Author: Rob Mielcarski

By Art Berman: Stop Expecting Oil and the Economy to Recover

This recent essay by Art Berman may be the best historical analysis of oil and its relationship with the economy I’ve read.

https://www.artberman.com/2020/09/03/stop-expecting-oil-and-the-economy-to-recover/

Here is my simplified summary of Berman’s analysis:

  • both supply and demand for oil have recently fallen
  • oil demand has fallen more than oil supply
  • this despite an all-time record amount of debt conjured to stimulate the economy
  • which means the global economy is contracting and is in serious trouble
  • the contraction was underway before the virus – the virus accelerated but did not cause the contraction
  • the problem began in 1974 when oil prices increased above the level that the economy can grow without debt growing faster
  • we’re not going to run out of oil, we’re going to run out of people that can afford oil
  • the problem being geologic and thermodynamic in nature, has no business as usual fix, and will continue to worsen

Berman’s analysis is consistent with the conclusions of the other leading minds on the energy-economy relationship: Gail Tverberg, Tim Morgan, Nate Hagens, and Tim Garrett.

The most interesting question, by far, when viewed from 10,000 feet is why do none of our political or intellectual or business leaders understand the most important influence (energy) on the thing they care most about (economic growth)?

The answer of course is that the human species evolved to deny unpleasant realities.

As an aside, recall that Eric Weinstein, the brilliant physicist/hedge fund manager whom I recently wrote about as a case study in denial believes correctly that economic growth and scientific advancement slowed in the late 70’s, but he doesn’t understand the cause despite thinking about it a lot. It’s no wonder that the much lesser intellects of almost all economists don’t have a clue what’s going on.

Berman believes that our economy, being a dissipative structure, will either collapse or spontaneously re-organize itself into a simpler form that uses less energy. I suppose the virus lockdown is a good example of a spontaneous lower energy re-organization. I put my money though on some form of collapse in the not too distant future. Despite a surfeit of entitled citizens, we could weather a significant reduction in living standards because we in the developed world consume so much more than we need to survive, however, the unprecedented debt bubble we have created by denying reality blocks a civil contraction.

Berman concludes that as the economy necessarily simplifies and we live much poorer lives, our energy mix will shift to lower productivity energy sources like wind and solar. My response to this is maybe. It’s more likely that Berman is denying the reality of his own analysis.

I can see solar panels being used for low power/high impact applications like, for example, LED lighting and pumping water into a gravity fed cistern. But it is unlikely and probably impossible that we will heat our homes, or cook our food, or cultivate and harvest our crops, or mine and smelt our minerals, or transport ourselves and our necessities with solar and wind.

When our solar panels and wind turbines wear out some decades in the future it is unlikely that the sophisticated factories and complex supply chains needed to manufacture and install replacements will exist. If some do exist to supply elite customers, like the military, most citizens probably won’t be able to afford their products.

I expect reality denial will prevent us from ever acknowledging peak oil and its offspring human overshoot. Instead, our consensus story all the way to a medieval lifestyle, at best, will likely be that there’s plenty of oil if the other tribes would stop using so much and we just need to elect someone tougher to deal with them and get our economy growing again.

Acknowledging our genetic tendency to deny reality would be a good thing because we might then focus on the best response to our overshoot predicament which is to rapidly reduce our population. Other wise responses can be found here.

Here’s the excerpted conclusion from Berman’s essay, but it’s definitely worth your time to read the whole thing for the data backing up these conclusions.

The Great Simplification

Energy is the economy. Money is a call on energy. Debt is a lien on future energy.

What is happening to oil markets and to the global economy is not because of a virus. The virus greatly accelerated what was already happening. Things won’t go back to normal when the virus ends.

The expansion of energy and debt have been leading toward some sort of reckoning for at least the last fifty years. That day of reckoning has been brought forward by coronavirus economic closures.

Oil prices had averaged $25 per barrel from the end of World War II until 1974 when average prices doubled (Figure 9). From 1979 through 1986, oil price soared to an average of $86 per barrel. These massive economic dislocations resulted in use of debt to maintain economic growth.

Excessive debt was the leading cause for the Financial Collapse of 2008. The crisis was resolved with more debt and monetary policies that ushered in the present era of central bank primacy in the world financial system.

Quantitative easing, near-zero interest rates and high oil prices led to the first wave of the tight oil boom. Over-investment resulted in over-supply and price collapse in 2014. By February 2016, WTI price reached $33 and investors rushed in to support the second wave of the tight oil boom.

WTI reached $72 by mid-2018 but by then, investors had begun to abandon tight oil as well as oil companies in general. The coronavirus economic closure brought monthly average prices to $17 in April, 2020—the lowest month on record. Unlike early 2016, investors weren’t writing any checks this time.

U.S. production may be 50% lower by mid-2021 than at year-end 2019. The implications for U.S. geopolitical power and balance of payments are staggering. It seems likely that the economy will weaken as government support for the unemployed decreases

I doubt that we are on the cusp of either a global energy crisis or the end of the oil age. It is more likely that both supply and demand will fall in tandem as the global economy contracts.

These observations are at odds with the mainstream view that both supply and demand are recovering. Some might concede that I am correct for the present but that things will improve and return to normal although it may some time.

Figure 10 shows credit growth and credit impulse for the United States from 1960 through the first quarter of 2020. Credit impulse is the change in flow of credit (debt) relative to economic activity (GDP).

Spikes in credit impulse correlate well with the oil-price shocks of the 1970s and 1980s. The extraordinary U.S. comparative inventory drawdown of early 2017 through the second quarter of 2018 also corresponds to credit impulse anomalies.

The chief feature of Figure 10, however, is that the magnitude of the first quarter 2020 credit impulse was more than twice as large as any previous increase. Moreover, GDP growth was either neutral or positive during previous spikes but was negative (-10%) for the first quarter of 2020. Also, oil prices were increasing during earlier periods but prices were decreasing in early 2020.

Ilya Prigogine was a chemist who won the 1977 Nobel Prize for his work on dissipative structures and self-organization. Dissipative structures are physical systems that release considerable heat as they consume ever-greater energy to support their growth and increasing complexity. A crisis occurs when growth can no longer be supported by available energy resources. The system either collapses or spontaneously re-organizes itself into a simpler form that uses less energy.

Empires, organizations and economies are dissipative structures. So is the human brain.

My friend Nate Hagens has applied some of Prigogine’s ideas to his own research about world energy, economics and ecology. He believes that we are on the cusp of something quite different from the scenarios suggested by Ahmed, and Goehring and Rozencwajg.

Hagens predicted a global economic decline in the 2020s and publicly expressed that opinion before the Covid pandemic. The main reason for decline, he stated, was too much debt undertaken to continue consuming and growing the economy. The virus has accelerated its timing and may result in contraction greater than the 30% drop during the Great Depression.

The Great Simplification will occur when the credit-supported part of the economy is removed. Economic activity will contract and less energy will be needed because it will be increasingly unaffordable to many parts of the population. People will be forced to adjust living standards downward and self-organize around energy with greater emphasis on local supply chains and regional economies.

I expect that the mix of energy sources will be similar initially. That will probably change as declines to meet the decreased carrying capacity of a society deprived of fossil energy productivity. Then, I imagine the world will move increasingly toward lower productivity energy sources like wind and solar. A viable economy may very well be created based heavily on wind and solar. It will, however, support a much poorer world than we have known for many decades in the world’s advanced economies.

Most ideas and analyses about future trends in energy and the economy fail to recognize that they are the two aspects of the same thing. That is why they are so far off the mark. This basic misalignment is painfully obvious because the energy sector represents only 2.5% of the S&P 500 valuation but underlies probably 95% of U.S. GDP.

That is what Hagens calls energy blindness1.

1I call it energy denial.

By Jack Alpert: How the World Works

This latest video from Jack Alpert is very good.

Alpert explains why on our current default trajectory most of the global population that lives after 2050 will experience starvation and that by about 2100 our 8 billion will be reduced to about 600 million serfs leading a medieval lifestyle on a sick planet.

Alpert then describes an alternate trajectory via voluntary rapid population reduction that avoids unnecessary suffering and preserves a modern human civilization of 50 million living on a healthy planet.

Alpert remains the only person that I’m aware of with a thermodynamically feasible plan for maintaining a modern human civilization as fossil energy depletes.

His plan does require us to break through our evolved tendency to deny unpleasant realities. A few, such as the readers of this blog, have demonstrated this is possible but scaling to the majority remains in serious doubt.

You can find other work I’ve posted by Jack Alpert here.

What a relief, I was wrong, we’ll be ok…

I just listened to Michael Shermer’s interview of Michael Shellenberger on his new book Apocalypse Never.

Here is the publisher’s summary of the book:

https://www.goodreads.com/book/show/50173134-apocalypse-never

Apocalypse Never: Why Environmental Alarmism Hurts Us All

Michael Shellenberger has been fighting for a greener planet for decades. He helped save the world’s last unprotected redwoods. He co-created the predecessor to today’s Green New Deal. And he led a successful effort by climate scientists and activists to keep nuclear plants operating, preventing a spike of emissions.

But in 2019, as some claimed “billions of people are going to die,” contributing to rising anxiety, including among adolescents, Shellenberger decided that, as a lifelong environmental activist, leading energy expert, and father of a teenage daughter, he needed to speak out to separate science from fiction.

Despite decades of news media attention, many remain ignorant of basic facts. Carbon emissions peaked and have been declining in most developed nations for over a decade. Deaths from extreme weather, even in poor nations, declined 80 percent over the last four decades. And the risk of Earth warming to very high temperatures is increasingly unlikely thanks to slowing population growth and abundant natural gas.

Curiously, the people who are the most alarmist about the problems also tend to oppose the obvious solutions.

What’s really behind the rise of apocalyptic environmentalism? There are powerful financial interests. There are desires for status and power. But most of all there is a desire among supposedly secular people for transcendence. This spiritual impulse can be natural and healthy. But in preaching fear without love, and guilt without redemption, the new religion is failing to satisfy our deepest psychological and existential need.

Key points from the interview:

  • It’s unhelpful, unscientific, and depressing to describe our problems in apocalyptic terms.
  • Doomers are angry depressed people who want the world to collapse.
  • Environmentalism fills a spiritual need within atheists. When you’re living a life of prosperity and you stop believing in god and think you’ll become worm food after you die, you ask yourself what’s the purpose of life?
  • There is no 6th mass extinction underway. We are only causing 0.001% of species to go extinct each year. It is a problem that we’ve reduced wild animals by 50% since 1970 but the solution is to end poverty.
  • People are overreacting to Amazon deforestation.
  • CO2 emissions in advanced countries have been falling for years.
  • Nobel price winning economist William Nordhaus has shown that 4 degrees temperature rise is optimal considering the benefits of burning fossil energy and the costs of climate change; it’s a good thing we’re only going to experience 3 degrees rise thanks to us switching from coal to clean and amazingly abundant natural gas.
  • Nothing bad is going to happen at 3 or 4 degrees temperature rise, nor will it remove the flood control system that protects my house in Berkeley. The only bad thing that might happen at 4 degrees is we grow less food, but that can be solved by providing tractors, irrigation and fertilizer to farmers in poor countries.
  • The Netherlands has proven that sea level rise is not a problem for rich countries.
  • Eating less meat will not help climate change nor improve your health. We evolved to eat meat and CAFO’s have reduced our use of land for livestock by an area equivalent to Alaska.
  • People wanting to lower their impact should drive a used car and fly less.
  • Cheap abundant energy is the source of our well being.
  • Renewable energy has too low power density to support our lifestyle. If you want to reduce climate change you should support nuclear energy.
  • Using more energy is good for people and nature because it reduces the consumption of materials.
  • The solution to environmental problems is to bring poor people up to our standard of living.

To summarize what I think is Shellenberger’s message:

  • A modern affluent lifestyle is good for the environment and is enabled by abundant low cost energy.
  • Renewable energy does not have sufficient power density, we need fossil and nuclear energy.
  • There are serious environmental problems but helping poor countries achieve a similar lifestyle to ours will solve many of them, and if we’re wealthy we can cope with the remaining problems.

I think Shellenberger is intelligent and is correct on many of his points. Unfortunately the points he’s wrong on are fatal:

  • Affordable fossil energy will deplete much quicker than he assumes. Our economic problems of the last 12 years are evidence that power down is underway.
  • If I’m wrong on the depletion rate of affordable fossil energy, our economic growth will be constrained by other non-renewable resources.
  • Nuclear energy was once a good idea, but not now that fossil energy depletion is weakening economies and governments thus making good governance a too risky bet. Nuclear also doesn’t solve our dependency on diesel for tractors, combines, trucks, trains, and ships.
  • The consequences of our current 1 degree temperature rise are already dire due to the loss of ice. The 3 degrees Shellenberger is comfortable with will create a planet incompatible with modern civilization due to the impact on food production and sea level rise. Even if I’m wrong, we won’t have the wealth to cope.

People like Michael Shellenberger, Eric Weinstein, Matt Ridley, Steven Pinker, and Yuval Noah Harari demonstrate that regardless of how intelligent or well educated you are, if you deny the reality of energy depletion, then most of your beliefs are probably wrong, because pretty much everything depends on energy.

Perhaps this is why Nate Hagens once likened discussing peak oil to eating a bad oyster.

I’ve added Shellenberger to my list of famous polymaths in denial.

On the other hand, if you think Shellenberger is right, then I’ve got just the tune for you.

Eric Weinstein: A Case Study in Denial

I watch for evidence that supports or contradicts Varki’s MORT theory.

With average citizens it’s hard to distinguish ignorance from denial. The only way to know for sure is to explain the facts and associated evidence about human overshoot to someone and then observe if they still deny our predicament and what needs to be done about it.

It’s much easier to detect denial in polymaths because almost always fossil energy driven overshoot is the only important topic they are completely blind to.

I’m therefore on the lookout for smart polymaths, especially those with physics degrees, because with a physics background it is impossible to be blind to energy overshoot without denial of reality being in play.

I recently discovered Eric Weinstein via an interview on the Joe Rogan podcast. Weinstein has a PhD in physics from Harvard and hosts a podcast called The Portal in which he discusses big picture problems facing society.

Weinstein has been quietly working for a couple decades on a theory to unite general relativity with quantum mechanics. There’s no consensus yet on whether he’s onto something promising, but he’s clearly a really smart guy, as this recent unveiling of his theory demonstrates.

I’ve listened to several of Weinstein’s Portal podcasts and he demonstrates an impressive command of many disciplines. This one is a good representative sample covering a wide range of topics:

Weinstein is thus the perfect polymath poster child for testing Varki’s MORT theory.

On the important issues facing our species, this is what I think Weinstein is saying:

  • Economic growth and scientific advancement slowed in the late 70’s which is a big problem, but he doesn’t know the cause. He thinks we should invest more in physics research, we should make higher education more effective, and we should encourage innovation. He’s apparently blind to the effect of rising energy costs. I wrote about our stagnation after the 70’s here.
  • Economic growth today is faked with debt which is a big problem that threatens democracy. He doesn’t know the cause and makes up crap like all the other pundits. He’s apparently blind to the relationships between energy, wealth, debt, and growth.
  • He thinks that we need to return to 3+% economic growth to avoid a zero sum game and the human violence this will unleash. He’s apparently blind to the implications of 3% exponential growth on a finite planet.
  • One of the new technologies he thinks has promise is radical lifetime extension in which people will live many more years before dying. He’s apparently blind to human overshoot and the need to get our population down quickly.
  • He thinks non-carbon energy is a feasible solution to climate change, and is thus just as wrong as all the other famous polymaths.

In summary, Weinstein understands everything except what matters. Given his impressive intelligence and education this is impossible without strong reality denial.

I’ve added Weinstein to my list of famous polymaths in denial.

Don’t Sleep, There Are Snakes by Daniel Everett

I just finished the book Don’t Sleep, There Are Snakes: Life and Language in the Amazonian Jungle by Daniel L. Everett. Thank you to Perran for recommending it.

A riveting account of the astonishing experiences and discoveries made by linguist Daniel Everett while he lived with the Pirahã, a small tribe of Amazonian Indians in central Brazil.

Everett, then a Christian missionary, arrived among the Pirahã in 1977–with his wife and three young children–intending to convert them. What he found was a language that defies all existing linguistic theories and reflects a way of life that evades contemporary understanding: The Pirahã have no counting system and no fixed terms for color. They have no concept of war or of personal property. They live entirely in the present. Everett became obsessed with their language and its cultural and linguistic implications, and with the remarkable contentment with which they live–so much so that he eventually lost his faith in the God he’d hoped to introduce to them.

Over three decades, Everett spent a total of seven years among the Pirahã, and his account of this lasting sojourn is an engrossing exploration of language that questions modern linguistic theory. It is also an anthropological investigation, an adventure story, and a riveting memoir of a life profoundly affected by exposure to a different culture. Written with extraordinary acuity, sensitivity, and openness, it is fascinating from first to last, rich with unparalleled insight into the nature of language, thought, and life itself.

I read the book hoping to find some evidence either supporting or contradicting Ajit Varki’s MORT theory. It was an enjoyable and very interesting read. The author is smart, articulate, and an engaging expert on languages and anthropology.

Everett describes in detail the Pirahã (pronounced Pita-hah) which is (was?) a rare tribe whose culture has (had?) not yet been significantly modified or subsumed by contact with modern industrial civilization.

The Pirahã are unusual in that they have no origin myths or well defined religion, although they do believe in spirits, but Everett was very vague on how these spirits influence their culture. The Pirahã have no interest in, and resist conversion to, other religions like Christianity.

I was most interested to learn whether the Pirahã believe in life after death because this is central to Varki’s MORT theory. I found it very odd that the author, a former Christian missionary, would discuss almost everything about their culture except their belief, or lack thereof, in life after death. Everett did say the Pirahã bury their dead with the few valuable items they own, which to me suggests they do believe in life after death, otherwise why not keep the wealth for the living?

I found it difficult to identify Pirahã behaviors that suggested they do or do not deny unpleasant realities. Perhaps this is a side effect of them living in the moment and therefore having many fewer unpleasant things to deny.

In summary then, with respect to support for or against Varki’s MORT theory, I’d say there was evidence for denial of death, but not much else.

The book offered, as a pleasant surprise, some genuine inspiration on how to lead a happier and more sustainable life.

The behavior of the Pirahã suggests that the Maximum Power Principle (MPP) may not be a primary driver in all human cultures, as I had previously assumed. The Pirahã work hard to acquire enough resources to survive, and will fight to protect those resources if necessary, but do not acquire nor desire more resources than required to survive.

The Pirahã live in and enjoy the moment. They do not obsess about bad events in the past. They do not worry about the future. They forgive quickly. They laugh, tell stories, and dance. They are proud of their way of life. Everyone is expected and does contribute to the tribe, unless they are physically unable, in which case the tribe looks after them.

I very much like stories with happy endings and this book delivered. Everett began his work as a devout missionary trying to convert the Pirahã to Christianity. Over time his scientific training that required evidence based reasoning, and the obvious fact that the Pirahã led happy fulfilling lives without Jesus, caused Everett to abandon Christianity and become an atheist. Hallelujah!

I wish the Pirahã would turn the table and send out missionaries to convert the 8 billion lost souls that need salvation.

P.S. Everett did a nice take-down of Noam Chomsky’s linguistic theories, which I enjoyed, because Chomsky irritates me as yet another famous polymath who knows a lot about everything, except what matters.

P.P.S I’ve started another book by Daniel Everett, How Language Began: The Story of Humanity’s Greatest Invention.

P.P.P.S. Here are a few videos of Everett talking about the Pirahã.

Biased Cognitive Biases

Cognitive Bias Codex

Thanks to Apneaman for bringing this image to my attention, it’s very interesting.

This info-graphic was constructed from a list of cognitive biases assembled by a team of experts collaborating via Wikipedia over a 15 year period.

A cognitive bias is defined as:

A cognitive bias is a systematic pattern of deviation from norm or rationality in judgment. Individuals create their own “subjective reality” from their perception of the input. An individual’s construction of reality, not the objective input, may dictate their behavior in the world. Thus, cognitive biases may sometimes lead to perceptual distortion, inaccurate judgment, illogical interpretation, or what is broadly called irrationality.

Some cognitive biases are presumably adaptive. Cognitive biases may lead to more effective actions in a given context. Furthermore, allowing cognitive biases enables faster decisions which can be desirable when timeliness is more valuable than accuracy, as illustrated in heuristics. Other cognitive biases are a “by-product” of human processing limitations, resulting from a lack of appropriate mental mechanisms (bounded rationality), impact of individual’s constitution and biological state (see embodied cognition), or simply from a limited capacity for information processing.

A continually evolving list of cognitive biases has been identified over the last six decades of research on human judgment and decision-making in cognitive science, social psychology, and behavioral economics.

I counted them. There are 195 distinct cognitive biases named and described in the list.

Have a look. Do you notice something very odd?

The most important and powerful of all human cognitive biases, and the one that created our unique species, is not on the list: denial of unpleasant realities.

Nor is its progenitor, denial of death.

Any half-wit who studies human history will notice that the first wacky thing our species did after evolving into behaviorally modern humans was make up stories (religions) to deny death.

Today our species aggressively denies every single unpleasant reality of substance that threatens its survival including: over-population, non-renewable resource depletion, climate change, pollution, habitat destruction, and species extinction.

So here’s the question…

How is it possible that a group of experts over 15 years can assemble a list of 195 cognitive biases and completely miss the most important one?

The only explanation big enough and powerful enough to explain this gobsmacking dumbfuckery is denial of denial.

WASF

Sabine Hossenfelder’s Lost in Math

Sabine Hossenfelder - Lost in Math

I just finished Sabine Hossenfelder‘s book Lost in Math.

Whether pondering black holes or predicting discoveries at CERN, physicists believe the best theories are beautiful, natural, and elegant, and this standard separates popular theories from disposable ones. This is why, Sabine Hossenfelder argues, we have not seen a major breakthrough in the foundations of physics for more than four decades.

The belief in beauty has become so dogmatic that it now conflicts with scientific objectivity: observation has been unable to confirm mindboggling theories, like supersymmetry or grand unification, invented by physicists based on aesthetic criteria. Worse, these “too good to not be true” theories are actually untestable and they have left the field in a cul-de-sac. To escape, physicists must rethink their methods. Only by embracing reality as it is can science discover the truth.

My review is brief but accurate:

  • Brilliant.
  • Lucid.
  • Brave.
  • Not in denial.
  • Rare.

Most of the physics Hossenfelder discussed was over my head but it makes me happy to be reminded of what the brain of our species is capable of achieving.

I also very much enjoyed watching a great intellect take down other great intellects that are denying reality.

I’m pretty sure Hossenfelder’s a denial mutant. I wish she would read and discuss Varki’s MORT theory.

I will read her book again soon.

Hossenfelder blogs here, and makes physics videos here.

Here is a must watch 7 minute synopsis of the book by the author.

 

Her most recent video took down Trump using quantum mechanics.

 

Hossenfelder also makes music videos here and here. These are a couple of my favorites.

 

 

Yuval Harari’s Sapiens: A Brief History of Humankind (revisited)

Harari Sapiens

I first reviewed Harari’s book 5 years ago here.

After watching this book sit near the top of popular book lists for several years I thought I should re-read it to see if I missed something. I posted the following refreshed review on Goodreads.

Another fine example of Panglossian cognitive dissonance in the tradition of Pinker’s Enlightenment Now and Ridley’s Rational Optimist.

Harari gets everything right except what matters: human overshoot and the total dependence of everything he admires about humans on rapidly depleting non-renewable resources.

Harari does seem to get the fact we’re trashing other species and the planet but then leaves that thought unfinished and shifts to an abundant future with genetically engineered humans and artificial intelligence.

By pandering to and reinforcing the human tendency to deny unpleasant realities it’s no wonder his book is popular.

Despite being very well read he’s just another idiot monkey in denial.