By Irv Mills: My Peak Oil Journey

Irv Mills

Irv Mills today published a very nice history of peak oil in which he summarizes what has occurred to date, and explains how his understanding of the relationship between energy and the economy has evolved and improved over time.

Mills’ essay is clear, accurate, and accessible. I recommend it as an excellent primer on peak oil.

Mills observes that oil consumption in recent years has grown about 1.7% per year despite little or no real growth in the economy. He speculates that the extra energy is being consumed by the oil industry to produce oil that is now hard, and getting harder, to extract. I suspect he’s right and recently wrote about this red queen phenomenon here.

Mills sees economic problems in our future but also expects some surprises. I agree. As readers know, I am fascinated by the fact that we collectively deny the reality of peak oil, despite it being, by far, the most serious short-term threat to civilization. My hunch is that we will never accept the reality of peak oil. Something else will happen that we can blame for our economic woes. Like war. To admit that growth is over due to nature being more powerful than our hubris, and that we totally screwed up by ignoring obvious facts, is a pill too big to swallow for our egos.

https://theeasiestpersontofool.blogspot.com/2018/06/autobiographical-notes-part-4-my-peak.html

As that average EROEI declines toward about 15, economic growth grinds to a halt and it becomes difficult to raise capital to start new ventures and to maintain existing infrastructure. Below 15 a modern industrial civilization quits working. Because this is a weighted average, choosing to produce more energy from low EROEI sources makes things worse while temporarily seeming to make them better. It has been estimated that the current average EROEI of the world economy is around 11. Of course some lucky countries are doing much better than that.

But because of our “lowest hanging fruit first” approach, EROEI continues to decline. Real economic growth appears to have stopped in the 1990s, with governments using clever new ways of calculating gross domestic product, and unemployment and cost of living statistics to make things look better in the short run. And low interest rate policies to encourage lots of borrowing and keep the economy growing, again, in the short run.

 

The major oil companies were hurt by low prices too, and cut back on their investment on discovery in order to save money. This has left us in a very bad situation as far as oil supply goes over the next few years. Trillions of dollars would have to be spent on discovery to catch up with demand. It seems to some of us that there is no sweet spot where oil prices are low enough to keep the economy growing and high enough to make the oil business profitable.

In any case, it seems unlikely that there are actually sufficient oil resources out there even if we could find the money to spend on discovery.

By Sam Harris & Bart Ehrman: What Is Christianity?

 

Fascinating discussion, especially when viewed through the lens of Varki’s MORT theory which says the uniquely powerful human brain exists because it evolved an ability to deny mortality.

https://samharris.org/podcasts/what-is-christianity/

In this episode of the Waking Up podcast, Sam Harris speaks to Bart Ehrman about his experience of being a born-again Christian, his academic training in New Testament scholarship, his loss of faith, the most convincing argument in defense of Christianity, the status of miracles, the composition of the New Testament, the resurrection of Jesus, the nature of heaven and hell, the book of Revelation, the End Times, self-contradictions in the Bible, the concept of a messiah, whether Jesus actually existed, Christianity as a cult of human sacrifice, the conversion of Constantine, and other topics.

Bart D. Ehrman is the author or editor of more than thirty books, including the New York Times bestsellers Misquoting Jesus and How Jesus Became God. Ehrman is a professor of religious studies at the University of North Carolina, Chapel Hill, and a leading authority on the New Testament and the history of early Christianity. He has been featured in Time, The New Yorker, and The Washington Post, and has appeared on NBC, CNN, The Daily Show with Jon Stewart, The History Channel, National Geographic, BBC, major NPR shows, and other top print and broadcast media outlets. His most recent book is The Triumph of Christianity.

 

By Nate Hagens: Contrasts and Continuums of the Human Predicament

Here is this year’s annual Earth Day talk by Nate Hagens.

My introduction to last year’s talk by Nate is still valid:

I used to preface Nate’s talks by saying he provides the best big picture view of our predicament available anywhere.

While still true, I think Nate may now be the only person discussing these issues in public forums.

Everyone else seems to have retired to their bunkers and gone quiet.

If you only have an hour this year to devote to understanding the human predicament and what needs to be done, this may be the best way to spend it.

 

On Apollo: The Most Impressive Human Achievement

How Apollo Flew to the Moon

I’m an electrical engineer that specialized in operating system design. I built my first computer in 1981 before the IBM PC was available. I designed an integrated circuit in 1983 for my Masters thesis. I managed large R&D groups for most of my 25 year career. I continue to be a technology geek in my personal life. As a consequence, I have a pretty good sense of what is impressive, and what is not, from an engineering perspective.

As readers probably know, I think net energy constraints have placed us at, or passed, the peak of all forms of complexity, including technology. I see evidence everywhere of peak technology.

The highlights of human engineering accomplishments for me include: steel, concrete, glass, Haber-Bosch fertilizer, diesel engines, turbine engines, turbine electricity generators, electric motors, electromagnetic communications, hydraulics, heat pumps, Panama canal, Golden Gate bridge, Chunnel, Concorde, Apollo, Hubble, Voyager, nuclear submarines, skyscrapers, deep-sea oil rigs, integrated circuits, microprocessors, magnetic storage, lasers, LED lights, internet, lithium-ion batteries, robotics, and DNA sequencing.

Notice that everything on this list is over 20 years old.  I can’t think of anything of equal importance that was invented in the last 20 years.

Gasoline and turbine engine efficiency gains have stalled. Diesel engine efficiency is going backwards due to new pollution regulations. Air travel speed plateaued many years ago.  The promise of too cheap to meter nuclear electricity appears certain to remain a dream. Battery performance barely creeps forward despite a hundred years of promises. My 3 year old smart phone works fine with no compelling reason to upgrade. Cameras were good enough many years ago. Household appliances are getting smarter, but their core functions are not improving, and they don’t last as long due to cost reduction pressures. TV resolution is increasing but few need it. LED lights are getting cheaper, but the technology was invented many years ago. Popular Mechanics magazine no longer writes about jet packs and flying cars.

It’s been 6 years since I built my current desktop computer. There’s still no compelling reason to upgrade it. If I spend the thousand dollars required to upgrade it, I will gain 25% performance. That’s nothing compared to the gains we saw 20 years ago.

I can see how a non-engineer might think otherwise. A computer in your pocket with a wireless connection to the internet feels like magic, but advances in the technologies used to build smart phones began to level off years ago. It’s not advances in fundamental technology that’s creating today’s magic. It’s thousands of small innovative apps, plus a few monster apps that leverage a 25 year old internet to connect us with friends and businesses, that creates the illusion of magic. Apps are software, and software is not new. There’s just a lot more software variety available to supply a much larger market created by everyone having a networked computer camera in their pocket.

For a long time I’ve felt our most impressive technology accomplishment occurred 50 years ago when we visited the moon. I vividly remember as an 11 year boy going outside at night and looking up in awe at Armstrong on the moon.

Over the years I’ve read and watched much about the Apollo program but never encountered anything that got into the details of Apollo’s engineering. I intuitively suspected there was a lot of impressive technology depth to Apollo, but never had the facts to back up my intuition.

I’ve just finished the book How Apollo Flew to the Moon by W. David Woods and now I have the facts to confirm my intuition. The book covers all of the technical details for every phase of the mission from launch to splashdown. I love the clear, concise, and engaging writing style of the author.

What those 400,000 people 50 years ago accomplished over 10 years is breath-taking. Every step of the mission involved staggering engineering challenges and trade-offs.  Lives were at stake on prime time television. The scale is hard to fathom. For example, the power produced by the Saturn V first stage was equivalent to the entire electricity consumption of the UK. More recent engineering accomplishments are not even in the same league.

Wood’s book answered all of my questions plus many I had not thought of:

  • how did the engines work?
  • how did they navigate?
  • how did they steer?
  • how did the stages separate?
  • how do you move from an earth orbit to a lunar orbit and back?
  • how did the lunar module land?
  • how did the lunar module take off, find, and rendezvous with the command module?
  • how did mission control track location and monitor systems?
  • what did the computers do?
  • what were the emergency contingency plans?

If you prefer to listen than read, here are some excellent podcasts with W. David Woods discussing the Apollo program:

Omega Tau 083 – How Apollo Flew to the Moon (December 15, 2011)

Omega Tau 097 – How Apollo Explored the Moon (June 18, 2012)

Omega Tau 176 – The Gemini Programme (July 18, 2015)

Omega Tau 239 – The Saturn V Launch Vehicle (March 12, 2017)

If you prefer to watch than read, here is a video presentation by W. David Woods in which the production quality is mediocre, but the content is strong.

 

If you are wondering why we have not accomplished anything even close to the Apollo program in the intervening 50 years, it’s because per capita net energy peaked around 1970, and has been declining ever since. In other words, our most complex achievement coincided with the peak of per capita net energy, as students of thermodynamics should expect.

I predict that the Apollo program will remain in perpetuity the most impressive achievement of the human species.

 

Per Capita Net Energy

http://questioneverything.typepad.com/question_everything/2013/09/what-might-the-dynamics-of-net-energy-per-capita-look-like.html

 

By Paul Arbair: The World in 2018 (part 4)

Paul Arbair - The World in 2018

I just stumbled on Paul Arbair. I’m very impressed.

I now need two hands to count the number of people in the world that understand and regularly write about the reality of our predicament. Although apparently Paul Arbair is a pen name (his avatar is a Polar Bear), so maybe one hand will continue to suffice.

Here Arbair explains the history and centrality of energy to the success of humans, how economics (and all the other social sciences) are embarrassingly ignorant of this vital relationship, how we have used debt to mask a decline in the quality of energy and to accelerate ecosystem damage, and how we are fast approaching an unpleasant end game.

I note that Arbair concludes his essay by discussing our near universal denial of reality.

Following are a few paragraphs I extracted from the essay, but I recommend you read the whole thing.

https://wordpress.com/read/blogs/102935372/posts/1485

 

The issues with conventional economic theories and models are many, varied and complex. They include a number of flaws and blind spots, which have been laid bare by the Great Financial Crisis and its aftermath. Most importantly, they include the almost complete ignorance – or rather voluntary omission – of the fundamental biophysical foundations of the economic process. This ignorance of how the flows of energy and matter underpin economic activity – and economic growth – results from the evacuation of the natural world from mainstream economic thought, which occurred in the 20thcentury, when it suddenly looked like homo sapiens had managed to conquer nature and the curse of resource scarcity had been all but defeated.

 

Losing thrust at high altitude

However, in advanced economies this energy boost started to wear out in the 1970s, for several reasons. First, energy use ran into a classic phenomenon of diminishing returns: the low-hanging fruits of economic growth had been picked first, many large-scale infrastructure investments with a high economic multiplier effect (including electrification) had already been made, and in many industries and sectors maximum machine speed/velocity was already being reached. Just like the average speed of automobiles, motorbikes or planes, the average speed of industrial machines in many sectors increased much faster until the late 1960s/early 1970s than after that. The physical and economic limits to energy-based speed-ups thus probably played a role in the sudden slowdown in productivity growth at the turn of the 1970s. Second, increasing concerns about the atmospheric and ground pollution resulting from fossil energy use – and from material use made possible by fossil fuels – triggered the adoption at the beginning of the 1970s of the first set of environmental regulations in Western countries, which established some constraints on the further expansion of energy use. Third, oil depletion in the U.S. – until then the world’s largest producer – and a subsequent realignment of energy geopolitics lead to a dramatic rise in the price of oil (i.e. the 1973 oil crisis), which rapidly reverberated across the economy. This triggered a considerable slowdown of the rate of increase of energy consumption, resulting in much slower economic growth. The combination of economic stagnation and soaring price inflation came to be known as ‘stagflation’, and lasted until the beginning of the 1980s, when oil prices finally started to decrease. After a sharp growth slowdown in the 1970s, world energy use per capita started to decline slightly in the 1980s and 1990s, an only picked up again at the beginning of the 21st century, as a result of China’s rapid expansion and massive use of domestic coal resources.

Oil depletion and its effects have remained a constant source of concern – and of geopolitical tensions – since the oil crises of the 1970s. The threat of oil supply shortages was partly alleviated in the 1980s and 1990s by the discovery and exploitation of new major oil fields in North America (Alaska) and Europe (North Sea), but it resurfaced in the 2000s when wars disrupted production in the Middle East, oil prices spiked, and fears of an imminent peak and decline of global oil production (‘peak oil’) grew. These fears have since then receded, largely as a result of the exploitation of ‘tight oil’ (also called ‘shale oil’) in North America, using hydraulic fracturing (‘fracking’) and horizontal drilling, as well as to other ‘unconventional’ sources (oil sands, deepwater oil) and to the use of enhanced recovery techniques in conventional oil fields. These are however temporary fixes: shale oil production is expected to peak in just a few years time, and global oil discoveries have fallen to their lowest point since the 1940s, prompting rising fears of a supply crunch – and possible price spike – around 2020.

While concerns about oil depletion – and fossil fuels depletion in general – tend to mostly focus on quantitative aspects (i.e. availability and affordability), qualitative aspects are often overlooked. Yet they are as, or even more, significant. In fact, depletion means that it is getting more and more difficult, costly, resource-intensive and polluting to get oil – and other fossil fuels – out of the ground. It also means that the energetic quality (measured in terms of exergy) and productivity (measured in terms of net energy or EROI) of what is extracted tends to go down, resulting in a decreasing capacity to power useful and productive work, and in a decreasing ability to provide ‘surplus energy’ to society (i.e. energy that can effectively be used for doing other things than finding, extracting, processing, converting, transporting and distributing energy). According to some estimates the EROI of global oil and gas has declined by nearly 50% in the last two decades, meaning that new technology and production methods (deep water or horizontal drilling) help to maintain production but appear insufficient to counter the decline in the energetic productivity of conventional oil and gas. In other words, we are now entering the age of ‘crappy oil’, or at least we are clearly heading that way…

The declining energetic quality and productivity of fossil energy resources has resulted in the last decades in a rising energy intensity of the global energy system. According to the International Energy Agency (IEA), the share of the world’s Total Primary Energy Supply (TPES) used by the energy supply sector (which comprises all energy extraction, conversion, storage, transmission, and distribution processes that deliver final energy to end users) expanded from 24% in 1973 to 31% in 2015, while the share available for Total Final Consumption (TFC) by other sectors of the economy went down from 76% to 69%. Overall, the quantity of energy supplied to end-use sectors (i.e. industry, transport, residential, services, agriculture, etc.) rose by 101% over the period, but the quantity of energy that had to be used by the energy system to supply this energy to end users increased by 196% (source: IEA Key World Energy Statistics 2017). Overall, a rising share of the fossil energy we get out of the ground therefore ends up being used by the energy system itself – or in other words the ‘energy cost of energy’ (ECOE) is rising, and the trend is accelerating. This relative energetic productivity decline not only constrains the growth the amount of ‘net energy’ that the global energy system can make available for use by other sectors, it also increases the share of those sectors’ output that has to be consumed by the energy sector. As the energy sector becomes less productive, it indeed tends to consume not only more energy but also more materials, more labour, more services, etc. A rising share of the output of other sectors has to be dedicated to servicing the needs of the energy sector, which ends up constraining economic growth and eroding economic prosperity (i.e. the capacity for societies to dedicate a rising fraction of economic output to discretionary uses).

Therefore, starting in the 1970s fossil energy progressively ceased to boost global economic growth as it had done since the dawn of the Industrial Revolution, and most particularly during the post-WWII period. The world’s energy-based growth engines, it suddenly appeared, were losing thrust, exposing the global economy to growing and hazardous turbulence while flying fast and at high altitude…

 

We are now in the tail end of what arguably constitutes the biggest bubble in economic history, the ‘everything bubble’ that has been blown in response to the Great Financial Crisis. This ‘everything bubble’ concerns all asset classes, and its effects directly or indirectly extend to the whole of the global economy. There is no single activity, sector, firm, household or public body in advanced economies – as well as in most emerging economies – whose current economic and financial situation is not either determined, underpinned or heavily influenced by the ‘everything bubble’, and not a single of them will remain unaffected when the bubble pops. To some extent, it could be argued that it’s the global economic and financial system itself that has now become the bubble. Most of us fail to understand or acknowledge it, probably because the bubble is so massive and so extended this time that it is paradoxically more difficult to recognise than more circumscribed and classic asset bubbles. Probably, as well, because our collective intoxication with technology and with the promises of a techno future is increasingly blinding us to the reality of the economic system we’re living in. Probably, also, because the consequences of our global economy being predicated on the existence and perpetuation of an all-encompassing financial bubble are too uncomfortable to contemplate. Yet we are inevitably approaching the unavoidable denouement of our bubble cycle, and the slight economic recovery about which we have been rejoicing of late might now be bringing us there faster as it puts pressure on central banks to tighten monetary policies more rapidly and decisively, thus getting us closer to the point where the bubble edifice starts to unravel.

Debt accumulation and financialisation, globalisation, liberalisation and ‘technologisation’ have thus largely failed, over the last four decades, to adequately compensate the global economy’s waning fossil energy boost. They have nevertheless lifted economic growth enough to continuously push up the use of fossil fuels and of other natural resources, as well as the environmental damage resulting from this use. Half of all oil burned by the human race has been burned since the collapse of the Soviet Union, and almost one-third of all human emissions of greenhouse gases occurred in the last twenty years. After remaining flat during the 2014-16 period, these emissions started to rise again in 2017 as economic growth was picking up. CO2 concentrations in the atmosphere have been rising increasingly fast over the last decades, destabilising the planet’s climate system and setting in motion a climate change dynamic that we only partly understand, that we cannot control, and that we already know we will be unable to fully mitigate. And if climate change is probably the major threat facing humanity, it is also just one of the symptoms of the destabilisation of the Earth system that is occurring and accelerating as a result of homo sapiens’ relentless activity. Every year we consistently increase our use of non-renewable resources, thus drawing down our reserves, degrading our environment and crowding out other life forms ever faster. Earth Overshoot Day (EOD), i.e. the date on which humanity’s resource consumption for the year exceeds the planet’s capacity to regenerate those resources that year, now falls in early August, vs. the end of December at the beginning of the 1970s. Our demand for renewable natural resources and the services they provide is now equivalent to that of more than 1.5 Earths, and is on track to require the resources of two planets well before mid-century. All this, it needs to be remembered, is only occurring because of the burning of fossil fuels and the energy and material input into human activity that it makes possible. Scaling back our use of fossil fuels as quickly as possible, and eradicating it before the end of the 21st century, has now become the only way for humans to avoid terminal environmental catastrophe.

 

‘The World in 2018’, hence, is a world that has been unable to find adequate substitutes to the long-term economic boost it received from exploiting fossil energy, and that has merely managed to substitute genuine economic growth with debt accumulation and financial manipulation. It is a world that has been deceiving itself through financial leverage about the essence of its economic growth and progress, and that is still very much in denial about the scale of the consequences of the energy and resources binge this growth and progress have entailed. It is a world that has now left itself just a few decades to stop using the energy sources that underpin its modern economy and even modern civilization – or that risks seeing this modern economy crashing down and modern civilization burn itself to the ground. All this, of course, is not exactly how economists and policy makers typically talk about the state of the world or of the economy. It is also not exactly what dominates most people’s perceptions of their economic and financial conditions, which remain largely based on shorter-term considerations. Yet it is nevertheless the reality of our world – a reality that increasingly influences and shapes the course of events around us, and that will increasingly impose itself to all of us over the coming years. A reality, as well, that determines or at least significantly constrains the economic, social and political prospects and options we now have. We will start looking at these prospects and options in more details in the next instalment of this series.

The Great Story (A Reality Based Religion led by Michael Dowd)

2-gs-photo

Michael Dowd recently introduced himself in a comment on one of my blog posts. Reviewing his large body of work has been a pleasant surprise because I thought I was aware of most of the thinkers and activists in the overshoot space, and Dowd has some excellent fresh ideas.

We seem to share a few things in common. We were born within 7 days of each other. We have been deeply influenced by many of the same great minds. We have come to similar conclusions about the severity of human overshoot. And we both would like to find some path to making the future less bad.

I’ve long thought there might only be two possible paths to pulling humanity back from the precipice. All of our destructive behaviors were created in the crucible of evolution when daily survival was paramount and overshoot was a distant future problem. Any “solution” must acknowledge the genetic underpinning of our behaviors and find a way to shift those behaviors in a positive direction.

One possible path is to acknowledge the genetic disposition for spirituality in humans, and the power religions have had throughout history to influence behavior, and to create a new religion with an overshoot harm reduction agenda. This is the path it seems Dowd has chosen.

Dowd leads a new religion grounded in science and reality that worships the universe and life, and that acknowledges the special responsibility our species has because of its rare and possibly unique ability to understand how the universe and life were created, and how our behaviors are placing us and other species in peril.

Here are the ten commandments:

ten-commandments-one-slide

This is the third of a three-part series of videos Dowd recommended as an overview of his movement. I think this sermon is excellent and worth your time.

Dowd thinks that religions are stories created by humans to explain the reality they currently live in. Our reality today is much different from the reality 2000 years ago. Today we understand the science of lightning and floods and famine and plagues and life and death. Dowd says we need to update our religious stories to reflect our current understanding of the world. He makes a persuasive case that this new story is much more majestic and inspiring than any of the old stories. An example Dowd gives is that everything in the universe, including amazing brains capable of understanding this paragraph, emerged from a cloud of hydrogen that obeyed a few well understood physical laws.

Dowd thinks the genetic underpinning of religion is the brain’s propensity to give human characteristics to non-human things in our world. I do not disagree with Dowd that the brain has this behavior but I would explain it differently. The human brain is a computing machine that creates models to explain and predict reality. We create new models using fragments of models we already have to explain what we see and to influence what we hope will happen. Some of these models (or stories) have evolved over time into thousands of religions and gods.

So far so good. Where we may disagree is that I think Varki’s MORT theory points to a deeper and more important genetic foundation of religion, denial of mortality. There is much evidence to this claim which I explored here and here. An important point being that if religions were mainly about explanatory stories and not about denial of mortality we would expect to see a few random religions with life after death stories, but not as we observe, a life after death story central to every single one of the thousands of religions, including new religions like Scientology. As a famous comedian/actor whose name we may no longer speak once said, “I don’t want to live on in the minds of my fans, I want to live on in my apartment”.

The reproductive fitness of an intelligent social species is often improved by a more powerful brain. Therefore there is evolutionary pressure in some species to become smarter. As a brain evolves increased computing power it reaches a point at which it can understand its own mortality. The MORT theory rests on the assumption, which I believe to be true, that the human brain is the only brain on our planet that has evolved this level of power. MORT explains that sufficient brain power to understand mortality, on its own, lowers reproductive fitness through reduced risk taking and depression because all complex species have evolved behaviors to avoid injury and death. Thus there is a barrier to increased brain power that can only be crossed by simultaneously evolving denial of mortality. Crossing this barrier requires an improbable evolutionary event, analogous to the energy per gene barrier that blocked complex life for 2 billion years until a rare endosymbiosis (merging) of prokaryotes (simple cells) created the eukaryotic cell.

Humans are the only species, so far, on our planet to have crossed the barrier. Several other intelligent social species like elephants, dolphins, chimpanzees, and crows may be blocked at the barrier. It seems likely we outcompeted or killed all of our many hominid cousins that were blocked at the barrier for over a million years.

Evolution appears to have implemented denial of mortality in humans by tweaking the fear suppression module in our brain, which resulted in behavior that manifests as broad denial of all unpleasant realities, including mortality.

This then leads to the second promising path for trying to make the future less bad.  I believe it is our inherited denial of reality that is the most important obstacle to shifting human behavior in a positive direction.

There are several encouraging examples that suggest broad awareness of a harmful inherited behavior can shift society’s average behavior in a positive direction. I plan to explore these examples in a later essay.

So my chosen path is to try to increase awareness of our strong genetic tendency to deny the behaviors that cause overshoot, and to deny the imminent dangers of overshoot.

I nevertheless applaud Dowd’s chosen path and wish him well. It will be interesting to see if a religion can succeed that conflicts with the underlying goals of our genes, namely to maximize replication by competing for finite resources.

It must have been so much easier 2000 years ago when the message of religions was to go forth, multiply, and exploit the earth’s bounty that God created for the exclusive benefit of his chosen people.

I know from experience that a message of no more than one child, austerity, and conservation is a tough sell.

I recommend you spend some time at Dowd’s site The Great Story. It has a deep library of wisdom from many great minds relevant to our predicament.

Dowd has invested a large amount of time creating audio versions of important books and documents. I’m currently re-reading his audiobook version of William R. Catton, Jr.’s seminal 1980 book Overshoot: The Ecological Basis of Revolutionary Change.

By JT Roberts: On Resources and How the World Really Works

I don’t know who JT Roberts is but he is very bright and is an excellent writer. I stumbled on some comments she made in a recent post by Tim Morgan and I thought they were so good I’ve copied them here.

https://surplusenergyeconomics.wordpress.com/2017/10/27/111-a-spike-to-puncture-the-bubble/

In the 70s just as US domestic oil production peaked Nixon made some unusual but very interesting moves.

  • Opened China for trade
  • Established the EPA
  • Created a Petro-Dollar deal with Saudi’s
  • Took the Dollar off Gold

I have a very difficult time believing that he, or his cabinet, or congress had any clue of the significance of those particular moves. I think that in particular they would not have understood the Limits to Growth reality, since they decided not to give ear to the findings by Meadows and Forester. US wealth had been built on abundant easily accessible energy and mineral resources. The US was the manufacturer to the world up until 1970 not because of innovation but because the world couldn’t compete on price. ( The Battle of Somme was the effective killing machine it was because of the cheap steel rails that had been supplied by the US, these latter became the light gauge system in the UK ) No other country had the combination of resources at the volumes that the US had. As these became depleted it hampered growth because of affordability. Had it only been a matter of raising the price to meet increased cost of production why didn’t that happen? Affordability is the real driver of growth not supply and demand.

By opening China it gave the US access to offshore its energy intensive industries like steel production, and mining. As well as labor intensive industries like clothing. ( A population living on rice is far less costly in energy terms then one living on hamburgers) Establishing the EPA created additional pressure to move manufacturing elsewhere. The suspension of Dollar-Gold convertibility was a necessity as there wasn’t enough gold to cover the dollars in circulation. It also hampered the ability to create currency. The risk was that dollar demand would collapse but that was countered with the Petro-Dollar arraignment effectively giving the currency a place to go rather than returning to the US to be inflated away. That move calmed the markets, because they felt that at least their dollars could now be converted to oil, which is of higher value than Gold.

Saddam Hussein, and Qaddafi threatened the stability of that system. Saddam had boycotted sales of crude to the US in 2002 and started selling his oil in Euros. For 30 days he stopped all exports in a show of force that he had control of their national petroleum system. What he didn’t understand was he was threatening to limit access to what the US needs most, energy and resources. The war was the answer to that threat. Now Iraqi oil is safely in the control of the international oil majors. Qaddafi had made a similar error since his interest wasn’t to allow the state owned system to be controlled by the oil majors. He also threatened the the Petro-Dollar by creating a competing gold currency that was being used in Africa. The French were particularly at risk as it was replacing the Franc still in use in there former colonies.

If we look closely at NAFTA we see that much of it revolves around access to resources. In exchange for easier economic trade with the US, both Canada and Mexico have agreed to unlimited access to their oil and other resources. When the USSR fell we saw the same pattern. Anglo-US corporations rushed in to gain access to whatever resources they could. Putin the patriot didn’t play ball like Yeltsin. So now he is vilified. Canada and Mexico have peaked in oil production, and now NAFTA is at risk. The UK joined the EU just as it had oil to sell and promptly left when it didn’t.

What we see is a common pattern that is larger then any political system.

Capitalism is a dissipative system out of equilibrium, as all dissipative system are. Like hurricanes Capitalism requires energy input to exist, anything that threatens that will collapse the system. It must grow or die. Within the structure, like hurricanes, there can be self organized subsystems. Tornado’s, Micro-bursts, and other elements that feed off the core. With Capitalism these are corporations and governments. In order for the core to survive the entire system must grow in aggregate. As the net energy driving the system declines the structure weakens, like a hurricane on land or cold water.

Not only is it impossible to return to a local agricultural existence. It is also impossible to decouple the elements of the system. We see that with Trump. His platform was isolation, and now its war. He has no choice he’ll make similar moves as Nixon did, but it can’t work because there is no more sweet spots to exploit.

Just as the shale play is a high cost desperate act of a dying industry. (Shale was well know in the 70s but as uneconomical as it remains today) The US will attempt to turn back time with it’s military machine as it has in the past. The problem is they can’t return affordability so the system will simply grind to a halt.

I guess Adam Smith was right about an Invisible Hand.

 

Without energy to drive real growth all you have left is moving money around. I think most mistake the symptom for the cause. The lax regulations are needed to increase debt which increases money supply. So strangely the corruption is part of the system.

For example it has been documented that the primary money laundering economies are US and U.K. So for all their show as the bastions of freedom and democracy the reality is they benefit from corrupt dictators that stuff their ill gotten gains in the western banking and real estate system.

With Trump it’s just irrelevant he’s neither good or bad. He is no different then any other elected president. He is limited to the resources at his disposal and won’t accomplish anything beyond that. Basically a symptom not a cause.

The Appolo success if we so call it really needs to be considered in context. If you compare the energy production of the US with the USSR it becomes clear that technology wasn’t the key to the space race. In actuality the Soviet rocket engines were 20% more efficient and more powerful. They dared to pipe oxygen rich exhaust from the turbos into the primary engine. But it was done because of necessity they couldn’t afford to waste the fuel. It also constrained their ability to test run the engines. Instead they choose to test them at launch.

The arrow all points in the same direction. Without the resources that the US had access to the USSR could not compete. But it had nothing to do with technology because they were winners with technology.

AK 47 is another example.

I sum it up this way. If you have wood you cook with wood. If you have coal you cook with coal. If you have oil you cook with oil. If you have gas you cook with gas. If you have a lot of it you have trains, planes, and automobiles. I might add rockets. With a little of it you cook.

Technology is a function of abundance not the cause of it.

It’s interesting to note the Roman Empire grew in wealth through military conquest. Then it started developing schools of higher learning in imitation of the Greeks.

Education has never preceded empire. So the thought that education or technology are the source of wealth is false. It has always been resources. It will always be. So in that regard it is no coincidence that the US military is larger then the next 10 militaries combined. So the military industrial complex was also a necessity.

Ironically the competitive economic system, communism thought that they could only find success within a highly educated society. Lenin targeted Germany for that reason. But educated people make poor soldiers. Ignorant religious zealots make far better soldiers. Which system promoted religious freedom and zealotry? For God and Country. God save the Queen. In God we trust. One nation under God.

So in many places Americans are hated because of their ignorance. But perhaps their ignorance has been their strength all along. In this regard we might want to watch closely the current US administration.

War is Peace
Freedom is Slavery
Ignorance is Strength