your argument. When I say "price" is a good measurement it's because oil is simply too worldwide a resource for any one nation or currency to control it. And the 3 biggest suppliers (Russia/USA/Saudi) could never conspire for very long anyway. I look at oil versus gold when I say "price" since that's the only fair way to bypass currency and get a true price. So I think the economic conspiracy meme (gold price, oil price manipulation, whatnot) I hear as of late is just sour grapes and not liking the data which shows we are doing quite well economically due to technology. Hell, even if "they" could manipulate oil and gold prices worldwide, so what? Everything is cheap and we are consuming massive everything. How long could this really happen if it was fake? Not this long.

If and when we get short of oil supply (price maybe $200-$500?) we will merely start to cut back on our waste and start using other sources so will likely never see serious economic crisis due to energy. Maybe Japan or Europe at bit, but not the USA.

For this reason I disagree with CM "oil" is the "master resource" meme. Oil is merely the easiest and cheapest energy resource and people can't seem to grasp we can change rapidly. Why not just use nuclear and electric cars? Or NG cars? Or just cut back on driving? Man, are Americans greedy, but we could definitely use half our oil with probably twice the lifestyle. The linear graph of GDP and oil is merely "because we can" consume more oil with more GDP, not the other way around, oil causing GDP, like CM thinks. Look at Japan, a massive GDP with no oil at all.

Truth be told, human innovation is the real "master resource". The stone age didn't end due to lack of stones, it ended by us finding other useful things to replace the stones with. Rock oil replaced whale oil for lighting, which was then replaced by coal and electric lights, with lighting price falling exponentially even until now. Same way, rock oil will go out of fashion once it gets scarce enough. We just don't need it when we live smarter, not to mention we have too dang much coal, nuclear, NG, etc. when we finally deplete oil. Which isn't happening very rapidly...I'm a PE and foolishly guessed peak oil by at least 2020...boy have I proven to be a fool since no way that's happening. Why did I get fooled? Technology. It's flat-out amazing how cheap fracking and drilling has become in my career (I remember being all proud when drilling a 27M ft well in the '80s which set a North American record...which is today a pathetic joke, we drill those in our sleep). Technology advances, on all fronts, in drilling, production, and reduced consumption with more efficient consumption, it makes us all richer each day and needing less and less energy for the same quality of life.

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Snydeman
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You're pretty dense.
MKI wrote:

For this reason I disagree with CM "oil" is the "master resource" meme. Oil is merely the easiest and cheapest energy resource and people can't seem to grasp we can change rapidly. Why not just use nuclear and electric cars? Or NG cars? Or just cut back on driving?

Then back it up with actual numbers. Real. Data.

 

MKI wrote:

Oil is merely the easiest and cheapest energy resource and people can't seem to grasp we can change rapidly. Why not just use nuclear and electric cars? Or NG cars? Or just cut back on driving?

 

I really want to know what kind of engineer you are, because I've NEVER heard an engineer talk about any project being easy and quick to accomplish. Probably because they understand that the process of going from idea to implementation takes a whole lot more than a hope, a dream, and a prayer. Keying over our entire travel infrastructure to accommodate anything other than oil is a massive and timely undertaking, and your apparent inability to grasp that indicates you either are not an actual petroleum engineer, or that you are a really, really bad one.

 

And, nuclear cars? That tech isn't exactly scalable to automobiles. Are you aware of how many nuclear plants it would take to meet even half worldwide demand for energy?

 

Oh, and you didn't get most of what Grover was saying. His was a subtle and nuanced series of points regarding the interplay of energy and the economy. Your response, on the other hand, was like a banner at the head of the technology cheerleader parade.

 

-S

 

 

 

 

 

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Grover
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Price VS Value
MKI wrote:

I understand your argument. When I say "price" is a good measurement it's because oil is simply too worldwide a resource for any one nation or currency to control it. And the 3 biggest suppliers (Russia/USA/Saudi) could never conspire for very long anyway. I look at oil versus gold when I say "price" since that's the only fair way to bypass currency and get a true price. So I think the economic conspiracy meme (gold price, oil price manipulation, whatnot) I hear as of late is just sour grapes and not liking the data which shows we are doing quite well economically due to technology. Hell, even if "they" could manipulate oil and gold prices worldwide, so what? Everything is cheap and we are consuming massive everything. How long could this really happen if it was fake? Not this long.

MKI,

I'm not as confident as you that the manipulation of prices isn't distorting your perception. I do agree that we are consuming massive everything. I see it more analogous to the way some incandescent lamps get really bright just before going out forever. I'm not arguing that the petroleum we've consumed wasn't there. If the petroleum weren't available, it couldn't be consumed. The question becomes: How much is left and how long will it last?​ Please give these questions your best shot.

I understand that the first answer depends on petroleum quality definitions and the second answer depends on technological abilities, but even if the earth were a hollow ball filled with petroleum, we'd pump it dry in less than 1,000 years given just 3.5% per annum compound growth rate. The earth contains lots of materials other than petroleum and petroleum is generally located in isolated pockets. Isolated pockets cost more energy per unit energy recovered to exploit than Ghawar oil giants. There aren't any more Ghawars to find.

MKI wrote:

If and when we get short of oil supply (price maybe $200-$500?) we will merely start to cut back on our waste and start using other sources so will likely never see serious economic crisis due to energy. Maybe Japan or Europe at bit, but not the USA.

I seriously doubt that oil will ever get to a stable cost of $200 per barrel. It may spike that high briefly, but the blockage in the economy would clog economic activity and prices would fall back to affordable levels. Of course, affordable levels would be much lower when all the non-elite workers who lost their jobs couldn't afford to buy it at any price.

Just to make it clear, I agree with you that we 'murikans waste lots and lots of resources! Unfortunately, lots of your suggestions on this thread require massive retooling to accomplish. As a PE, you should understand that takes lots of time and resources. As an example, if you live in a mcmansion in an isolated community and currently drive a Hummer 30 miles to work each way each day, you have few options that are currently available. There won't be public transportation because you're isolated. There may be ride sharing available, but only if you can adjust schedules to meet the other participants' needs. The other options is to sell your house and move closer to work or sell your Hummer and get something more fuel efficient. If the economy turns down due to oil being really expensive, the Hummer isn't too attractive to anyone and would be worth very little. Also, the house would be seen as a white elephant for the same reason. You'd take a big financial bath to be more energy efficient.

MKI wrote:

For this reason I disagree with CM "oil" is the "master resource" meme. Oil is merely the easiest and cheapest energy resource and people can't seem to grasp we can change rapidly. Why not just use nuclear and electric cars? Or NG cars? Or just cut back on driving? Man, are Americans greedy, but we could definitely use half our oil with probably twice the lifestyle. The linear graph of GDP and oil is merely "because we can" consume more oil with more GDP, not the other way around, oil causing GDP, like CM thinks. Look at Japan, a massive GDP with no oil at all.

Again, I'm not arguing that 'murikans couldn't cut back on our wasteful habits. I also think it would potentially increase happiness. (It has for me!) As a population, we've made bad decisions in the past and we can't just snap our fingers to correct those bad decisions. How long would it take to convert the current infernal combustion engine vehicles to any of the other sources? Would that be just another temporary solution that would require massive retooling once those resources reached their limits?

Your point about Japan having a massive GDP without oil at all is ludicrous! Are you saying that Japan doesn't import any oil at all from anywhere? Where would they be if they couldn't import any oil or oil products from anywhere? Would they still have such a massive GDP?

MKI wrote:

Truth be told, human innovation is the real "master resource". The stone age didn't end due to lack of stones, it ended by us finding other useful things to replace the stones with. Rock oil replaced whale oil for lighting, which was then replaced by coal and electric lights, with lighting price falling exponentially even until now. Same way, rock oil will go out of fashion once it gets scarce enough. We just don't need it when we live smarter, not to mention we have too dang much coal, nuclear, NG, etc. when we finally deplete oil. Which isn't happening very rapidly...I'm a PE and foolishly guessed peak oil by at least 2020...boy have I proven to be a fool since no way that's happening. Why did I get fooled? Technology. It's flat-out amazing how cheap fracking and drilling has become in my career (I remember being all proud when drilling a 27M ft well in the '80s which set a North American record...which is today a pathetic joke, we drill those in our sleep). Technology advances, on all fronts, in drilling, production, and reduced consumption with more efficient consumption, it makes us all richer each day and needing less and less energy for the same quality of life.

You say that fracking and drilling is cheap today. You say that 27M ft well is a pathetic joke now. What would you consider a typical well length/depth today? Could you provide a rough quantity of various materials and approximate costs for such a well? How much of the material is recoverable and can be used as is in the next well? Otherwise, is there a rough percentage for salvage value recovery?

It would be nice if you could rustle up a nice graph(s) showing oil recovery over time on a typical well. You know how many wells are out there (or have a good guess) and you know what the overall production is. You should be able to come up with something you consider reasonable that the rest of us would just be amazed at.

Why do we focus on oil here? You are right that this country has lots of coal. I don't have a single vehicle that has a coal tank. Almost all the vehicles I see on the road have the same problem. Coal would be easier to use than nuclear. It would be easier to convert to NG, but NG isn't as commercially available or convenient as gas or diesel. Besides, the best time to convert is before it is needed.

You say that you live in a small house in Anchorage. Do you bike/walk to work? What do you do with all your savings? (If you travel or have things delivered to your house, that has to be factored into your energy footprint.) If you just invest your money to grow it for whatever, shouldn't you consider the companies you invest in to be part of your footprint as well? For these reasons, the best gage I've found for an energy footprint is the amount of money one earns. The less one earns, the less one can waste.

Grover

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mememonkey
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Joined: Nov 1 2009
Posts: 257
Holy Incredulity Batman

MKI,

Not to pile on  put you really do seem oblivious to basic concepts underpinning peak oil theory and it's impact on oil based economy ~  EROI, law of diminishing returns, Sunk costs and embodied energy of built infrastructure, Scalability of alternatives, role of debt,  and economic constraints.  How do we get to $200-500 price point when the economy breaks (demand destruction) closer to $100 oil?  How do we fund ever increasing costly oil development that yields lower and lower net energy. 

Could we survive on half of our oil budget and triage its use?  Absolutely,  but it would make the Great Depression  look like a party. The notion that we will "never see economic crisis because of energy shortage" is magical thinking of the first order. 

 I would argue that we are in still in an unfolding economic crisis due to passing conventional oil peak circa 2005 and that the energy dynamics of peak cheap oil are integral to the whole house of cards debt economic bubble monstrosity that has been built and now teeters on the edge of collapse.

You really seem to be approaching this from a preconceived ideological frame of reference, assuming pure free market price signaling and effortlessly perfect substitution that would make Milton Friedman blush.   Yet you  ignore the centralized price setting, loss leading market share /geopolitical gamesmanship that is happening in the real world and the debt ponzi financing of the "shale miracle" that is a provably time limited production supply spike aberration  and uneconomic at any price point that wouldn't break the economy regardless.

Your testify to a religious like faith in progress and technology which is understandable given that is your entire life's and vocational  frame of reference, but which ignores laws of diminishing returns and history which shows that progress is not linear. 

Finally you don't seem to ever truly address the points you are given.  You employ a number of fallacies in your arguments, the primary one being arguments of personal incredulity, i.e.,  You can't imagine why something can't be done therefore it must be doable.   You respond to most counter arguments you are presented with by either ignoring them, applying techno worship platitudes, anecdotal non sequiturs or just flat out mindless misstatements of 'fact' such as:

"Look at Japan, a massive GDP with no oil at all."

yeah, unless you count the approx 3.5 million BBL/day they import.

I give you points for consistency though!

Mememonkey

 

 

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MKI
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Posts: 77
Typo above post

Re-reading my post above I meant '90s not '80s for that 27M ft well. Sry.

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MKI
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Posts: 77
Price VS Value

Grover,

I appreciate the conversation. You have a good handle on the energy issues unlike most folk not in the industry.

But I would appreciate not turning this convo about me because my personal situation is not relevant. But for transparency sake: I'm recently-retired 20 years oil (currently do investment partnerships & technical writing, like CM I did very well in the 2008 crash & don't need to work). But yes, walked/biked to work & don't drive much except to hunt/fish. I also actually own a large house but only live in a small part of it. But again, my personal situation is not relevant.

Regarding a transition out of oil once we hit peak production and costs finally get high? I agree it might be ugly at first (potential war). But I think a good analogy would be the 1920-30 dust bowl era, where while a lot of people got screwed and WWII followed. But a lot of people got rich also & GDP just kept marching up as we transitioned out of farming. Capitalism is always tough during economic transitions. But remember, we are very rich today in comparison to then. We eat, drive, and fly like kings...all due to technological advances. We could live with 1/10 our energy consumption and never notice a loss of GDP "quality of life". Hell we would probably live better! We are on average what, 30# overweight? How many people are living in non-family situations with a huge housing footprint? This isn't a high quality of life.

A older book to read on my economic thinking is "Knowledge and the Wealth of Nations" (Warsh). Many people on this site seem to get trapped in the old "Land, labor, Capital" meme of wealth generation (modified to "Land, Energy, Resources" in a Malthusian flashback). In reality, real wealth is generated by "People, Ideas, and Things" (this was mathematically demonstrated by Roper and others and it really holds true over time. It's why we won't notice oil or cars when they go the way of the Dodo. How much energy do we really need for a good life anyway? Look at a chart of the cost of lighting falling exmponentially every year of human history. We've just broke the human genome. Life just keeps getting easier for the naked ape as we understand our natural world (if we can just keep from killing each other...). Remember, we are now using less electricity for the first time in our history because we're getting so efficient and just don't need the increase anymore. We will not run out of energy. We will run out of work as machines to everything. Look how few people it takes to drill an oil well today. Driverless cars. Solar, Engine efficiency using computers. Communication. Digital revolution. Our problem is what to do when all the machines do our work for us...

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Snydeman
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Joined: Feb 6 2013
Posts: 510
Less is relative

MKI,

Your personal information is relevent if you reference your profession and leverage that to buttress your arguments absent actual data to back those arguments up. "I've worked as a petroleum engineer" is a statement designed to imply that you know more about the topic than anyone else here, and making such statements opens you up to people demanding to know more details about your supposed expertise. This is especially true when the statements you make run counter to what other experts (who have made the source of their expertise clear by being specific as to their careers, education, etc) are saying. You opened that can of worms. You also started off your comments initially by assaulting the data Chris and Gail discuss by using self-reinforcing fluffy statements rather than actual data. If you don't back up your arguments with measurable, sourced, verifiable data, I don't care if you have a red telephone hotline to God and a 175 IQ, and I think you'll find most members of Peak Prosperity feel the same way. If you don't back up your statements with actual sourced data, expect to be ignored.

 

As to your most recent post...I'd love to know where you base the statement "we are now using less electricity for the first time in history" from? Because I'm not seeing that supported by any data I can find. Outside minor fluctuations year to year, electricity and energy consumption in the nation seems around the same, and across the globe seems to be inexorably increasing as a whole.

\

 

Please, though, enlighten me. With data. Sourced.

 

-S

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MKI
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Posts: 77
Less is More

Snydeman: ...expect to be ignored.

MKI: Please ignore me. I'll return the favor. I'm confident you will find someone else to argue with.

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Mark_BC
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Posts: 503
MKI wrote:Snydeman:
MKI wrote:

Snydeman: ...expect to be ignored.

MKI: Please ignore me. I'll return the favor. I'm confident you will find someone else to argue with.

WHERE'S THE BEEF???

SHOW US THE MONEY!!!!

References please, to back up all of your statements, as others have already asked for 10 times.

I made the wise choice to ignore you after my first post because it was clear you can't formulate a coherent argument, but I am impressed with the quality of the responses and critique given by Grover, mememonkey  and Snydeman. Just wanted to say that. I didn't want to put in the effort to explain it because I saw it going nowhere, but they did.

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fionnbharr
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Posts: 87
Crash Course Chapters 17a 17b 17c Peak Oil: - 2008 Version

Hi MK1,

I'm noticing the lack of something on this thread, and that's The Crash Course series. It's central to the tenets of Peak Prosperity - an exponential diagram built upon the physicals. Everybody you're in conversation with, including a very patient Snydeman, Grover and Mememonkey etal, have digested its depths and studied hard to understand its dynamics.

The original version is the glue that made this site possible back 10 years ago. I note you've been a member since January 2009. Could this be something you've missed, I wonder?

Chapters 17a 17b and 17c : -

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dcm
Status: Silver Member (Offline)
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Posts: 218
MKI

MKI: "In reality, real wealth is generated by "People, Ideas, and Things"

The abstract "idea" is sandwiched between two real items: "people" and "things"

real items...  with real limits

MKI: "Life just keeps getting easier for the naked ape"

have you asked the ape? Then ask the other living things on this planet

MKI: "Look how few people it takes to drill an oil well today"

funny, it's not getting cheaper.  There's more than one way to measure the "human cost"...and this energy has a lot of complex human cost

 

 

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Snydeman
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Posts: 510
Yep
Mark_BC wrote:
MKI wrote:

Snydeman: ...expect to be ignored.

MKI: Please ignore me. I'll return the favor. I'm confident you will find someone else to argue with.

WHERE'S THE BEEF???

SHOW US THE MONEY!!!!

References please, to back up all of your statements, as others have already asked for 10 times.

I made the wise choice to ignore you after my first post because it was clear you can't formulate a coherent argument, but I am impressed with the quality of the responses and critique given by Grover, mememonkey  and Snydeman. Just wanted to say that. I didn't want to put in the effort to explain it because I saw it going nowhere, but they did.

Mark_BC,

You are a wiser man than I. I suppose I figured that it's worth the effort here on PP, but I see that's not always the case. Live, learn, and move on. 

 

It's fascinating that MK1 sees this as an argument, when most of us probably see it as trying to explain the complexity of the universe to an adolescent who sees things in only the most basic ways. 

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Grover
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Posts: 867
Hopium VS Reality
MKI wrote:

Grover,

I appreciate the conversation. You have a good handle on the energy issues unlike most folk not in the industry.

But I would appreciate not turning this convo about me because my personal situation is not relevant. But for transparency sake: I'm recently-retired 20 years oil (currently do investment partnerships & technical writing, like CM I did very well in the 2008 crash & don't need to work). But yes, walked/biked to work & don't drive much except to hunt/fish. I also actually own a large house but only live in a small part of it. But again, my personal situation is not relevant.

MKI,

I appreciate the compliment from you (and everyone else!) This conversation is a bit frustrating for me. I hope you understand that your position (that seamlessly transitioning out of oil) is a whole lot more appealing than my doom and gloom scenario. I'd really like to have a reason to adopt your view. Unfortunately, I'm only getting hopium from you. I've asked you many questions to give you a platform for launching a great oratory ... but you choose to answer a throw-away question I posed that was intended to get you thinking about the situation of people like us and how it will impact us. I'd much rather that you counter Chris' argument of oil being the master resource (which I've bought into) with good arguments supported by strong data. Your petroleum industry insight here would winnow the chaff for the rest of us. I sincerely hope this request makes sense to you.

MKI wrote:

Regarding a transition out of oil once we hit peak production and costs finally get high? I agree it might be ugly at first (potential war). But I think a good analogy would be the 1920-30 dust bowl era, where while a lot of people got screwed and WWII followed. But a lot of people got rich also & GDP just kept marching up as we transitioned out of farming. Capitalism is always tough during economic transitions. But remember, we are very rich today in comparison to then. We eat, drive, and fly like kings...all due to technological advances. We could live with 1/10 our energy consumption and never notice a loss of GDP "quality of life". Hell we would probably live better! We are on average what, 30# overweight? How many people are living in non-family situations with a huge housing footprint? This isn't a high quality of life.

There was a lot going on in the 1920s, but the dust bowl wasn't part of it. There may have been dry periods, but the "dust bowl" was mid 1930s-1940. https://en.wikipedia.org/wiki/Dust_Bowl. The 1920s were more characterized by optimism fueled by the federal reserve's flexible money that was 40% backed by gold. That backing level allowed for 2.5 times as much money as there was gold to back it. There was lots of funny money to fund all the great ideas. When confidence was high, people preferred to keep their money in the bank and use foldable paper money. It's when fear overcame the greed that people wanted their gold out of the bank. The 40% backing insured that there wasn't enough gold to meet the demand. Imagine being in a long line at a bank to withdraw your money (gold) as promised ... only to find out that all the gold is gone. Would that instill more fear or robust confidence?

During the '20s, lots of innovations and new technology flooded the market place. Tractors reduced the need for farm workers, so lots of the displaced farm workers moved to the city to find jobs. There was money to build factories and employ these people building things. Industrialists made a lot of money in the process. By today's standards, they shared quite a bit with their workers. It was a magic combination of ideas, funding, available labor, optimism to organize it, and energy to run the equipment. Greed was good, flappers flapped, and the sky was the limit. What could possibly go wrong?

Then, the depression hit. The ideas didn't seem such a sure path to the gold paved streets. Funding vanished. Available labor skyrocketed. Optimism turned to pessimism. The energy to run the equipment was still there. It was a scary time. Would-be leaders saw the angst and fear and worked to organize those emotions to their benefit. FDR tapped into that angst. He instituted the beginnings of the socialism that is bankrupting us today. His policies lengthened and deepened the depression. WWII was really his only remaining option to get us out of the depression. (If he had insisted that his kin fight on the front lines, I'd have more (at least some) respect for him.)

MKI wrote:

A older book to read on my economic thinking is "Knowledge and the Wealth of Nations" (Warsh). Many people on this site seem to get trapped in the old "Land, labor, Capital" meme of wealth generation (modified to "Land, Energy, Resources" in a Malthusian flashback). In reality, real wealth is generated by "People, Ideas, and Things" (this was mathematically demonstrated by Roper and others and it really holds true over time. It's why we won't notice oil or cars when they go the way of the Dodo. How much energy do we really need for a good life anyway? Look at a chart of the cost of lighting falling exmponentially every year of human history. We've just broke the human genome. Life just keeps getting easier for the naked ape as we understand our natural world (if we can just keep from killing each other...). Remember, we are now using less electricity for the first time in our history because we're getting so efficient and just don't need the increase anymore. We will not run out of energy. We will run out of work as machines to everything. Look how few people it takes to drill an oil well today. Driverless cars. Solar, Engine efficiency using computers. Communication. Digital revolution. Our problem is what to do when all the machines do our work for us...

Land, labor, and capital VS people, ideas, and things. I'm not really sure there is any distinction here. Capital can buy land, things, and rent people's labor to transform ideas into products that generate more money. Isn't our current situation somewhat rhyming the 1920s? Back then, radio was the new idea. Today, we have smart appliances. Soon, self driving cars will be reality. Robots and artificial intelligence are improving by leaps and bounds.

When the depression hit, labor was in surplus. Every day, we hear of innovations that make human labor more efficient (by eliminating other human labor positions.) We'll hit the zenith (our nadir) when machines can invent/build machines to replace the few tasks left for humans. Do we want to hope that artificial intelligence progresses to the point that humans become simply "worthless eaters"? (That certainly answers what we'll do when the machines do all our work.) I don't expect the definitive answer for that question for perhaps a decade or so.

When the depression hit, new leaders emerged by channeling the people's angst and fear for their own purposes. Will we have the same thing when this great GDP enhancing experiment topples? Who knows?

One thing that is certain is that machines need energy to do work. So do we. Unless a machine is designed to accept different types of energy, the available energy source needs to be converted to a usable type. We're no different. On average, we convert 10 calories of fossil fuels to make 1 calorie of food. That's because we use all these machines in the process of growing/processing/transporting our food. Just like bacteria in a Petri dish, we've grown our population because of the extra food. When energy is cheap and available, it makes sense to leverage the advantage that fossil fuels offer. There's a huge problem if sufficient energy isn't available to fuel the machines that our very existence depends upon.

From everything I'd read, seen, and heard, the earth has an essentially finite amount of fossil fuels in it. Of the fossil fuels, petroleum has properties that make it the most valuable to run our machinery. Most of it is uneconomical to extract given current technology. It is highly unlikely that technology will ever advance enough to make extracting every last drop feasible. (As such, I agree with you that we'll never run out.) Meanwhile, we have many, many machines that do our bidding as long as the proper amount/type of fuel is provided. Retooling those machines to use a different type of fuel would be prohibitively expensive. We are unlikely to recognize the need for this massive retooling until it is too late to do so - fossil fuels will suddenly become too expensive/unavailable.

You sit in a mental technological cornucopia, yet you won't (or can't) convince any of us that our fears are just that. It takes data and logic to do so. Your shared data (so far) is nonexistent and your logic isn't even that good. As I said at the beginning of this post, I'm frustrated. I'm afraid that I've plumbed the depths of your knowledge, skills, and abilities. If you can't prove your points, I'm chalking my participation up to wasted energy. No use wasting any more on you. Please prove me wrong.

Grover

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Uncletommy
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Is the math straight forward?

I love technology, until it doesn't work as good.There's a hole 6 miles west of me that goes down 1800 meters, angles horizontally over 300 meters and continues another 900 meters laterally. Fracked? yes. Producing? yes.Making good money? Noticed the price of oil today?

Atlantic #3).

Does this graph suggest anything?

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It pretty much has to be

It pretty much has to be Seneca Cliff type graph because of the increase in population.  The number of people using fossil fuels is not the same at the top of the graph as it was at the beginning of the use in 1850.

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Well is Art Berman is the

Well is Art Berman is the only person you listen to then from everything you are saying you disagree with his point that  - Shale oil is a retirement party -

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Just To Stir The Pot...

We'll be recording a podcast interview with Art Berman next week.

Will be released a week from this Sunday.

Figured we could spare folks from speculating on Art's views and just hear from the man himself....

:)

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Kudos
Grover wrote:

You sit in a mental technological cornucopia, yet you won't (or can't) convince any of us that our fears are just that. It takes data and logic to do so. Your shared data (so far) is nonexistent and your logic isn't even that good. As I said at the beginning of this post, I'm frustrated. I'm afraid that I've plumbed the depths of your knowledge, skills, and abilities. If you can't prove your points, I'm chalking my participation up to wasted energy. No use wasting any more on you. Please prove me wrong.

Grover

Grover,

I don't want to quote your entire post for the sake of space, but I wanted to say that your overall approach to MKI has been quite masterfully done, and I've learned a few things about how to approach this level of ignorant intractability in the future. If there was a "Peak Prosperity Emmy" given out every year, I'd sure as hell be nominating you for it this year. There have been simply a brilliant series of responses from multiple members on this thread, but yours shine among them. Mememonkey gets honorable mention for "best meme," which is appropriate given his screen name.

 

If ever we cross paths at one of these conferences held by PP, I'm buying you a beer, or the equivalent thereof.

 

-Snydeman  

 

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Hopium VS Reality

Grover,

You sit in a mental technological cornucopia, yet you won't (or can't) convince any of us that our fears are just that.

Just to be clear, I don't have any emotional attachment to the reality that real prices (resources, technology, energy) have been falling my entire life and Americans are now rich beyond anything we've seen in human history due to technological innovation. It's just reality. I certainly don't need or wish to "convince" anyone or think that I can predict the future. I'd rather just make money ignoring the Malthusian ways of thinking I see here. Why do I read PP and occasionally discuss with those who disagree? Because it's very dangerous to get into a singular mode of thinking. I like to test my thinking with those who disagree and then try to follow the data without emotion or prejudice.

One of the reasons I believe PP & CM tends to be confused on economic and energy issues (I say this without prejudice merely looking to the massive wealth gains over the last decade while CM and fellow thinkers missed out) is it's hard to "see" our extreme wealth generation happening today due to technology because it's so unequally distributed. As I mentioned above, it's a lot like the Great Depression when farming went away and we had massive oversupply and no buyers. Things like oil depletion makes it even more confusing because it will be another of those "transitions" as the easy oil gets too expensive. But it won't effect our long-term technological advances.

Anyway, the reason I accept the "technical cornucopia" thesis is because it matches both the physical reality I live in and the economic reality I make money in. It also mathematically matches the economic models I mentioned above but granted those are too fuzzy for me to accept with any certainly (almost as bad as GW models) but I just accept them because they seem to check out (for now).

I'm afraid that I've plumbed the depths of your knowledge, skills, and abilities. If you can't prove your points, I'm chalking my participation up to wasted energy. No use wasting any more on you. Please prove me wrong.

Chuckle. Over the last 30 years my way of thinking has done very well at both matching reality and making money compared to the Malthusian one. We were supposed to be groping in the dark, starving, or living the "long emergency" by now right? Look at all the prediction on PP since 2010 alone. Why would I wish to prove anything? Reality matches my interpretation of things. But it's been a good convo and again I appreciate it.

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Shale oil is a retirement party

karenf - why do you say that? I fully agree with Berman on the "shale oil is a retirement party" meme and nothing I've said here contradicts that. I've thought that for years. Art is 100% correct here IMO. As I mentioned above, my peak oil prediction was 2020. I just don't worship oil as some "master resource". It's just another excess energy resource we exploit because, well, being rich, we can. Remember when everyone said nuclear was "too cheap to meter"? A lot of truth to that when you take the politics out. Oil is just the easy path so we take it. NG, nuclear, renewables, and conservation would be a lot cleaner and better for everyone.

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Just To Stir The Pot

Look forward to it!

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be careful stirring the pot

there are no federal guarantees

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It Sucks To Be You

The Parent Company, Walmart is closing 63 Sam's Club stores nation wide.  Three are in Alaska, apparently transportation costs are too high.  WHAT, but we are awash in energy?  And doesn't it cost the same to stock Walmsrt as it does Sam's Club, are the transportation costs different? Yes, yes, I know it's only three in Alaska, no big deal right.  Well it is for those who live in rural Alaska, limited access to goods became well even more limited.  But corporate profits are paramount and the motto for small Alaska villages is IMHO, "it sucks to be you".  

Most people in villages live in SMALL square footage homes. (Your generalizations MK1 are wrong) They, like you and I like to eat three times a day.  So, what did we learn here MK1 et-al, it's all a matter of perspective.  For some people a Sam's Club closing will be an economic collapse, For Them.  Being - Awash-In-Energy - is relative.  Remember it's easy to debate the finer points of a topic when you live in a warm home, have food on the table and a steady income.  If not, well they don't give a shit what you/I/we think the basics suddenly become paramount.

Perspective is everything!

AKGrannyWGrit

 

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Appropriate Tech
MKI wrote:

One of the reasons I believe PP & CM tends to be confused on economic and energy issues (I say this without prejudice merely looking to the massive wealth gains over the last decade while CM and fellow thinkers missed out) is it's hard to "see" our extreme wealth generation happening today due to technology because it's so unequally distributed. As I mentioned above, it's a lot like the Great Depression when farming went away and we had massive oversupply and no buyers. Things like oil depletion makes it even more confusing because it will be another of those "transitions" as the easy oil gets too expensive. But it won't effect our long-term technological advances.

"massive wealth gains over last decade...unequally distributed....."

Ok  I understand know,  You are confusing cause and effect.  i.e.  the technology of robotics, AI,  fracking etc with the  technology of Central Bank's electronic printing press

Good luck with that thesis moving forward in perpetuity.

mememonkey

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Now that I'm back at my

Now that I'm back at my computer, I have a couple comments on the discussion with Gail, including one disagreement. First comment:

Well, I think of the situation being kind of like a bicycle. You have a front wheel and a back wheel, and actually you probably have the frame as well. And the debt is the front wheel. It's what makes it – pulls it forward. It makes it go. And the frame is all of these technologies that allow you to use this energy. And the back wheel is the actual energy itself. And in order for the economy to keep rolling along, you need to have this whole bicycle operating properly. And once – if you don’t have enough debt pulling the bicycle forward, the bicycle tends to fall over just as your bicycle would fall over if you stopped – if you slowed it down too much.

But it needs the real energy for the back wheel as well. And it needs additional technology. And of course, it needs the buyers for all of these goods and services, and they have to be – have enough money to be able to afford things. And usually the way you get that income down to the buyers is through debt. The businesses borrow some money, and they use that to hire workers. Our governments borrow money, and they use that to pay Social Security payments and such things. And it's this debt that enables this whole process.

I would agree that, the way the economy is currently structured, debt is the essential front wheel pulling the economy forward. However, I disagree that this is necessarily the way it needs to be. I'm not sure if Gail understands that another model for the economy could function much better, since it wasn't really discussed.

The reason we need debt to pull us forward, and the reason everyone believes this, is because we have become a world of debt slaves, for a very loooong time, and we know no different. It is a two-tiered system of the elites versus everyone else, primarily the middle class.

The reason we need debt to do anything nowadays is because the average person doesn't have a positive net worth with which to allocate their money on future enterprises, or a positive net worth on which to fall back on when jobs are lost (for example, a paid-for house). If we want to do something, we need to go into debt to the banks to do it, to get "money", and the banks are owned by the elites.

This also creates the need for a perpetually exponentially growing economy, because due to automation, the amount of jobs needed to keep the economy humming along at steady state without growth or contraction would result in a high unemployment rate over 50%. Since the average person is a debt serf with no net assets, these people would starve in the streets if these jobs were not provided by economic growth.

However, fundamentally, there is no reason why the economy could not be structured entirely differently, in which the middle class, not the elites, owns the wealth, and as a result of this, would not have such a need to go out and work their eyeballs out at minimum wage, because the average person would own their house outright and would have no debt (mortgage) payment. Therefore, with less of a need for work, the 50% unemployment rate could easily be incorporated into the economy somehow without a social collapse.

How do we get to this utopia? It starts with eliminating the elites, which I agree is never going to happen until things get so bad that a popular revolt occurs, which will by definition be too late. There are lots of other changes that would need to be made to the economy to achieve this, but this is not the place to discuss them. The point here is that the reason we require debt to move forward and avoid collapse, and the reason we need an exponentially growing economy (both of which tie directly into the energy / oil picture), is ultimately due to class inequality and debt surfdom of the majority. This needs to be more explicitly included in the discussions of this topic because we didn't just arrive here all of a sudden for no reason. We have at least 100 years of plundering by the elites using their weapons, the banks, which have brought us to this place.

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My second comment, the

My second comment, the disagreement, concerns the assertion made that wind and solar are basically useless because they aren't storable. I fully agree that at the present time, they aren't storable. And I also must say that I agree that given our current trajectory, wind and solar are never going to take over the energy picture as the cornucopians dream about. However, on a purely technical basis, I have to disagree with the conclusion that they would never work, because they could, in a different economic environment, if we had made the changes decades ago, which we didn't. But still, technically, I don't see why they wouldn't work.

There is a potentially very large and ubiquitous energy storage device out there -- electric cars. On a related note, I have heard numerous times in other discussions that it won't be possible to power a complete conversion of the vehicle fleet to electric with the current infrastructure because doing so would require 25% more overall electricity demand. However, this is a false conclusion for two reasons: 1)  most people would charge overnight when electricity demand otherwise drops around 50%, easily absorbing all the demand from electric cars, 2) far from being elements making the electrical grid unmanageable, electric cars would do the opposite, simply by plugging into a "smart grid", in which they charge when electricity is abundant and cheap (when the wind is blowing or sun is shining), and in the reverse case, they would feed back into the grid (making profit for their owners) when demand is high. This could offset maybe 20% fluctuations in electricity production from renewables. Basically all it would require is that people plug their cars in whenever they aren't using them. They would do this because they would be making money by doing so.

The valid argument could be made that electric cars currently represent a tiny proportion of the vehicle market so I'm just dreaming to think that they would ever reach a scale to be able to do this. Yes, I agree, but the same argument applies to wind and solar. They currently account for a small proportion of the overall market, but that doesn't stop people from slamming them as being unscalable. Well, what if both electric cars and intermittent renewables rose up at the same time?

As to the impracticality of batteries, well I've had my Nissan Leaf for about 6 years now and have probably seen about a 25% reduction in my range and I use it almost daily. It's haad to say for sure how much it's gone down because Nissan did a firmware update a couple years ago which hides a certain proportion of my charge to prevent people from running out of charge on the road. Maybe I have lost less than 25%.

Will there be enough lithium available for the batteries? I don't know, I've heard conflicting reports. But if there isn't I'm sure with the right motivation, other battery technologies will emerge which they seem to be doing. There is no fundamental thermodynamic factor limiting battery technology so in the end, material science will win out.

Also as to the assertion that fossil fuels are needed to build and erect wind turbines and presumably solar panels too, well I don't see why electric powered machinery couldn't be used to erect them. The biggest dump trucks in the world are electric drive. As to where the positive net energy comes from to get the raw materials to build the fiberglass etc., well that positive net energy could come from the wind turbines themselves which I have heard have a quite high EROEI even including all the erection costs. With some of this positive net energy in the form of electricity, you extract some otherwise negative EROEI tar sand and use that as a raw material to make the wind turbine. This "solution" wouldn't last forever, but a very long time because there is a lot of otherwise uneconomic tar sand and other such things like coal which could be extracted in mining operations simply for their chemical use as feedstock, not as a source of energy.

Now, I fully agree that the likelihood of us ever seeing such a transition to a smart grid with a bunch of electric cars balancing out intermittent supply from solar and wind is remote to none. However, on a purely technical basis there is no reason that this won't work (which is why I must disagree with arguments stating that it won't work, based on a technical reasons) and I think it is something we should be striving for.

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MKI

Regardless of all the well thought out retorts through the PP lense, I feel I should say a few words for myself rather than anyone else. MKI’s vision of the future should be appealing to us, shouldn’t it? Why do we “PPers” get so repelled by such viewpoints? I mean, aside from all the data leading us to our conclusions.

Personally, I used to get angry because events weren’t confirming my beliefs. But today, I’m not so sure. I think now it’s more to do with the great sadness involved in such short sightedness. It’s not MKI’s viewpoint that I find difficult, it’s what it represents; business as usual. That’s what’s hidden in it. A presumption of more growth, species loss, consumption rather than connection, pollution and decay. It’s the continuing slow death many of us feel, and MKI has just handed me a shot of heroin to take the edge off a little longer. The cognitive dissonance in our daily lives is so extreme for those of us that don’t buy the maintream narrative, so that when we meet that narrative here it feels like a violation. It’s partly this dynamic I feel that Stephen Jenkinson was touching on “there are times in your life when you go on not being able to”. The sadness is so extreme I can barely breath some days. Not because I have nothing to be joyful about, but because I have a great deal to be joyful about. I’m beginning to understand what a terminally ill person must feel in the extra time they’ve been granted by palliative care, or the person looking at a beautiful flower whilst tied to a train track. Only, it’s not just my demise I’m dealing with, it’s the demise of everything I hold dear. This culture’s inability to be aggrieved by that which has already occurred is the reason it blindly stumbles on into the future it ordered. Here comes the new boss, same as the old boss; I go on.

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It is the business as usual that offends

Good points Pipyman, you have captured some of what I have been thinking as I followed this thread. The problem I have with MKI’s assertions relate more to a perceived callousness/arrogance that fails to address the other predicaments we collectively are facing. I always struggle trying to relate to people who are too focused on money and/or making money, while never seeming to display any caring about all of the other things that are of significant importance, our biosphere and ability to survive - as well as future generations. The fact is I don’t care if we are energy rich now - what gives us the right to do the rape and pillage thing, draining every last drop to use and pad our paycheques? How gluttonous, and immoral, from the perspective of not caring about the future.

Colour me more altruistic in my thinking. While there may be an illusion that we in this (greedy) first world are and remain energy rich, that is all it is, an illusion.  The energy illusion is propped up by the debt illusion. To borrow a slogan from one of the big Canadian banks, “you’re ricer than you think.” Ya right.... 

There has been a lot of great commentary and rebuttal. Perhaps this is a debate of “is your glass half full or half empty?” Hate to say it but I am in the half empty camp because the data and 3E’s are pretty persuasive, while MKI’s ‘data’ is lacking. But then again, I don’t have a vested interest, as MKI appears to have. Perhaps there is data that shows a correlation between one’s beliefs and how those belief’s impact ones paycheque. Just wondering...

Jan

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Everything old is new, again!

In defense of our buddy, MKI, perhaps instead of focusing on bickering about those things that divide, we could look through the clutter and embrace those things that have withstood the ages; the scythe, the anvil, harnesses, physical labour, wind and water power and apply them intelligently. A couple of simple applications:

 http://www.steffes.com/electric-thermal-storage/room-units/

https://www.architonic.com/en/products/ceramic-stoves/0/3238841/1

http://www.voltbike.ca/voltbike-yukon.html

https://www.livescience.com/61389-alligators-snorkel.html  (Time to slow down?)

Do we choose to look into the abyss or scale the high ground. (Disclaimer: I have no vested interest in any of these products - wish I did, however). Are we looking at a catastrophe or at a predicament? The "cutting edge" of technology occasionally needs to be honed.

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Costco still strong

We do all our shopping at Costco; Sam's Club has never been competitive in our experience. I think that's the more likely reason for the closure. Walmart and Fred Meyer are still doing well, too. Remember what it was like in the 1970s, how expensive food was? Life in AK is so much easier today.

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Costco Still Strong? What

Well MKI it's all relative.  

You say "life in Alaska is so much easier today"! Really, that's a blatant GENERALIZATION.  Compared to what, were you here? I was.  If someone has trouble putting food on the table or generating income today, they don't care what the price of milk was in 1970.  And for your information there are no COSTCO's in Fairbanks which means a whole lot of people North of Anchorage have to shop retail or have stuff shipped, or flown or driven or snow-machined to their remote locations, and that's expensive.  I have been told that the Sam's Club in Fairbanks was the highest grossing in the nation.  Guess that didn't matter.

I find your lack of empathy and hubris sad.

AKGrannyWGrit

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MKI

Pipyman,

My primary thesis: we could easily cut our consumption of everything way back and still live a very rich and pleasant life. So why all the angst? I've lived without power or running water for years when younger, and it's a good life. Imagine if we all had gardens in your front lawn? Lived in 1/10 the SF? Walked instead of drove? We could cut back literally 50% of our GDP and live quite well. No, better! We could completely replace oil and be better off for it.

Regarding the reality of technology growth and economic growth? This is merely factual data and I have no allegiance to it, it's just blunt reality that things just keep getting easier every year of my life due to technology. This has been a fact of my my nearly 50 years of life. It's not some prediction where I think I'm so smart I can predict the FED does this or oil prices do that. Could this growth reverse? Sure, but growth has been this way since the 1750's at least I doubt it will reverse in my pathetic lifetime, and I sure ain't smart enough to predict if or when this will happen anyway even if it does.

So why not just keep 10% of one's net worth in gold and own one's home as a hedge, walk to stay fit, and hunt/fish/garden better and healthier and cheaper food...and continue to participate in our GDP growth? And what steady ride it's been; I remember in 20 years ago amazed as the DOW broke 10,000. Now it's 25,000. And I've made at least 3% in stock dividends over that time as well by staying in the game. What's not to like? If WWIII happens or we run dry of oil, just be living well and healthy is it's own reward and own your home, have a well and garden/hunt/fish to hedge against a crisis. Life is good. 

I'm open minded to anyone with a good argument against my thinking. I've yet to see it; so many seem so sure they understand and can predict the economics, the FED, the price manipulations, the oil situation. Good luck with all that. I'm not that smart, I just follow the data that has matched my reality for my entire life.

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Utopia
MKI wrote:

My primary thesis: we could easily cut our consumption of everything way back and still live a very rich and pleasant life. So why all the angst? I've lived without power or running water for years when younger, and it's a good life. Imagine if we all had gardens in your front lawn? Lived in 1/10 the SF? Walked instead of drove? We could cut back literally 50% of our GDP and live quite well. No, better! We could completely replace oil and be better off for it.

On the wish fulfillment front, why not make it happen? Get everyone on board. Why not become the person that changed an entire nations ideals - let alone it'd be like herding cats.

You do know the outcome, I'm sure : -

We're not going to change much in this country. It isn't the job of this website. Neither is it the intention. People here aren't trying to build a utopia. That would be stupid. 

"For if you suffer your people to be ill-educated, and their manners to be corrupted from their infancy, and then punish them for those crimes to which their first education disposed them, what else is to be concluded from this, but that you first make thieves and then punish them."

Sir Thomas More - Utopia 1516

Finn

 

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Mark Theissen - MK1's Brother From Another Mother

Hey Tom,

You've just gotta love former Bush speech writer Mark Theissen for the promo work on Trump at the Washington Post. I mean, I recall him stating on live interview a few years back that waterboarding wasn't torture. I bet the revenue in advertisement has been good for the paper of late?

It's 40 odd years since Bernstein and Woodward blew open Watergate. Nothing changes, yet some things stay the same ...

Finn

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The Cult of me?

I’m hearing an awful lot about you and yours MKI. And if I selfishly took the same perspective of my own current situation, from many directions, I could concur. But, I’m talking about the costs, you know, those externalities? The resource wars, the collapsing insect populations, the children doped up on tv, computer games and toxic cheap food (possibly from Costco if my understanding of the place is correct), the consumption/trash heap economy. Even if you can’t grasp where the current trends are heading in the near future, I can’t understand why you are so blind to the costs that are right in front of you. But, I guess “there are none so blind as those who refuse to see”. I’ll enjoy the privilege I have for a while longer just as you appear to be doing, but I sure as hell won’t allow myself to detach from the costs. I rightfully carry that weight, and I honour the living world as best I can.

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Costco Still Strong? What

AKG,

Yes, I was here in 70 & have lived in nearly every type of community (Anch/Fbx/Kenai/Wasilla/bush). Remember the cost of food in the 1970's? The terrible fruits/veg available? At outrageous costs? Not to mention the paved roads were at least 1/2 the quality/quality of today. And of course cars were maybe 1/3 as reliable...making driving much easier today & flying is cheaper today as well...& Amazon has made everything easier to access here, Kindle cuts down on shipping, the web automates much that took work back in the day. Technology improvements have made our life in AK way, way better over the last 50 years. This is just an objective reality to everyone I know and live with. We talk about it all the time, grateful.

But I'm mystified how my observation about life is better today warrants an accusation I "lack empathy" & am engaging in "hubris"? I'm cheerful in this thread, I have nothing against those who disagree with me. Why all the angst?

AKGrannyWGrit's picture
AKGrannyWGrit
Status: Gold Member (Offline)
Joined: Feb 6 2011
Posts: 476
Now Where Was That Ignore Button

My Dear MKI, we live in different worlds and let me enlighten you why your posts give me angst and after this post I will be putting you on my ignore list.  

You say, for instance "And of course cars were maybe 1/3 as reliable...making driving much easier today"  Ah no, we have a 1974 Truck that still runs.  I can sit for months and then start and purrs like tiger.  Easy to work on a real gem.  People often want to buy it as it's so much more reliable than high tech vehicles today.. Get it, no computers it's MORE reliable.   And, "Kindle cuts down on shipping"  I read and collect books no shipping.

"Technology improvements have made our life in AK way, way better over the last 50 years. This is just an objective reality to everyone I know and live with. We talk about it all the time, grateful".  '

Repeatedly in my posts I have pointed out that it's not an objective reality that everyone is doing better.  There are many who are struggling.  Your posts seem to reflect that you do not read the posts of others in order to understand but only to respond.  Silly me for trying multiple times to get your to see the world isn't just about you but many others who's lives are difficult.  Much like arguing with a alcoholic it's an effort in futility.  Hey, I get it, let me see if I can push Granny's buttons.  Yep I care deeply and you did.  But there is an ignore button for a reason.

End of story, Period!

AKG

 

Quercus bicolor's picture
Quercus bicolor
Status: Gold Member (Offline)
Joined: Mar 19 2008
Posts: 470
Why people are frustrated by your demeanor in this thread

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Quercus bicolor's picture
Quercus bicolor
Status: Gold Member (Offline)
Joined: Mar 19 2008
Posts: 470
Why people are frustrated by your demeanor in this thread

MKI.  I'm going to take my best guess at the reason for the "lack of empathy" and "hubris" comments.  You have repeatedly written about how much easier life has gotten since about 1970.  I think they are frustrated by what seems to be your lack of awareness of the terrific costs to ecosystems, human culture and those who have been left out in increasing numbers from this fantastic life style.  To them (and me), all you can see is yourself and the people around you who have similar experiences. 

You don't see (or at least don't mention):

  • our toxic agricultural system whose biggest export is topsoil into the worlds oceans
  • the huge reduction in insect, ocean fish, and large mammal populations.
  • a financial system that has increasingly been gamed to funnel wealth to the well connected which, as energy and other resources have gotten more expensive to extract (the pie has stopped growing or at least slowed it's growth), has created a larger and larger underclass that is increasingly stressed, addicted, even dead from overdose, suicide, etc.
  • Climate change and soon ocean acidification are increasingly impacting us in bigger and bigger ways.
  • Our nation continues to prosecute declared and undeclared wars that have killed at least hundreds of thousands (probably millions) over that time frame and caused untold suffering for millions more.
  • Millions of people in dozens of countries have worked in horrid working conditions to produce the raw materials and cheap consumer goods our economy depends on.

In short, there is untold suffering in this system that has made life so much easier for some of us and it is absolutely awful for others.  It is also absolutely unsustainable, probably on a time scale of a few decades or less.  You haven't mentioned anything about the big picture, and what our easy lifestyles have caused for others, and the world or the unsustainability of it all.  How can a sober adult be so simplistic?  It's frustrating.

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