Gas

The German question

Off the keyboard of Pepe Escobar
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Originally published in Ron May 8, 2015

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Seventy years after the end of World War II, and twenty-five years after the fall of the Berlin Wall, Germany is once again under the grip of ‘sturm und drang’, but this time barely registered in either East or West.

Without a serious attempt at myth busting, it’s impossible to discern what could be interpreted as a new, discreet German attempt at hegemony.

Contrary to a myth currently propagated by US ‘Think Tankland’, political Berlin under Chancellor Merkel is not a mediator between a still hegemonic US and an “aggressive” Russia.

The reality is Berlin, at least for the moment, would rather give the impression of singing Washington’s tune – with minor variations – while chastising Russia. That’s the case even when we consider the solid energy/trade/business ties with Moscow, as in Germany importing a third of its natural gas, and German industry/companies/corporations hugely invested in Russia.

Contrary to a second myth, political Berlin does not seek “stability” in Europe’s eastern borderlands, but rather outright vassalage. The relentless Eastern European integration to the EU, led by Berlin, was as much a strategy to open new markets for German exports as to erect a buffer between Germany and Russia. As for the Baltic States, they are already vassals; Germany is the largest trading partner for all three.

Yet another myth is that Berlin cannot lift – counterproductive – sanctions against Moscow as long as “security” of Central and Eastern Europe is not assured. The reality is that Germany would rather exert total political/economic control over the periphery of the former USSR.

As for the EU itself, now mired in a post-democratic, un-egalitarian, austerity-ravaged toxic environment, with no discernible way out, Germany already rules, politically and economically.

Deutschland under control?
Amidst the current EU intellectual quagmire where, to quote Yeats, “the best lack all conviction, while the worst are full of passionate intensity” – think puny neoliberal ideologues scurrying under their sinecures in that Kafkaesque temple of mediocrity, Brussels – a modern Diogenes would be hard pressed to find an informed observer capable of seizing up Germany’s game.

Thus the glaring exception of historian and anthropologist Emmanuel Todd, author of the seminal 2002 essay After the Empire which showed no mercy in its cartography of American decline. In a long 2014 www.les-crises.fr interview, centered on Germany, Todd hits the geopolitical ball out of the park.

Todd deeply worries about the West’s dysfunction – manifested at its prime in Europe being “virtually at war with Russia”. He sees the anxious, sick West’s “fixation” on Russia as the search for a scapegoat, or better, “the creation of an enemy, necessary to maintain a minimal coherence of the West. The European Union was created against the USSR; it cannot do without Russia as an adversary.”

And yet, behind the EU, there’s the real deal; the German project, which Todd identifies as a project of power, driven “to compress demand in Germany, to enslave the debt-ridden countries of the South, to put to work the Eastern Europeans, to throw some peanuts to the French banking system.” And that project of power could not but open the ominous door to Germany’s “immense potential for political irrationality” – a theme very much prominent now with all those rehashes of the fall of the Reich.

Todd identifies what Lacan would dub the great European non-dit (“not enunciated”); “The key to the control of Europe by the United States, which is the inheritance of the victory of 1945, is the control of Germany.”

German Chancellor Angela Merkel (Reuters/Hannibal Hanschke)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yet now the control is dissolving, albeit chaotically, and that means “the beginning of the dissolution of the American imperium.” And imperial decline – visible in myriad declinations – leads Todd to a bombshell; the real threat to the US, much more dangerous than Russia – “which is external to the empire” – is Germany.

And what about the threat to Russia from Germany? Todd strongly implies the populations of Russian language, culture and identity are being attacked in Eastern Ukraine with "the approval and support" of the European Union – which is a fact. At the same time, he interprets the Russian "silence" about it not "as in the French and the American case, a refusal to see reality,” but as good diplomacy; "They need time. Their self-control, their professionalism, compels admiration." Try finding this kind of analysis in CIA-infested European corporate media.

“Europe” out, Germany in
So what Todd is essentially gaming here is “the emergence of a new face-to-face between two great systems: the American continent-nation, and this new German empire, a political-economic empire which people continue to call ‘Europe’ out of habit.” And yes, he’s got a compelling case.

Using a political science concept coined by Belgian anthropologist Pierre van den Berghe, Todd qualifies the German system as “un-egalitarian domination”; whatever equality is left concerns only the dominant, as in German citizens. Welcome, then, to Herrenvolk democracy – the “democracy of the master people.”

Todd bolsters his case by pointing to the dynamism of the German economy as based in the former USSR satellites; “Part of the success of our German neighbors stems from the fact that the communists were much interested in education. They left behind them, not only obsolete industrial systems, but also populations that were remarkably well educated.”

So “annexing” the populations of Poland, Czech Republic, Slovakia, Hungary, etc, meant Germany reorganizing its industrial base using low-cost labor. But then there’s a major “if”; Todd believes Germany might also “annex” an active population of 45 million in Ukraine, “with its good level of training inherited from the Soviet period.”

Not only that’s extremely unlikely; Moscow has been explicit this is a red line. Moreover, “Ukraine” is a failed state in terminal disintegration, now a lowly, de facto, IMF colony, whose only interest for the “West” is rich agricultural land to be plundered by Monsanto and cohorts.

“He hasn’t seen Germany coming”
The fun really starts when Todd examines the mess “classical American geopoliticians of the ‘European’ tradition,” are in. He had to be talking mostly about notorious Dr. Zbig “Grand Chessboard” Brzezinski; “Obsessed by Russia, he hasn’t seen Germany coming.”

Todd correctly notes how Dr. Zbig “has not seen that the American military might, by extending NATO all the way to the Baltic States, to Poland… was in fact cutting out an empire for Germany, at first economic, but at present already political.” And in parallel to what I have been examining for years now, he hints that “the extension of NATO to the East could in the end bring about a version B of Brzezinski’s nightmare: a reunification of Eurasia independently of the United States.”

The clincher is to be savored like the best Armagnac; “Faithful to his Polish origins, he feared a Eurasia under Russian control. He is now running the risk to go down in History as another one of these absurd Poles who, out of hatred of Russia, have insured the greatness of Germany.”

For the moment, political Germany – but not its industrialists – has chosen to continue to be subjugated to the US/NATO as Chancellor Merkel appears to be enforcing the encircling of Russia.

The Reichstag building, the seat of the German lower house of parliament Bundestag (Reuters/Fabrizio Bensch)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Todd nailed it, Germany painstakingly organized its EU hegemony on the basis this disparate basket of nations would provide Berlin with the economy of scale to win against its main industrial competitor, the US. Yet Germany lacks energy – oil and gas. Supply from Africa and the Middle East is inherently unstable.

So this is how we come to another scenario circulating among what Bauman called “nomad elites of liquid modernity”; not think tanks or Western intel agencies.

According to this scenario, instead of a EU trying to work with Russia, we have Berlin trying to undermine Moscow to ultimately seize financial control of Russia’s immense resources; back to those good old disaster capitalism Yeltsin days, when everything was collapsing other than Russia’s natural resource production.

After all the ‘New Great Game’ is mostly about control of the natural gas, oil and resources of Russia and Central Asia. Will they be controlled by oligarch fronts supervised by their masters in London and New York, or by the Russian state? And once Russia had been subdued, then the Central Asian “stans”, especially gas republic Turkmenistan, would also be free to do Germany’s bidding.

But for the moment, it’s all shadow play. Merkel utters platitudes about the Minsk ceasefire – when every serious player knows Kiev breaks it on an everyday basis. Berlin works backstage to keep the proverbial “reluctant players” – Italy, Greece, Hungary – on board with sanctions on Russia while spinning it’s doing its best to contain hysterical Poland and Lithuania.

Merkel is very much aware the US prosecutes much of its drone war out of Germany while the BND – German intel – spies for the NSA on the French, the European Commission (EC) and even German industry.

So she will never directly antagonize Washington – as she in fact mostly fears German Atlanticists, while posing about Putin and the Kremlin living “in a different world.” Berlin and Moscow continue to talk diplomatically, but the mood tends to the tone deaf.

The new exceptionalism
Todd is one of the few who at least are setting alarm bells ringing. As in this formulation: “German culture is un-egalitarian: it makes difficult the acceptance of a world of equals. When they are feeling that they are the strongest, the Germans will take very badly the refusal of the weaker to obey, a refusal which they perceive as unnatural, unreasonable.”

Once again, we’re in the realm of exceptionalism, but now with the added, historically troubling German penchant for political irrationality. The new, remixed lebensraum may revolve around an ever-expanding export powerhouse – adding on global trade by using educated, low-cost labor. While the Reich disintegrated in a larger than life folly seventy years ago, the new deal accomplished a dream; as Todd characterizes it, there are two great “developed industrial worlds” today, America and “this new German empire.”

He sees Russia as a “secondary question” and he has not examined China’s long game; thus he’s not focused – as in my own case – on myriad moves toward Eurasia integration. But what he’s concentrating on is no less than a thriller for the ages, a “completely different future for the twenty years to come, other than the East-West conflict;” Germany rising – and the US and Germany inevitably clashing, all over again. History may yet repeat itself as (lethal) farce after all.


Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Conservation Commutation Plan

Off the keyboard of RE

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Published on the Doomstead Diner on February 1, 2015

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Discuss this article at the Energy Table inside the Diner

As my good friend Steve on Economic Undertow often points out, probably 90% of the energy problems we have right now come from the incredible WASTEFULNESS of so many people driving around individual Carz, often to little real purpose and certainly not generating any new “wealth”. just burning up old wealth in energy from increasingly depleted energy reservoirs around the world.

Clearly, as a society we need to STOP using so much Oil, and the biggest waster of that Oil is the current Car oriented paradigm, particularly in the FSoA which has been pursuing it the longest, but also in Europe and China now too.  It’s really ridiculous that every single commuter is riding in his or her individual car 20 or more miles to work every day from their Suburban McHovels, then leave the car parked all day in the lot or garage and drive another 20 or miles back to the McHovel after the workday is done.

As the population increases while the available SPACE on the planet does not, you end up getting some AMAZING traffic problems from this system.

NY Shity Traffic Jam

http://images.fineartamerica.com/images-medium-large/nyc-traffic-jam-ronda-broatch.jpg

Beijing Traffic Jam

http://www.caradvice.com.au/wp-content/uploads/2011/01/Beijing_traffic.jpg

 

This of course makes the whole system even MORE inefficient, with MORE waste of energy as cars sit in interminably long traffic jams from NY Shity to London to Paris to Beijing and back again.

The SOLUTION many folks propose is more Public Transportation, back to the Railroads as it were. This is a favorite paradigm for Jim Kunstler, but he is not alone in this idea.  What’s wrong with it?

Well, if you grew up inside NY Shity riding the Subway, you know immediately what is wrong with it, it absolutely SUCKS waiting for trains, muscling yourself in on crowded train platforms to get a seat on the next arriving train, etc.  Besides that, the train almost NEVER goes EXACTLY where you need it to go, like the Parking Lot of Walmart does.  You drive to Walmart, you buy a Big Screen TV, you wheel it out to  your SUV in a Shopping Cart and then you drive it home.  Good luck with getting your Big Screen TV home if you ride the Subway to Best Buy!

http://mainfun.ru/uploads/images/01/44/10/2014/12/02/bd3bfb.jpg

So, it is waste, Waste, WASTE everywhere here on a daily basis, and in fact the entire infrastructure has been designed in such a way that you can’t STOP this, not on a Dime anyhow.  If you took out the Carz tomorrow with no decent alternative plan to substitute for them, just about every Bedroom Community in the FSoA would be totally FUCKED.  Really, they would be UNLIVABLE.  However, you cannot rebuild an entirely new infrastructure overnight to accommodate for this, so you have to start thinking about how to ADAPT the current infrastructure

https://grist.files.wordpress.com/2012/05/chevy-volt_02.jpgBesides utilizing Mass Transport and Light Rail, the other main substitute often proposed by Cornucopians are EVs, aka Electric Vehicles which usually means Electric Carz like the Chevy Volt or Toyota Prius.  These vehicles take the SAME idea that every single person can have their own Powerful Individual Car which can travel Continent Size Distances, and instead of putting in a Gas Tank, they drop in an INCREDIBLY expensive set of Li-I batteries to run the thing.

People who promote this never really deal with the fact that if EVERYONE was charging up this sort of vehicle off the grid to do the same sort of Happy Motoring they do now, the energy requirement necessary would collapse the grid!  There is not enough electric generation capacity to substitute for all the ICEs, in fact there really is not enough Electric Generation capacity in many places to handle what we have NOW in terms of demand.

So, you have a few issues here you need to solve simultaneously.  You need to reduce the total energy demand.  You need to keep the current suburban model functioning at least through a Transition Period.  Outright INSTANTANEOUS abandonment of the Suburban Model is IMPOSSIBLE without a Mad Max style dislocation.  You just cannot move so many people so fast with an infrastructure that took decades, even CENTURIES to build.

Believe it or not, there is means and method to meet these goals, not perfectly but at least enough to avoid the Mad Max outcome IMHO.  It’s not with Rail, though that is a part of it, and its not a large Mega-Infrastructure project either.  It’s an adaptation that works on a Cellular Level, is redundant and easily achieved.

The SOLUTION here is PERSONAL SCOOTERS and ELECTRIC VANS.

The biggest issue you have in the daily commute if you do NOT use a car to get from PointA to Point B is the First and Last Mile.  AKA, if you are using some sort of Mass Transit, the distance from your McHovel to the Boarding Train Station, then the distance from the disembarkation point to your workplace, and vica-versa.

To resolve the First and Last Mile problem, you use the Scooters, which can be Electric or Gas Powered.  Gas powered ones get in the neighborhood of 80 MPG, so even there you have more than 70% savings usually.  Electrics, no gas at all, and renewable generation can charge them most of the time.  You drive your Scooter to a Pick Up location served by Independent Entrepreneurs who run 10 Passenger Vans with a Trailer capable of pulling 10 Scooters, Gas or Electric.

Electric-CommutersWhere there were before 10 individual SUVs all running on GAS, now there is only ONE Van running on renewable electricity.  Even if the scooters are running on Gas, they do only the first and last mile of the commute. Besides that, even if Gas powered, the scooters get 80 mpg while the SUV gets 30 at best.

Productivity is increased here, all the folks who used to be busy driving for an hour or more each way to work now sit for that hour in a comfortable Workstation in the Electric Van, answering emails and getting ready for morning Trading on the NYSE.  LOL.

There are now 1/10th of the Carz on the road than there were before, since 10 Pigmen were in the Electric Van instead of 10 each in their own Mercedes.  Parking your Scooter is easy anywhere in Manhattan also, even down on Wall Street!

Getting the Big Screen TV Home from Best Buy with a Scooter remains a problem with this meme.  However, Big Box Stores aren’t doing too well anyhow, so you just order the the Big Screen TV from Amazon.com or Alibaba and an electric truck deposits it in your driveway, or maybe a Drone will do it!

Overall, my estimation is that pursuing this paradigm would drop Oil consumption AT LEAST in half, maybe even 70%.  There would not be THAT much change in the industrial societies resultant from that.

Over time here, keeping all the Scooters charged or gassed up will become difficult.  However, in the INTERMEDIATE time, conservation of this sort can extend out the industrial lifestyle 20 or more years.

Of course, as of today, for most Amerikans not yet off the Economic Cliff, the Individual lifestyle of having boundless energy resource to waste remains the driving paradigm.  It doesn’t matter what Idea you present these days, be it High Speed Rail from the Chinese or Scooter Econmics from me.

Before any significant change can occur,  a lot more Shit has to Hit the Fan.

Meanwhile, before it all collapses, Prep up with Scooters and Bikes! 🙂

RE

Can China and Russia Squeeze Washington Out of Eurasia?

Off the keyboard of Pepe Escobar
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The Future of a Beijing-Moscow-Berlin Alliance

China Russia

Published in Tom Dispatch on October 5, 2014

 

A specter haunts the fast-aging “New American Century”: the possibility of a future Beijing-Moscow-Berlin strategic trade and commercial alliance. Let’s call it the BMB.

Its likelihood is being seriously discussed at the highest levels in Beijing and Moscow, and viewed with interest in Berlin, New Delhi, and Tehran. But don’t mention it inside Washington’s Beltway or at NATO headquarters in Brussels. There, the star of the show today and tomorrow is the new Osama bin Laden: Caliph Ibrahim, aka Abu Bakr al-Baghdadi, the elusive, self-appointed beheading prophet of a new mini-state and movement that has provided an acronym feast — ISIS/ISIL/IS — for hysterics in Washington and elsewhere.

No matter how often Washington remixes its Global War on Terror, however, the tectonic plates of Eurasian geopolitics continue to shift, and they’re not going to stop just because American elites refuse to accept that their historically brief “unipolar moment” is on the wane. For them, the closing of the era of “full spectrum dominance,” as the Pentagon likes to call it, is inconceivable. After all, the necessity for the indispensable nation to control all space — military, economic, cultural, cyber, and outer — is little short of a religious doctrine. Exceptionalist missionaries don’t do equality. At best, they do “coalitions of the willing” like the one crammed with “over 40 countries” assembled to fight ISIS/ISIL/IS and either applauding (and plotting) from the sidelines or sending the odd plane or two toward Iraq or Syria.

NATO, which unlike some of its members won’t officially fight Jihadistan, remains a top-down outfit controlled by Washington. It’s never fully bothered to take in the European Union (EU) or considered allowing Russia to “feel” European. As for the Caliph, he’s just a minor diversion. A postmodern cynic might even contend that he was an emissary sent onto the global playing field by China and Russia to take the eye of the planet’s hyperpower off the ball.

Divide and Isolate

So how does full spectrum dominance apply when two actual competitor powers, Russia and China, begin to make their presences felt? Washington’s approach to each — in Ukraine and in Asian waters — might be thought of as divide and isolate.

In order to keep the Pacific Ocean as a classic “American lake,” the Obama administration has been “pivoting” back to Asia for several years now. This has involved only modest military moves, but an immodest attempt to pit Chinese nationalism against the Japanese variety, while strengthening alliances and relations across Southeast Asia with a focus on South China Sea energy disputes. At the same time, it has moved to lock a future trade agreement, the Trans-Pacific Partnership (TPP), in place.

In Russia’s western borderlands, the Obama administration has stoked the embers of regime change in Kiev into flames (fanned by local cheerleaders Poland and the Baltic nations) and into what clearly looked, to Vladimir Putin and Russia’s leadership, like an existential threat to Moscow. Unlike the U.S., whose sphere of influence (and military bases) are global, Russia was not to retain any significant influence in its former near abroad, which, when it comes to Kiev, is not for most Russians, “abroad” at all.

For Moscow, it seemed as if Washington and its NATO allies were increasingly interested in imposing a new Iron Curtain on their country from the Baltic to the Black Sea, with Ukraine simply as the tip of the spear. In BMB terms, think of it as an attempt to isolate Russia and impose a new barrier to relations with Germany. The ultimate aim would be to split Eurasia, preventing future moves toward trade and commercial integration via a process not controlled through Washington.

From Beijing’s point of view, the Ukraine crisis was a case of Washington crossing every imaginable red line to harass and isolate Russia. To its leaders, this looks like a concerted attempt to destabilize the region in ways favorable to American interests, supported by a full range of Washington’s elite from neocons and Cold War “liberals” to humanitarian interventionists in the Susan Rice and Samantha Power mold. Of course, if you’ve been following the Ukraine crisis from Washington, such perspectives seem as alien as any those of any Martian. But the world looks different from the heart of Eurasia than it does from Washington — especially from a rising China with its newly minted “Chinese dream” (Zhongguo meng).

As laid out by President Xi Jinping, that dream would include a future network of Chinese-organized new Silk Roads that would create the equivalent of a Trans-Asian Express for Eurasian commerce. So if Beijing, for instance, feels pressure from Washington and Tokyo on the naval front, part of its response is a two-pronged, trade-based advance across the Eurasian landmass, one prong via Siberia and the other through the Central Asian “stans.”

In this sense, though you wouldn’t know it if you only followed the American media or “debates” in Washington, we’re potentially entering a new world. Once upon a time not so long ago, Beijing’s leadership was flirting with the idea of rewriting the geopolitical/economic game side by side with the U.S., while Putin’s Moscow hinted at the possibility of someday joining NATO. No longer. Today, the part of the West that both countries are interested in is a possible future Germany no longer dominated by American power and Washington’s wishes.

Moscow has, in fact, been involved in no less than half a century of strategic dialogue with Berlin that has included industrial cooperation and increasing energy interdependence. In many quarters of the Global South this has been noted and Germany is starting to be viewed as “the sixth BRICS” power (after Brazil, Russia, India, China, and South Africa).

In the midst of global crises ranging from Syria to Ukraine, Berlin’s geostrategic interests seem to be slowly diverging from Washington’s. German industrialists, in particular, appear eager to pursue unlimited commercial deals with Russia and China. These might set their country on a path to global power unlimited by the EU’s borders and, in the long term, signal the end of the era in which Germany, however politely dealt with, was essentially an American satellite.

It will be a long and winding road. The Bundestag, Germany’s parliament, is still addicted to a strong Atlanticist agenda and a preemptive obedience to Washington. There are still tens of thousands of American soldiers on German soil. Yet, for the first time, German chancellor Angela Merkel has been hesitating when it comes to imposing ever-heavier sanctions on Russia over the situation in Ukraine, because no fewer than 300,000 German jobs depend on relations with that country. Industrial leaders and the financial establishment have already sounded the alarm, fearing such sanctions would be totally counterproductive.

China’s Silk Road Banquet

China’s new geopolitical power play in Eurasia has few parallels in modern history. The days when the “Little Helmsman” Deng Xiaoping insisted that the country “keep a low profile” on the global stage are long gone. Of course, there are disagreements and conflicting strategies when it comes to managing the country’s hot spots: Taiwan, Hong Kong, Tibet, Xinjiang, the South China Sea, competitors India and Japan, and problematic allies like North Korea and Pakistan. And popular unrest in some Beijing-dominated “peripheries” is growing to incendiary levels.

The country’s number one priority remains domestic and focused on carrying out President Xi’s economic reforms, while increasing “transparency” and fighting corruption within the ruling Communist Party. A distant second is the question of how to progressively hedge against the Pentagon’s “pivot” plans in the region — via the build-up of a blue-water navy, nuclear submarines, and a technologically advanced air force — without getting so assertive as to freak out Washington’s “China threat”-minded establishment.

Meanwhile, with the U.S. Navy controlling global sea lanes for the foreseeable future, planning for those new Silk Roads across Eurasia is proceeding apace. The end result should prove a triumph of integrated infrastructure — roads, high-speed rail, pipelines, ports — that will connect China to Western Europe and the Mediterranean Sea, the old Roman imperial Mare Nostrum, in every imaginable way.

In a reverse Marco Polo-style journey, remixed for the Google world, one key Silk Road branch will go from the former imperial capital Xian to Urumqi in Xinjiang Province, then through Central Asia, Iran, Iraq, and Turkey’s Anatolia, ending in Venice. Another will be a maritime Silk Road starting from Fujian province and going through the Malacca strait, the Indian Ocean, Nairobi in Kenya, and finally all the way to the Mediterranean via the Suez canal. Taken together, it’s what Beijing refers to as the Silk Road Economic Belt.

China’s strategy is to create a network of interconnections among no less than five key regions: Russia (the key bridge between Asia and Europe), the Central Asian “stans,” Southwest Asia (with major roles for Iran, Iraq, Syria, Saudi Arabia, and Turkey), the Caucasus, and Eastern Europe (including Belarus, Moldova, and depending upon its stability, Ukraine). And don’t forget Afghanistan, Pakistan, and India, which could be thought of as Silk Road plus.

Silk Road plus would involve connecting the Bangladesh-China-India-Myanmar economic corridor to the China-Pakistan economic corridor, and could offer Beijing privileged access to the Indian Ocean. Once again, a total package — roads, high-speed rail, pipelines, and fiber optic networks — would link the region to China.

Xi himself put the India-China connection in a neat package of images in an op-ed he published in the Hindu prior to his recent visit to New Delhi. “The combination of the ‘world’s factory’ and the ‘world’s back office,’” he wrote, “will produce the most competitive production base and the most attractive consumer market.”

The central node of China’s elaborate planning for the Eurasian future is Urumqi, the capital of Xinjiang Province and the site of the largest commercial fair in Central Asia, the China-Eurasia Fair. Since 2000, one of Beijing’s top priorities has been to urbanize that largely desert but oil-rich province and industrialize it, whatever it takes. And what it takes, as Beijing sees it, is the hardcore Sinicization of the region — with its corollary, the suppression of any possibility of ethnic Uighur dissent. People’s Liberation Army General Li Yazhou has, in these terms, described Central Asia as “the most subtle slice of cake donated by the sky to modern China.”

Most of China’s vision of a new Eurasia tied to Beijing by every form of transport and communication was vividly detailed in “Marching Westwards: The Rebalancing of China’s Geostrategy,” a landmark 2012 essay published by scholar Wang Jisi of the Center of International and Strategic Studies at Beijing University. As a response to such a future set of Eurasian connections, the best the Obama administration has come up with is a version of naval containment from the Indian Ocean to the South China Sea, while sharpening conflicts with and strategic alliances around China from Japan to India. (NATO is, of course, left with the task of containing Russia in Eastern Europe.)

An Iron Curtain vs. Silk Roads

The $400 billion “gas deal of the century,” signed by Putin and the Chinese president last May, laid the groundwork for the building of the Power of Siberia pipeline, already under construction in Yakutsk. It will bring a flood of Russian natural gas onto the Chinese market. It clearly represents just the beginning of a turbocharged, energy-based strategic alliance between the two countries. Meanwhile, German businessmen and industrialists have been noting another emerging reality: as much as the final market for made-in-China products traveling on future new Silk Roads will be Europe, the reverse also applies. In one possible commercial future, China is slated to become Germany’s top trading partner by 2018, surging ahead of both the U.S. and France.

A potential barrier to such developments, welcomed in Washington, is Cold War 2.0, which is already tearing not NATO, but the EU apart. In the EU of this moment, the anti-Russian camp includes Great Britain, Sweden, Poland, Romania, and the Baltic nations. Italy and Hungary, on the other hand, can be counted in the pro-Russian camp, while a still unpredictable Germany is the key to whether the future will hold a new Iron Curtain or “Go East” mindset. For this, Ukraine remains the key. If it is successfully Finlandized (with significant autonomy for its regions), as Moscow has been proposing — a suggestion that is anathema to Washington — the Go-East path will remain open. If not, a BMB future will be a dicier proposition.

It should be noted that another vision of the Eurasian economic future is also on the horizon. Washington is attempting to impose a Transatlantic Trade and Investment Partnership (TTIP) on Europe and a similar Trans-Pacific Partnership (TPP) on Asia. Both favor globalizing American corporations and their aim is visibly to impede the ascent of the BRICS economies and the rise of other emerging markets, while solidifying American global economic hegemony.

Two stark facts, carefully noted in Moscow, Beijing, and Berlin, suggest the hardcore geopolitics behind these two “commercial” pacts. The TPP excludes China and the TTIP excludes Russia. They represent, that is, the barely disguised sinews of a future trade/monetary war. On my own recent travels, I have had quality agricultural producers in Spain, Italy, and France repeatedly tell me that TTIP is nothing but an economic version of NATO, the military alliance that China’s Xi Jinping calls, perhaps wishfully, an “obsolete structure.”

There is significant resistance to the TTIP among many EU nations (especially in the Club Med countries of southern Europe), as there is against the TPP among Asian nations (especially Japan and Malaysia). It is this that gives the Chinese and the Russians hope for their new Silk Roads and a new style of trade across the Eurasian heartland backed by a Russian-supported Eurasian Union. To this, key figures in German business and industrial circles, for whom relations with Russia remain essential, are paying close attention.

After all, Berlin has not shown overwhelming concern for the rest of the crisis-ridden EU (three recessions in five years). Via a much-despised troika — the European Central Bank, the International Monetary Fund, and the European Commission — Berlin is, for all practical purposes, already at the helm of Europe, thriving, and looking east for more.

Three months ago, German chancellor Angela Merkel visited Beijing. Hardly featured in the news was the political acceleration of a potentially groundbreaking project: an uninterrupted high-speed rail connection between Beijing and Berlin. When finally built, it will prove a transportation and trade magnet for dozens of nations along its route from Asia to Europe. Passing through Moscow, it could become the ultimate Silk Road integrator for Europe and perhaps the ultimate nightmare for Washington.

“Losing” Russia

In a blaze of media attention, the recent NATO summit in Wales yielded only a modest “rapid reaction force” for deployment in any future Ukraine-like situations. Meanwhile, the expanding Shanghai Cooperation Organization (SCO), a possible Asian counterpart to NATO, met in Dushanbe, Tajikistan. In Washington and Western Europe essentially no one noticed. They should have. There, China, Russia, and four Central Asian “stans” agreed to add an impressive set of new members: India, Pakistan, and Iran. The implications could be far-reaching. After all, India under Prime Minister Narendra Modi is now on the brink of its own version of Silk Road mania. Behind it lies the possibility of a “Chindia” economic rapprochement, which could change the Eurasian geopolitical map. At the same time, Iran is also being woven into the “Chindia” fold.

So the SCO is slowly but surely shaping up as the most important international organization in Asia. It’s already clear that one of its key long-term objectives will be to stop trading in U.S. dollars, while advancing the use of the petroyuan and petroruble in the energy trade. The U.S., of course, will never be welcomed into the organization.

All of this lies in the future, however. In the present, the Kremlin keeps signaling that it once again wants to start talking with Washington, while Beijing has never wanted to stop. Yet the Obama administration remains myopically embedded in its own version of a zero-sum game, relying on its technological and military might to maintain an advantageous position in Eurasia. Beijing, however, has access to markets and loads of cash, while Moscow has loads of energy. Triangular cooperation between Washington, Beijing, and Moscow would undoubtedly be — as the Chinese would say — a win-win-win game, but don’t hold your breath.

Instead, expect China and Russia to deepen their strategic partnership, while pulling in other Eurasian regional powers. Beijing has bet the farm that the U.S./NATO confrontation with Russia over Ukraine will leave Vladimir Putin turning east. At the same time, Moscow is carefully calibrating what its ongoing reorientation toward such an economic powerhouse will mean. Someday, it’s possible that voices of sanity in Washington will be wondering aloud how the U.S. “lost” Russia to China.

In the meantime, think of China as a magnet for a new world order in a future Eurasian century. The same integration process Russia is facing, for instance, seems increasingly to apply to India and other Eurasian nations, and possibly sooner or later to a neutral Germany as well. In the endgame of such a process, the U.S. might find itself progressively squeezed out of Eurasia, with the BMB emerging as a game-changer. Place your bets soon. They’ll be called in by 2025.

 

Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

The Novorossiyan 300

Off the microphone of RE

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Aired on the Doomstead Diner on September 3, 2014

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Don’t miss also the recent related Podcasts with Dmitry Orlov

Analysing Ukraine and MENA

Supply Chains, Population & Community

Discuss this Rant at the Podcast Table inside the Diner

300 movie image Gerard Butler

Snippet:
…However, for a while there the Ukies also had superior equipment, more artillery, tanks etc that were legacy gifts from Mother Russia from the Soviet era. So Novorossiyan  irregulars armed mainly with rifles and RPGs were on the retreat, consolidating inside their home region for a Final Battle for all the Marbles.

You all know the story of the 300 from the film by the same name, which was a fictionalized account of the Battle of Thermopylae in 480 BC. From Wiki:

“Both ancient and modern writers have used the Battle of Thermopylae as an example of the power of a patriotic army defending native soil. The performance of the defenders at the battle of Thermopylae is also used as an example of the advantages of training, equipment, and good use of terrain as force multipliers and has become a symbol of courage against overwhelming odds. “

You also may have heard the poem by Alfred Lord Tennyson, Charge of the Light Brigade. I will read it in full.

Half a league, half a league,
Half a league onward,
All in the valley of Death
Rode the six hundred.
“Forward, the Light Brigade!
“Charge for the guns!” he said:
Into the valley of Death
Rode the six hundred.

“Forward, the Light Brigade!”
Was there a man dismay’d?
Not tho’ the soldier knew
Someone had blunder’d:
Theirs not to make reply,
Theirs not to reason why,
Theirs but to do and die:
Into the valley of Death
Rode the six hundred.

Cannon to right of them,
Cannon to left of them,
Cannon in front of them
Volley’d and thunder’d;
Storm’d at with shot and shell,
Boldly they rode and well,
Into the jaws of Death,
Into the mouth of Hell
Rode the six hundred.

Flash’d all their sabres bare,
Flash’d as they turn’d in air,
Sabring the gunners there,
Charging an army, while
All the world wonder’d:
Plunged in the battery-smoke
Right thro’ the line they broke;
Cossack and Russian
Reel’d from the sabre stroke
Shatter’d and sunder’d.
Then they rode back, but not
Not the six hundred.

Cannon to right of them,
Cannon to left of them,
Cannon behind them
Volley’d and thunder’d;
Storm’d at with shot and shell,
While horse and hero fell,
They that had fought so well
Came thro’ the jaws of Death
Back from the mouth of Hell,
All that was left of them,
Left of six hundred.

When can their glory fade?
O the wild charge they made!
All the world wondered.
Honor the charge they made,
Honor the Light Brigade,
Noble six hundred…

For the rest, LISTEN TO THE RANT!!!

Analysing Ukraine and MENA: A Conversation with Dmitry Orlov

Off the microphones of Dmitry Orlov, Monsta & RE

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Aired on the Doomstead Diner on August 21, 2014

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Technical Production Note:  In  the first 10 minutes or so of the Interview, I was working on my Cell Phone rather than over Skype, and my Audio is not very good there. Dmitry’s Audio is clear and so is Monsta’s.  I switched to Skype and my Audio for the rest of the Podcast is quite clear.

 

http://transitionvoice.com/wp-content/uploads/2011/08/dmitry.jpgDmitry Orlov has been studying the dynamics of the Collapse of Industrial Society for many years, he runs the Blog Club Orlov and is author of The 5 Stages of Collapse, as well as succeeding texts on the subject.  In my first years investigating Collapse issues, Dmitry’s name was often bandied about on the Peak Oil forum.

In this first part of our interview with Dmitry we look at the ongoing conflict inside Ukraine,  conflicts in the Middle East,the underlying conflicts of Energy and Credit systems behind these problems, Bilateral trade agreements between Russia and the other BRICS nations and many other related topics.

In Part II we look at more general aspects of collapse, possibilities for a population Bottleneck or Near Term Human Extinction, and the potential for developing Sustainable Communities in the aftermath of Industrial Civilization Collapse.

RE

Peak mileage and the diminishing returns of technology

Off the keyboard of Ugo Bardi

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Published on Resource Crisis on August 13, 2014

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This graph, from “economonitor,” is very interesting because it contains so much relevant information. (However, note one detail: the title of the graph, “Miles Driven” is somewhat misleading; it should be “mileage”, as the text of the post clearly says.) The relation of mileage to hourly wages is a parameter worth examining because it tells us a lot about the “systemic” efficiency of road transportation. What kind of efficiency can we actually afford?

Now, the graph shows a clear “peak mileage” which occurred around the year 2000, when Americas could afford the highest mileage from their cars in history. It was an efficiency peak of the road transportation system. But then, this efficiency diminished. How can we explain that?

The data of the graph depend on three factors 1) the cost of gasoline, 2) the average hourly wage, and 3) the average mileage of cars. Let see first the behavior of oil prices, which determine gasoline prices.

You see how oil prices spiked twice during the past 50 years, with the first and the second (ongoing) oil shocks. Amazingly, after the start of the first oil crisis, the mileage per hour worked increased, despite the steep price increases. But the opposite took place with the second oil crisis, mileage per hour worked rapidly decreased. Something must have compensated the price increase during the first crisis, but that is not occurring during the second. Why?

Of the other two parameters involved in the mileage curve, hourly wages play only a minor role. In real terms, wages have remained more or less constant in the US since the early 1970s, as you can see in this graph (source: income inequality)

What changed a lot in this period is the technology of cars. The first oil shock in the 1970s was, indeed, a shock. People reacted by actively seeking for technological solutions which would increase the mileage of their cars. And these solutions were easy to find: simply reducing the size and the weight of the monster gas guzzlers of the 1960s did the job. Look at these data (source):

You see how quickly mileage increased throughout the 1970s – it nearly doubled in less than 10 years! And you can see how quickly people forgot about the oil problem once prices collapsed in the second half of the 1980s. The graph also shows that, with the second oil crisis, mileage restarted to increase, but by far not as fast as in the 1970s. There is a reason: it is difficult to optimize something already optimized. This we call ‘diminishing returns of technological progress.”

In the end, it looks like the “peak mileage” of the late 1990s is the real one. In the future, the a combination of factors which led to the peak will never return. Oil depletion is destined to make oil less and less affordable, even though market oscillations may hide this phenomenon. Wages are unlikely to grow in real terms after having been static for the past 40 years. And technological miracles are unlikely. Even the Toyota Prius, technological marvel of our times, can only bring us back to where we were 15 years ago in terms of mileage per hour worked. As long as we remain within the paradigm of “road vehicle powered by a combustion engine” we have reached the limit of what we can do.

The result of the reduced overall efficiency of transportation we can see in this last graph (from advisorperspectives). In the US; people are driving less. Perhaps there are behavioral factors involved, but “peak mileage” suggest that they are doing that because they can’t afford to drive more.

h/t Giorgio Mastrorocco

Gas Siphoning & Energy Theft

Off the keyboard of RE

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Published on the Doomstead Diner on July 27, 2014

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LATEST RANT:  ANTI-DOLLAR!!!

ANTI-DOLLAR II Coming Soon to a Laptop Near You!

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RE-BM-Camp3In what is likely to become an increasingly more prevalent problem, twice in the last week I had Gas siphoned out of my Spare Carz while I was not around.  The main reason I know about it is because in one case the siphoners left the Gas Cap off and under the rear wheel on the passenger side, so I didn’t see it before rolling over it and busting it.

Second case worse, besides Siphoning, the Perps also went under the car and cut one of the hoses (or maybe more).  The hose was on the ground under the car, I spied it when I got home.  Since I don’t know if this was the only Vandalism, I did not drive the car.  Don’t know if maybe brake lines were cut too.  Had it towed over to the shop for a checkup and repair.  $80 just for the tow.  Don’t know what the repair bill will be yet.  My ATT Road Service Plan doesn’t cover Vandalism.

http://www.blogcdn.com/www.autoblog.com/media/2008/06/lockinggascap.jpgFortunately the Tioga Bugout Machine which has the largest Gas Tank at around 50 gallons wasn’t hit so far.  I have a locking gas cap on that one.  I went to Auto Zone and bought Locking Gas Caps for the other two vehicles also now.  Main issue with locking gas caps is they are very easily defeated, all you need is a portable electric drill.  You drill into the cap and this prevents it from free spinning while the drill bit is embedded in the cap.  I figured this out when I lost the keys to a locking gas cap a while back.  Fortunately, most siphoners haven’t figured that out yet, and they just move on to a car without a locking gas cap.

I am considering now getting Security Cameras, but this is another expense and also pretty easily defeated if the siphoner wears a hoodie and duct tapes over his license plate, if the license plate even gets in the picture.

Large Scale Siphoning stories at Gas Stations are also starting to appear.

Thieves In South Florida Siphoning Fuel From Gas Stations

Organized crime groups in South Florida are reportedly siphoning gasoline and diesel fuel from stations in broad daylight.

John Peach, vice president of operations for Victory Petroleum, says that thieves park on top of underground storage tanks at gas stations and remove false bottoms from their large vehicles, usually SUV or minivans, and lower a hose into the tank, stealing thousands of dollars of gas within minutes.

Peach joins Here & Now’s Jeremy Hobson to talk about this growing trend in Florida.
Guest

John Peach, vice president of operations for Victory Petroleum.

Transcript

JEREMY HOBSON, HOST:

It’s HERE AND NOW.

South Florida is dealing with an unusual crime wave: Thieves stealing gasoline and diesel fuel from gas stations in broad daylight. The thieves are using a siphoning and then storing the fuel in the back of their car.

Joining us now is John Peach, Vice President of Operations for Victory Petroleum, which owns and operates almost 200 gas stations in and around Miami/Dade County. John, thanks for being with us.

JOHN PEACH: Thank you, Jeremy.

HOBSON: Well, how exactly does this scheme work?

PEACH: Sure. So these people, who operate in organized crime, essentially identify properties that they target as places where they can steal fuel from. They pull up above our tank field. It’s usually a two to three-man operation involving at least two cars. And they compromise the lock on our tank field, which were the underground storage tanks sit. And they…

HOBSON: This is right on top of the parking lot where you would pull in to get your gas.

PEACH: Yes, sir. Correct. While the person who is in the car that actually performs a siphoning is going about the act of siphoning, they usually have one to two people inside of the convenient store who keep an eye on our employees and our control systems, to make sure that nothing identifies that the crime is going on. In the car, which has a false floorboard, removes the floorboard; they break the lock that sits on top of the underground storage tank.

And they drop a siphon pump down into either the diesel or the gasoline tank, which is hooked up to a motor on the car battery. And they turn on the motor and they can take anywhere from – we’ve seen 70 up to 600 gallons in about 10 minutes.

HOBSON: Ten minutes and no one notices.

PEACH: We do notice. We’ve had instances where our employees have noticed that this was going on. Again, we do have control points in place that identify when things like this happen. We have security systems, cameras. We have alarms that monitor the tank levels with the product underground, so that if product is leaving the tanks – in a manner other than going out of pump, the hose into somebody’s car – an alarm would go off.

And obviously our employees just have general awareness or they’re looking outside to see what’s going on. But, again, these people are operating in organized crime so it’s tough to have your employees stop this. It’s really a job for the local police department to do.

HOBSON: And then they take this gas or this diesel, and they try to resell it on the black market. What is the black market for gas and diesel? How do you even do that?

PEACH: Sure. So what they do is after they steal the product from a retail gas property, like the ones that my company owns and operates, they transport it to wherever it is that they resell it. I would be speculating if I told you that I knew where they resold it. It’s our assumption that they sell it for under market value, because if they were selling this at retail this market wouldn’t exist.

HOBSON: How much are you losing over all? And how much can they make on this?

PEACH: We’re losing tens of thousands of dollars. And other companies in the industry down here in South Florida, Central Florida, and I would speculate but probably other parts of the country are also losing as much money.

HOBSON: And do you have any sense of how much they can make reselling it?

PEACH: I don’t but it’s my guess that it’s a thriving business. We have seen an uptick in this type of organized crime, as the price of the commodity has risen. Probably starting back in October or November, we had a measurable increase of this kind of crime. Obviously we represent a cross sample of the larger industry down here in South Florida, but our sample size is pretty appropriate in the sense that we are in Miami, Fort Lauderdale, West Palm Beach and Naples, which represents most of South Florida.

And we’ve had properties that have been siphoned all over our geography. Also interesting to point out here that this used to be exclusive to diesel and, in recent months, we have actually had our first incidents of people siphoning gasoline from us.

HOBSON: Well, and I want to ask you about that because you say that having gasoline sitting in the back of a car is actually more dangerous than with diesel, right?

PEACH: Yes, sir. Gasoline is more explosive, that’s correct.

HOBSON: And what would it take to cause an explosion? It’s not just like driving around with a tank of gas in your car in the fuel tank. This is much more likely to be ignited by even a small spark, right?

PEACH: Yes, a couple of things to point out here. So the gas station environment, the retail gas environment, is a pretty well-controlled and secured; what I would refer to as a closed loop environment. So a truck brings product from a port, a rack, a terminal and then drops it in an underground storage tank. And then when they drop product into the underground storage tank, they recover the vapors that are sitting underground where the product used to be.

So in a perfect environment this is a closed loop circuit. When somebody introduces the act of siphoning into this environment without equipment – like a gasoline tanker or a truck – to recapture vapor, right there is where the problem begins. These people are operating siphon motors that we assume operate off a battery of their car. And we are also operating under the assumption that they don’t ground their vehicle properly. So this environment creates static electricity concerns, not to mention just general concerns of motors operating over 5,000, 8,000, 10,000 gallons of gasoline or diesel, very concerning.

In addition to that, we think about the gas tank or diesel tank on your automobile or my automobile, it’s logically placed. There was a reason that the automobile manufacturer put it where they put it on the car, to make sure that in the event of an automobile accident, the least problems could develop. And these people have, you know, 70 to 600 gallons of gasoline or diesel basically sitting in a very unsecured and illogically placed drum in the back of their car. So a common automobile accident would be very dangerous.

HOBSON: Do you think you’ll be able to catch all the people who are doing this?

PEACH: People get caught from time to time. If you look in the news and do a Google search, for instance, you’ll see that this kind of organized crime has existed for a while. From time to time these people do get caught. Sometimes they get caught just in routine traffic stops. Other times local law enforcement agencies see a case through.

But again, our concern in this is, it’s really three-fold. The act of siphoning, it’s dangerous, it’s dangerous to our customers. The act of transporting non-secured fuel on our city streets, it’s dangerous. You think about your friends, your family possibly getting in an automobile accident with one of these siphoning vans.

And then reselling fuel, you know, fuel is obviously a regulated industry, and you think about what they might be doing with the fuel before they turn around and resell it into automobiles. Again, those vehicles driving our city streets is concerning.

HOBSON: Now gas prices are going up a little bit right now, but they’ve held relatively steady for some times. Do you think this is just about the fact that gas is more expensive?

PEACH: No, I don’t necessarily think it’s just about the fact that gas and/or diesel has gotten more expensive. I think that these criminals have gotten more brazen over time with their success in procuring product from properties like ours in this manner. It used to be exclusive to nighttime and properties off the city grid. Now they’re doing it during daytime at properties that are deep in the city grid and highly visible, and I think with their success has come a more thriving market to turn around and resell this product.

HOBSON: That’s John Peach, vice president of operations for Victory Petroleum in South Florida. It operates almost 200 gas stations in and around Miami Dade. John, thanks so much.

PEACH: My pleasure. Thank you, Jeremy.

Now, while I think “Organized Crime” has some part in this, really it doesn’t take much organization, 3 or 4 guys can do it with hardware purchased at Home Depot.  Say you and 4 buddies in a Cul de Sac in some McMansion development each spend $100/wk in gas.  At $4/gal, that is 25 gallons each which is pretty typical between commuting and tooling around the neighborhood doing errands.  If you have a big enough tank and can scarf up 1000 Gallons in 10 minutes, pulling off one of these stunts every couple of months keeps all your tanks full up for FREE! You save $5000/year after tax income this way!

http://consumermediallc.files.wordpress.com/2011/09/sideofminivan.jpg?w=652&h=432Now, one would think the Gas stations could have a better security system.  There could be some kind of Sensor that detects when a siphon hose goes down in the tank.  This would then automatically phone the local Gestapo to come speeding to the scene of the crime.

That might work if there are tons of free cops cruising the neighborhood, but most communities don’t have so many cops and this is pretty low priority on the crime list.  For a gas station out in a rural area, the chances the cops would make it to the scene before the perps have left with the gas is small.

This phenomena among many others is likely to make gas harder and harder to come by.  Smaller stations getting ripped off will have to shut down.  Prices will have to rise to offset the “shrinkage” as it is known in the retail biz when merchandise is shoplifted.

Far as EVs go, the problem is even worse with them, as there are miles of unmonitored electrical transmission cables where with the right setup, you could tap into the power supply and recharge your EV for free.  For tiny EVs like my EWz, I already mentioned how EZ it would be to go into a laundromat or coffee shop and plug in the batteries for a recharge. Also, here in Alaska because of the Cold in Winter, many places have outdoor electric outlets for you to plug in the Block Heater for your car.  If you are driving an EV, you could ALSO plug the car battery in too for a recharge while you eat dinner.  To stop this, every plug would need a Meter on it and a Switch controlled from inside the restaraunt, a huge expense there.

Even outside the EV issue, theft of Energy from the Electrical Grid is SOP for many countries in the 3rd World, from Brasil to India, just for basic power to run household appliances.

http://www.csmonitor.com/var/ezflow_site/storage/images/media/content/2012/india/13344602-1-eng-US/india_full_600.jpg

http://static.progressivemediagroup.com/uploads/imagelibrary/Brazil%20slum%20TOP.jpg

http://www.bzconnect.com/wp-content/uploads/2013/02/stealing.jpg

The issue is, if you make it basically a REQUIREMENT to buy energy, but a significant portion of the population is too POOR to buy the energy, THEFT will ensue.

Why is it a REQUIREMENT to buy Energy?  Well, first of there are LAWS which mandate it.  Here in Alaska for instance, your domicile MUST have Hot and Cold running water and Electricity if you have any kids.  If you are an adult living by yourself out in the Bush, you can live in a cabin with an outhouse, but soon as you procreate, if your domicile does not have these “necessities” of Industrial Living, Child Protective Services can remove your kidz and send them to the Foster Care system.

In about every Big Shity, if you don’t maintain the Gas Bill, Electric Bill, Water Bill etc to your McMansion, the local “authorities” can and will drop in to CONDEMN the property.  One of the Diners, WHD had this situation ongoing for a while before he finally fortunately got re-employed and was able to start paying these Bills again.

Beyond the energy to run your McMansion, why is it a near MANDATE that you buy energy for travel?

To get to & fro work if you are fortunate enough to still have a JOB, because of the way the infrastructure of the society was built out, in most places you MUST have a car to traverse the distance between work and home.  Even inside the few Big Shities with a decent Public Transportation system, you have to pay the Bus Fares and Subway Fares, in NYC these days now up to $2.50 a trip.  When I was riding these rails regularly in the 70s, the price was 25-35 CENTS. My parents generation rode the Subways for a NICKEL, but in the Great Depression, even that was too much for many to afford.

http://www.futuristspeaker.com/wp-content/uploads/US-Prison-Population.jpgIn every aspect of the society, from the domicile in which you live to the travel you do every day, consumption of energy is mandated, if not legally than by social pressure.  Anyone living without these “necessities” is a FAILURE, homeless people living in Tents don’t get much respect in the society, in fact probably less than people in PRISON, where once in you get 3 Hots & A Cot.  In this case the energy bills for the Prison paid for out of taxation, or further debt issuance in reality.

Today, the FSoA has more people in PRISON than any other country in the world.  Why are so many in there?  Basically because the Industrial Economy does not pay enough people a living wage to afford the energy cost of this lifestyle.  In the end, they turn to a life of “crime”, selling drugs or siphoning gas, prostitution, whatever it takes to get by.

http://www.tildee.com/uploads/1-12-2011/011A3F63-8E7C-4B05-B2E9-7E48AFF1C228.jpgLike the old Workhouses of the British Empire in the Charles Dickens years, Prisons here have become the final stop for the portion of the population that can’t get on the Gravy Train for one reason or another.  Maybe its poor education, maybe there are few opportunities where they live, maybe they are just stupid, but whatever the reason here the “solution” of dropping them in prison is pretty stupid itself.  It costs around $35K to keep anybody in prison.  If you just handed most of these folks $25K, they probably could get by without resorting to crime, but then why would anyone work a Menial Job paying $25K?  Not to mention, a lot of Prison Guards would go Unemployed here, and a lot of Private Companies running Prisons would go outta biz!

People who successfully negotiated the Industrial paradigm, got a “good” job paying a high income by and large do not grasp or understand that the number of said jobs are far less than the size of the population, and so always with this sort of economy 50% or more of the population can barely meet the bills, and that is when the paradigm is working and there is copious energy to waste.  when it gets to the point where the cost of GETTING to work to earn a Minimum Wage that is less than the cost of fuel to get to work, it no longer makes economic sense to GO to work. This situation is already in full swing in places like Greece & Spain, but already even apparent here on the Last Great Frontier, where there still is a little Fossil Fuel energy left to extract, and a low population too.

As the price of Energy rises, it becomes much more profitable and worthwhile to do Energy theft.  At low prices it is not worth the risk, but at high prices the risk is more worth taking.  Generally speaking, if the theft is below $500, it’s a misdemeanor.  From Kentucky:

Under a new law which went into effect on June 25, 2009, the dollar amount for felony offenses has been increased.

A class D felony now requires theft , extortion or damage to property of a minimum of $500, A class C felony now requires $10,000.

The worst you get for Class C Felony of this type is probably Probation.  Its not violent crime, not drug related crime, it doesn’t get a prison sentence usually, if you have a decent lawyer anyhow.  Also, unless you actually are doing this on the big scale, it’s a misdemeanor.  Keep your amount down below 125 gallons or so, even if the cops catch you, it’s not a big crime.  That is easily enough gas to run your SUV for a month.

For now, hopefully the Locking Gas Caps will be enough to deter the local siphoners from hitting my spare carz as Gas Station while I am not around.  However, if this is ALREADY occuring up here where things aren’t really too bad overall, they are bound to be a lot worse in more depressed areas of the country, and will get worse here over time.

I expect to see a great deal of Energy Theft going on as things progress in this spin down, at both the low consumer level of Gas Siphoners, and at the Nation State level of Militaries commandeering Oil Fields in various nations at war.  Joe Biden’s son already appears to be trying such Profiteering in Novorossiya.

This goes on until there is nothing left to steal, and the infrastructure for distribution breaks down on the Grand Scale.

On the local scale, don’t be surprised if you exit Walmart tomorrow and find your Gas Tank emptied.

RE

End of Carz

Off the Microphone of RE

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Aired on the Doomstead Diner on June 12, 2014

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Snippet:

People who talk about Sustainability and Renewable Energy and who revere the older ways of living we once had just about uniformly revile the automobile.  There is no doubt that the automobile is an unsustainable technology, or that its use over the last century has developed an equally unsustainable infrastructure and style of living.

My friend Steve on Economic Undertow writes about this all the time, and presents the choice being made here, to Feed the carz at the expense of Feeding the People. You can’t keep the carz running and at the same time run an economy that keeps the people fed. The Carz simply waste too much energy, for no real remunerative reason in the end.

The problem of course is that you can’t simply dispense with automobiles, when you have built an entire infrastructure and society precisely around that device.

Steve writes in a recent blog:

“Take away the autos and there is a vanishingly small need for petroleum”-SfV

My response, fairly predictable for anyone who has followed the diner over the last couple of years;

Take away and replace with…what?

For the rest, LISTEN TO THE RANT!!!

RE

 

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The Flight of the Bumblebees

Off the keyboard of Steve from Virginia

Published on Economic Undertow on November 2, 2012

Discuss this article at the Epicurean Delights Smorgasbord inside the Diner

In the North-East, in the wake of Hurricane Sandy, there are emergency workers, linemen, construction crews clearing roadways of fallen trees and sand, pumping water, replacing electric lines, and trying bring back services to the stricken New York-New Jersey areas. Meanwhile, thousands of irate drivers are waiting in long gasoline lines such as this one pictured below:

 

 

Gas lineup of cars in New Jersey (Jeff Jarvis) Heaven forbid that Americans be deprived of the means to drive where and when they please! Certainly, the citizens of New York and New Jersey have the God-given right to cruise around and ‘see what’s open’/what’s destroyed.

Question? How will the same citizens cope with permanent crude oil shortages? If not during a disaster, when? Here is what James Howard Kunstler’s ‘long emergency’ looks like in its initial stages. Americans are indoctrinated to where cars are central to every possible activity. No gas = no car = (c)armageddon.

Notice the gasoline shortage that first appeared in California has migrated to the East Coast. The proposition is always the same: a defect in delivery mechanism, a refinery- or refineries shut down for various reasons yet with ‘plenty of gas’ in the delivery pipeline.

Is there really plenty of gas? If there is, why lines?

In California there were very high pump prices in areas with less gasoline, in New Jersey the gas is still cheap by mandate … where gasoline can be found. Why not market clearing prices? $20/gallon gasoline and there are no lines, and no frivolous waste of gas, either.

After the storm the river crossings into New York City were reopened to traffic, the streets were immediately jammed with single-occupant vehicles. Service vehicles and buses were unable to move until authorities began turning away all cars with fewer than three occupants, the 2d day after the storm.

– The city should ban all private vehicles from operating on New York City streets except for transit, emergency and delivery vehicles. The city should also ban any parking on arterial streets and free up space for buses. Oops! Can’t be done, the governments are all too ‘pro-car’.

– People waiting in long lines suggests the need for a rationing regime: odd-even days with the last number on the license plate being the determinant.

– People waiting in long standee- lines with gas cans in hand represents the triumph of marketing over common sense. The ongoing sequence of damaging storms since 2000 has convinced tract-house residents to ‘invest’ in portable generators. Users don’t realize how much fuel even a small, 3kw generator uses … A generator large enough to supply a tract house ‘normal’ power (Watts) uses more fuel in a day than a person can carry easily. People buy generators the way they buy cars: they obtain the largest and most powerful units they can afford … they run the refrigerator and the big-screen television and have lights on all over, they must also burn a gallon of gasoline per hour while doing so … a five-gallon Jerry-can weighs 45lbs filled … which is too heavy for most to carry more than a few hundred feet … this means daily trips in the car looking for large amounts of gas.

– The sensible approach is to use the smallest generator rather than the largest … run it sparingly … only when needed to charge telephones and laptops and use essential devices … the television is not essential.

– Keep yourself and your car off the roads until the emergency is over, period! Emergency services have enough to do without dealing with YOUR car wreck. In an emergency there is no need to drive anywhere … provided driving isn’t necessary to escape immediate danger.

– In an emergency stick close to your house. Check on your neighbors and make sure they are not ill or hurt. After hurricane Katrina, a great problem in New Orleans was the 100+ degree heat, high humidity and absence of water and power. Neighbors helped neighbors, there was no one else to whom to turn.

– Comparisons will be made between New York and New Orleans post- their respective hurricanes.

– The level of damage to both places and surrounding areas is very similar. The actual level of physical destruction won’t be accurately determined for months (if New Orleans is a guide).

– The bosses have learned: New Jersey, New York and Connecticut governments plus FEMA are more effective now than Louisiana, Mississippi and Alabama plus FEMA were post-Katrina. In New Orleans many police ran away, others looted or formed ad-hoc death squads that randomly shot at- and killed negroes. Later, ‘security duties’ were given over to private security goons who harassed and abused inhabitants. Meanwhile, road-blocks and miscommunication kept food and water trucks out of the city.

– Many rooftop rescues took place because Louisiana locals ignored police/military commands to stay out of the city and patrolled areas with small boats.

– Cleanup after the storm was a bonanza for well-connected ‘contractors’ who subcontracted- and subcontracted again and again much of the public work. So far, none of this seems to be taking place in the NY-NJ area … but it is too soon to claim that such abuses won’t take place in the future.

– Most of the storm destruction in the south was outside of New Orleans: coastal Mississippi was particularly hard hit. Ditto the coastal areas of New Jersey and Long Island. Right now there is little information about LI damage but it is likely to be severe.

– Reports of looting made no mention that even rescued persons lacked access to food or water or means of travel (boats). There was no violence @ Superdome or Civic Center even with these places packed with thousands without food, water or working toilets … despite numerous wild tales of violence at these places in the news media.

– New Orleans was closed to all for about 6 weeks … this allowed for a second major hurricane to smash the city and add more flood water … but kill no more people.

– Much of the traffic on New York-area roads is gawkers. How about arrests?

– A household should have enough basic supplies, food and water to function without refrigeration/power for at least 30 days without needing trips to the store. 30 days isn’t an extreme period of time and was considered basic household preparation only a couple of generations ago. Dried vegetables, starches, grains, smoked and salted meats keep intact for long periods without refrigeration. In cold weather, perishable items can be put outdoors in sealed containers (to keep roving pests out of your food).

– Every household should have a good supply of soap, salt, toilet paper, water, towels and blankets. Sweaters, long woolen undergarments and blankets are zero-energy solutions to cold/wet weather. They are more effective than running a 7KW generator to power a space heater. A small fan can be a life-saver in hot climates.

– Water should be stored in glass bottles not plastic or plastic-coated metal containers. Plasticizers contained therein leach into the water and accumulate, these are highly toxic. One-gallon glass bottles for vegetable oil are good after cleanup for water storage. Rotate your water storage periodically and keep it away from light … this keeps algae from growing in the water and making it slimy. Stored water can be rendered potable by use of purification tablets or by boiling.

– Before a disaster, seal and fill the bathtub to the overflow. This will be a source of washing and toilet-flushing water. 2 gallons of water are all that is needed to flush the modern toilet. Use the tub water for cleaning and rinsing first, then the wash water for toilet flushing. Flush the toilet once a day, close the lid when not in use.

– In any emergency closely ration your drinking water! DO NOT WASTE WATER you don’t know when clean water will be available. New Yorkers are learning the hard way how little fun it is to hump five gallon buckets from fire hydrants up twenty or more flights of stairs in the dark in high-rise buildings …

– Backup heating: a woodstove or fireplace with some firewood is the best backup. If there is no fireplace, the wick-type kerosene heaters are thrifty and newer models are safe. Do not use ‘salamanders’ or job-site kerosene heaters as these gobble electricity. Neither the generator nor the heater should be used in confined spaces due to carbon monoxide emissions. Do not use electrical space heaters.

– In a hurricane, there is little a homeowner can do when the storm is raging outside. Inside, some tarps, drop-cloths, duct tape, plywood, a hammer and some nails can be used to temporarily close an opening that allows the wind and rain to enter.

– In a snowstorm, the owner should be aware of snow loading his roof and be ready to shovel snow.

– During emergencies, commuters form car pools. Fortunately, the surface commuter rail systems in the New York City area are likely to be back in operation next week.

– In an emergency, the most useful tool is the shovel. It can be used as a pry bar, to remove mud, sand and water and to dig snow and ice. The second most useful is a flashlight.

– In an emergency, the greatest problem is not danger but boredom. Americans are used to being continually entertained. The demand for entertainment is such that content sources are exhausted … Keep some ‘old-fashioned’ games, cards, books (the paper kind), drawing materials, musical instruments and puzzles. Everyone in a household should be given chores to do including cleanup which is essential. Provided the house isn’t destroyed or seriously damaged, an orderly environment is helpful for morale, particularly over extended periods. Looking after neighbors is part of expanding the orderly environment beyond the house.

It is likely that most filling the roads in the New York-New Jersey hurricane zone are simply bored with being in a house with no lights, a droning generator and no junk food to gobble … Americans need to get over this need for outside stimulus … most will be spending extended periods inside one house … within one town … likely to be a small and boring town … for their entire lives. The gasoline shortages will be permanent … what then?

???

High-Priced Fuel Syndrome

Off the keyboard of Gail Tverberg

Published on Our Finite World on September 26, 2012

Discuss this article at the Epicurean Delights Smorgasboard inside the Diner

Governments and economists around the world have not figured out that what the world economy is suffering from, to varying degrees, is “high-priced fuel syndrome“.

High-priced fuel syndrome has a number of symptoms:

  • Slow economic growth, or contraction
  • People in discretionary industries laid off from work
  • High unemployment rates
  • Debt defaults (or huge government intervention to prevent debt defaults)
  • Governments in increasingly poor financial condition
  • Declining home and business property values
  • Rising food prices
  • Lower tolerance for immigrants
  • Huge difficulty in funding retirement programs, programs for disabled, and regular pension plans
  • Rising international tensions related to energy supply

The countries with the most problem with high-priced fuel syndrome are the industrialized countries that are big importers of oil. This is the case because oil has been a particularly high-priced fuel in the past few years. Importing high-priced oil adds challenges of its own, since funds used for imported oil flow out of the country.

Figure 1. Historical inflation adjusted oil price per barrel, (Brent equivalent in 2011$), based on amounts shown in BP’s 2012 Statistical Review of World Energy.

While oil is the biggest culprit in high-priced fuel syndrome, high-priced fuels of other sorts can play a role as well. Natural gas is recently high-priced in Europe and Japan, but not the USA. The higher natural gas price contributes to a higher average energy cost level for these countries.  High-priced renewables, such as off-shore wind and solar photovoltaic, can be expected to act in a similar fashion, because they add to the price challenge customers face.

At this point, Europe is hardest-hit by high-priced fuel syndrome. In part this is because Europe is a big importer of both oil and gas,  and both are high-priced. European countries have also encouraged the use of high-priced renewables, adding to their difficulties.

While many people have laughed at the issue of the world “running out of oil” (or natural gas, or some other substitute fuel), it seems to me that they have basically missed the point. There is always lots of fuel in the ground, or available through devices we create that produce “renewable” fuel. The major issue is that the fuel becomes too expensive for the economy to afford.

The United States, Europe, and Japan were industrialized back when fuels were cheap, in the pre-1972 era (Figure 1, above). The cost structure of government welfare programs (such as Social Security, Medicare, unemployment) also assume that the economy will continue as it did with low-priced fuels. Substituting ever more-expensive fuels can be expected to push a country toward economic contraction, reduction in programs that the economy can no longer afford, and the symptoms listed above.

Why We are Encountering Rising Fuel Prices

When companies begin extracting oil (or natural gas, or coal), they start with the easiest, cheapest-to-extract first. In Figure 2, oil (or natural gas or coal) extraction starts at the top of the triangle, and gradually works down the triangle.

Figure 2. Author’s illustration of impacts of declining resource quality.

As we require more and more fuel, we gradually seek out less-desirable sources of fuels. These fuels tend to be slower to extract, and are more expensive for what we get. They are often more polluting as well.

Oil is the fuel that we recently have had a problem with easy-to-extract supply running low. We had a somewhat similar problem in the mid 1970s and early 1980s. At that point there was still plenty of cheap oil left in areas where we had not yet drilled (Alaska, North Sea and Mexico, for example), so the problem was temporary, lasting only until we could drill more oil.

This time, the problem seems to be permanent. The chief executives of oil companies Total and Shell have been quoted as saying, “The days of so-called ‘easy oil’ are over, making it harder to meet demand without complicated and expensive projects.”(Voss, 2007). Examples of such expensive-to-extract oil include deep-water oil and tight oil that must be “fracked”. The fact that the cheap oil is mostly gone is the major reason why oil prices are higher than they were five or ten years ago. If oil prices had not risen, it is likely that the amount of oil extracted each year would be declining.

There are alternative fuels such as ethanol and biodiesel, but they also tend to be expensive.

Natural gas and coal aren’t immediate substitutes for oil. For example, they won’t act as fuels in most of today’s cars, trucks and airplanes. While there are long-term possibilities for substitution, the high-priced fuel syndrome is today’s problem, not a future problem.

Rising Fuel Costs Cause the Economy to Contract

There are a number of ways rising fuel costs can cause the economy to contract. The problem is that consumers’ incomes don’t rise, just because oil prices rise. If consumers are required to pay more for a necessity, they will cut back on discretionary goods and services. A few examples:

Food prices. If oil prices rise, the price of food tends to rise as well, because oil is used in many ways in producing food: cultivation of fields, planting fields, chemical sprays (herbicides, pesticides), transporting soil amendments, harvesting fields, and transporting food to market.

Figure 3. Comparison of Food and Oil Prices. Food Prices indices are as published by the Food and Agriculture Organization (FAO) of the United Nations, available at http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/
Oil prices are monthly average Brent Oil spot prices, as published by the US Energy Information Administration. http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=rbrte&f=m

Low-income customers tend to be disproportionately affected by rising food prices. They especially tend to cut back on discretionary spending, such as buying a car or going out to a restaurant, in order to be able to afford enough food. As a result, workers in discretionary industries are laid off.

Commuting cost. If oil cost rises, the price of auto travel rises. Some auto travel, particularly commuting, is a necessity. Consumers, particularly lower-income consumers, tend to cut back on discretionary spending, such as vacation trips, to afford essential trips.

Businesses. Businesses are affected in multiple ways by rising oil prices. First, businesses in discretionary industries find that their “unit-sales” are down, because customers are spending more on food and commuting, as a result, need to cut back elsewhere. Lower unit-sales are likely to lead to lay-offs.

In many instances, businesses also use oil directly in the products they sell. For example, airlines use jet fuel. If oil prices rise, they have they either face lower profits, or need to raise prices to recoup their higher costs. This type of price increase further stresses customers’ budgets.

Electricity. While the current US problem is oil prices, rising electricity prices would be expected to have a similar effect. Every business today uses electricity in various ways–electric lights, running computers, running elevators, operating tools of various sorts. If electricity costs rise because of higher natural gas prices or because of greater renewable surcharges, it will raise the cost of the product produced.

Businesses again have the choice of raising the price to consumers, or facing declining profits. If they raise prices, they will be less competitive with suppliers from other countries, who may not be facing rising electricity costs, if their source of electricity (perhaps coal or nuclear) is not rising in price as fast.

If electricity prices rise, consumers’ budgets will be stressed in a similar way to the way that they are stressed by rising oil prices. This, too, can be expected to lead to a cutback in discretionary expenditures.

Follow-on effects. Laid-off workers may move in with relatives and cut back on driving to save on costs. This helps reduce demand for both homes and automobiles. With less demand for homes, housing prices may decline, especially in parts of the country with significant layoffs and plentiful housing supply.

Laid-off workers may default on loans, creating financial distress for banks. Even people who still have jobs may find the hours they work reduced, so that their take-home pay is lower. They too may cut back on discretionary expenditures.

Impact on Governments

Governments suffering from high-priced energy syndrome can expect a number of negative impacts:

  1. Laid-off workers expect to collect unemployment benefits. If there are other kinds of benefits that they might collect under some other program (disability, retirement, low-income assistance), they will want them as well.
  2. If citizens are working fewer hours or laid off, the amount of taxes they pay is lower.
  3. Banks and other industries are likely to need bailing out, as borrowers default on loans.
  4. The government will be faced with direct increases in costs, because the government uses oil to fuel its autos and jets.
  5. The government will face increasing costs on products it buys that use oil, such as asphalt for highway projects.
  6. Local governments may face reduced tax revenue because of declining home and business property values.

Figure 4 below shows US Federal Government Income and Outlays, in recent years:

Figure 4. US Government Income and Outlay, based on historical tables from the White House Office of Management and Budget (Table 1.1). *2012 is estimated. http://www.whitehouse.gov/omb/budget/Historicals

It is clear from Figure 4 that income had dropped at the same time outlay has risen. Even though the crisis is supposedly past, there is still a huge gap between income and outlays. Outlays in recent years are higher than would be expected based on pre 2005 trends, while revenues are lower than would be expected. Revenue would need to be more than 50% higher, to match outgo, for 2009 through 2012 fiscal years.

The amounts shown in Figure 4 are consolidated, so include programs such as Social Security and Medicare, besides “on budget” spending. How many readers could afford to contribute 50% more than they currently pay for the sum of (Federal Income Taxes + Social Security + Medicare funding)? If the government were to actually raise taxes this much, there would be a huge new round of lay-offs, because consumers would find their after-tax income much reduced, leading to even more cuts in discretionary spending.

Needless to say, the US government will do everything in its power to cover up its problems. In a later section, we will discuss how this huge deficit is being hidden.

Note that the only years during which US Federal Government income exceeded outgo in Figure 4 are 1998 through 2001. These years approximately coincide with the time period when historical oil prices were at the lowest level in recent years (Figure 5, below).

Figure 5. Historical average annual oil prices, (“Brent” or equivalent) in 2011$, from BP’s 2012 Statistical Review of World Energy.

Impacts of the Oil Price Increase in 2006 – 2008 Period

While most people now don’t think of oil prices in 2006 as being high, according to Figure 5, oil prices already had more than doubled from 2002 levels by 2006. If we look back at the financial situation in 2006-2007, we see impacts very similar to what we would expect from rising oil prices.

Sub-prime borrowers began to default as early as 2006 (Bernanke, 2007). As mentioned earlier, it was people who were on the “edge” financially who were most at risk of defaults on home loans. Sub-prime borrowers would seem to be on the “edge” financially and thus were particularly as risk, because they lacked the financial qualifications to obtain “prime” interest rates.

Figure 6. S&P/ Case-Shiller 20 City Home Price Data, using seasonally adjusted data. June 2006 is the peak month. Data from http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff–p-us—-

Home prices started to drop in 2006 as well (Figure 6, above), and they haven’t been able to recover yet. We don’t think of homes as being discretionary spending items, but people can’t move into more expensive homes unless their incomes are rising. First-time buyers will also tend to put off purchases, if their financial situation is tight. The construction industry was one of the industries to face large lay-offs.

Defaults on loans caused considerable problems in the financial industry. “Short sales” (in which the sales price of a home is insufficient to pay off the remaining mortgage because the price of a home has fallen) also caused losses to the financial industry. The financial system was not set up with the idea that there may be a systemic problem of this sort. As a result, many banks found themselves in financial difficulty and needed governmental bailouts.

Other industries, such as auto manufacturing and insurance, also required bailouts. These patterns are precisely what one might expect from rising oil prices.

I make arguments similar to these in Oil Supply Limits and the Continuing Financial Crisis. James Hamilton (2009) has shown that the rise in oil prices alone were sufficient to bring on recession in the 2007-2008 recession.

One other important factor also affecting the 2006 to 2008 period was target interest rates. The Federal Reserve Open Market Committee (FOMC) raised interest rates during the 2004 to 2006 period (Figure 7, below).

Figure 7. Intended Federal Funds Interest Rates, as set by the Federal Reserve Open Market Committee http://www.federalreserve.gov/monetarypolicy/openmarket.htm

The basic idea in manipulating interest rates is that low interest rates are supposed to increase economic activity, because low interest rates make it less expensive to buy a car, using a loan, or to take out a home improvement loan. They also make it less expensive for businesses to finance expansion with a loan. Higher interest rates are supposed to decrease economic activity, because of the opposite impact.

Ludlum (2009) reviewed the minutes of the Federal Reserve Open Market Committee (FOMC). The FOMC noticed rising energy and food prices as early as December 9, 2003. It wasn’t until June 2004, though, that the FOMC first raised interest rates, in an attempt to “damp down” demand for oil. The committee’s view (not stated in the minutes, but implied by rising interest rates) was that the rapid expansion of the US economy was leading to rising oil and food prices. The expectation was that raising interest rates would damp down US demand for oil, and bring inflationary pressures affecting oil prices under control. The FOMC continued to raise interest rates by 0.25% at each of its meetings (the minutes repeatedly comment about rising energy and food prices), until the target interest rate reached 5.25% in June 2006). The FOMC did not start bringing interest rates down again until September 2007.

If the problem were really rising US demand for oil, this approach might have worked. In fact, the real issue was rising oil demand elsewhere, especially China, India and other Asian countries. China had joined the World Trade Organization in December 2001, and was ramping up its exports starting in 2002 and 2003. It also didn’t help that world oil supply was not rising very quickly, so rising demand led to rising oil prices.

Figure 8. Oil Consumption for Selected Areas, based on BP’s 2012 Statistical Review of World Energy

The combination of higher interest rates and rising oil prices provided a “double whammy” to the US economy, helping push the US economy into recession. Europe and Japan also experienced major recession. The parts of the world with rapidly growing oil consumption generally did not experience recession.

The Growing Economy Problem

At least part of the reason for the High-Priced Fuel Syndrome is the fact that with all of the world’s debt, there is a need for growth to continue indefinitely. In a growing economy, it is as if we can always “borrow from the future,” because the future is always bigger and better than the past. We start running into huge problems if this is not true.

Figure 9. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

Part of the problem is that repaying loans is difficult in a shrinking economy (Figure 9), because less funds are “left over” after loan repayment. If we think of the situation as a government whose revenues start declining, we can understand what the problem is with repaying debt, plus interest on that debt. (Arguably inflation could play a role for a while, but lenders soon would catch on, and require higher interest to compensate for inflation.)

As long as the economy grows each year (and government revenue is higher), it makes sense for the government (and many others) to keep borrowing.  But if the economy starts shrinking, we have a serious issue, because the government not only needs to stop borrowing more, but it also has to face the prospect of repaying what it already owes.

The situation is not too different for individual borrowers and for businesses. For individual borrowers, the risk is of being laid off from work, and not being able to find new job. For businesses, it is the risk of fewer buyers for their products, and because of this, less revenue in the future. With less revenue, fixed costs become a larger and larger share of total revenue, making it harder to repay debt.

Thus, in a shrinking (or even a flat) economy, debt defaults become more and more of a problem. Banks find themselves in more and more financial difficulty. This is basically the issue referred to earlier, with respect to high oil prices causing loan defaults.

Paying for Social Security and Medicare benefits is another area where growth makes a big difference. If an economy is growing, there is always a growing population of young workers to pay for benefits to the elderly. If the number of workers shrinks relative to the retired population because of high unemployment or few children, funding becomes a problem. This is yet another area where we have been counting on growth to continue indefinitely, to keep the model functioning as planned.

Recent Government Cover Up of High-Priced Fuel Syndrome

We noted above that the Federal Reserve raised interest rates in the 2004 to 2006 period, in an apparent attempt to damp down oil demand. Starting in September 2007, the FOMC took the opposite tack. Instead of raising interest rates, they brought them down, bringing them as close to zero as they could by late 2008. See Figure 7, above. The intent of this move was to stimulate the economy, by making borrowing less expensive.

Then the Federal Reserve decided to go further, and take up what it called Quantitative Easing, which is what other people call “printing money”—buying the government’s own debt, and some related debt.  Target interest rates affected only short-term debt. Through the use of Quantitative Easing, it hoped to lower longer-term interest rates, as well, and thus provide even more of the low-interest rate benefit to potential borrowers. The United Kingdom and the Eurozone are taking a somewhat similar approach.

A major reason for Quantitative Easing (besides the stated business reasons for decreasing interest rates) seems to be lowering the amount of interest payments that the government itself would need to pay. This would help reduce the big gap between governmental outgo and income (Figure 4, above).

A second reason for Quantitative Easing is that it was a way of enabling the huge amount of deficit spending taking place. Without Quantitative Easing, the government would have had to go, “hat in hand”, to the world market, asking for additional loans. There might be a possibility of not all of the loans being sold, or of higher interest rates being required. By buying back a large share of the US’s own debt, it was able to make certain that interest rates would stay low, and that there would be an adequate market for the debt.

Impacts of Government Cover-up

One problem with artificially low interest rates is that the interest rates, in effect, steal from one segment of society, and use it to subsidize a different segment of the economy. The segment of the economy that is “stolen from” consists of pension plans, and people who would otherwise be saving their money, perhaps for retirement, and would benefit from interest income. Part of the reason that pension plans are having so much difficulty with funding now is because of artificially low interest rates. Pensions plans will need to be bailed out, or contributions will need to be much higher, if the system continues with artificially low interest rates.

Another even more major problem is that without a return to growth, there is no nice way to end the low interest rate/Quantitative Easing policy. One possibility is that at some point, the dollar will drop relative to other currencies, and the price of imported oil will become even higher. This will make the situation worse.

Somehow the situation must be resolved. One possibility is that the government will greatly reduce benefits and raise taxes, so as to balance its budget. Alternatively, there could be a major governmental change, perhaps leading to a totally new governmental structure and different currencies. It is possible that there will be hyperinflation, or some type of break in international trade. Countries may trade more with trusted partners, or may require collateral for trade.

Impact of High-Priced Fuel Syndrome on Exporters

This post has mostly been about the impact of High-Price Fuel Syndrome on energy importers, such as the United States, Europe, and Japan. The situation isn’t quite as bad for energy exporters, but they are not completely spared.

Energy exporters are usually in a better position financially than importers, because they collect funds from the oil or other type of high priced energy they sell. These funds can be used to fund government programs. If the energy exporter is fortunate to still have some “cheap to extract” oil left, the energy exporter can perhaps subsidize oil prices for its own people. This approach works much better when population is relatively small, such as Saudi Arabia, than when population is large, such as Russia, because with subsidy, internal use tends to rise, and exports decline.

Even when a country is an energy exporter, high oil prices or other high energy prices can be a problem. One issue is that those who benefit from high oil prices (oil companies, oil workers, local economies, governments that tax oil production) are not the same as the economy in general. For example, if oil prices are high, the major producing areas, such as Alberta, Canada can benefit, even as the rest of Canada behaves much like an oil importer, with job losses.

Another issue is the one illustrated in Figure 3, that of food prices tending to rise as oil prices rise. The Middle East is an oil exporter, but a food importer. If food prices rise at the same time as oil prices, the government finds it necessary to cushion this cost increase for the poor. To do this, they must raise food subsidies, or increase the level of payments to those who are unemployed. Making these changes quickly is not necessarily easy. There is considerable evidence that the 2011 “Arab Spring” uprisings were related to high food prices (Lagi, 2011).

So even for oil exporters, high oil prices may lead to problems.

In Summary

In summary, we are running short of cheap energy, especially cheap oil. High priced oil (or high priced energy of any type) tends to slow down the economy, leading to economic contraction. Our financial system is not made for contraction. Ben Bernanke and others have used artificially low interest rates and Quantitative Easing to try to cover up our current problems, but this is not a long-term solution. At some point, the underlying problems will become evident, and some type of discontinuity will take place. The economic situation will change from one of growth to decline.

Our system of benefits and taxes to pay for those benefits is based on the cost structure that was possible with cheap energy, and the growth that was possible with cheap energy. Very major changes will be needed, if government outgo is to made to match income. Basic programs such as  unemployment, Medicare, and Social Security will either have to be reduced, or taxes raised substantially. Maintenance of huge amounts of infrastructure (such as roads, water and sewer pipelines, electricity transmission lines, and schools) can be expected to be increasingly expensive as well.

It is not clear exactly how the current situation will play out, but a return to cheap energy and robust economic growth seems very unlikely. A more likely outcome is a serious discontinuity, with affected countries much poorer afterward.

References: 

Bernanke, B. S., The Subprime Mortgage Market, Speech at the Federal Reserve Bank of Chicago’s 43rd Annual Conference on Bank Structure and Competition, May 17, 2007. Available at http://www.federalreserve.gov/newsevents/speech/bernanke20070517a.htm

Hamilton JH. Causes and consequences of the oil shock of 2007-08. Brook-
ings Papers on Economic Activity
:215e61. Accessible at http://www.brookings.edu/~/media/Files/Programs/ES/BPEA/2009_spring_bpea_papers/2009a_bpea_hamilton.pdf; Spring 2009.

Lagi M., Bertrand, K., and Bar-Yam, Y. The Food Crises and Political Instability in North Africa and the Middle East, Complex Systems Institute, 2012 Available at http://arxiv.org/pdf/1108.2455v1.pdf

Ludlum, S. Further Evidence of the Influence of Energy on the US Economy – Part 2, The Oil Drum, April 23, 2009. Available at http://www.theoildrum.com/node/5326

Tverberg, G. Oil Supply Limits and the Continuing Financial Crisis, Energy, 2012, 37 (27-34).

Voss S. and Patel, T. Total, Shell Executives Say ‘Easy Oil’ Is Gone (Update 1), Bloomberg, April 5, 2007 Available at http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aH57.uZe.sAI

Knarf plays the Doomer Blues

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When President Trump and Democratic presidential nominee Joe Biden face off Tuesday night in the first presidential debate, there's one topic they're not expected to get asked about: climate.Thirty-six senators, spearheaded by Ed Markey, D-Mass., sign...

Nice to see the silver fox still batting away. I gathered moving to the equator to form an intentional community, of near term climate extinction believers (yes really), only lasted a couple of years. I'm sure everyones down payments were fully refunde...

Foreward: Presidential capture is a form of government failure that occurs when the office of the Presidency, created to act in the public interest, instead advances the commercial or political concerns of the President himself, his associates and spe...

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Knarf’s Knewz

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Quote from: UnhingedBecauseLucid on March 18, 2019 [...]

CleanTechnicaSupport CleanTechnica’s work via dona [...]

QuoteThe FACT that the current incredibly STUPID e [...]

Quote from: K-Dog on February 24, 2020, 06:23:52 P [...]

I wonder how much these coins have been debased? [...]

Precious tip of the day.....Buy silver NOW  She [...]

Scientists have unlocked the power of gold atoms b [...]

Quote from: azozeo on August 14, 2019, 10:41:33 AM [...]

I am OUT of Jury Service!  I got summoned to be a [...]

Quote from: Eddie on May 16, 2020, 10:30:30 AMQuot [...]

Quote from: RE on May 16, 2020, 08:20:06 AMQuote f [...]

Quote from: RE on May 16, 2020, 08:20:06 AMQuote f [...]

Alternate Perspectives

  • Two Ice Floes
  • Jumping Jack Flash
  • From Filmers to Farmers

Harvest at Chez Cog By Cognitive Dissonance   It became obvious to Mrs. Cog and I by early February [...]

  Perhaps a Crumble Rather Than a Collapse Chapter One By Cognitive Dissonance     “...we can endure [...]

The Flim-Flam Men by Cognitive Dissonance   I suspect if average Joe or Jane were asked to identify [...]

The Coming War With China Re-posted from CaitlinJohnstone.com   (Have you noticed that (suddenly) Ch [...]

Papers Please! By Cognitive Dissonance     For those who may not know, Mrs. Cog and I live in the mo [...]

Event Update For 2020-09-26http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2020-09-25http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2020-09-24http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2020-09-23http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2020-09-22http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

In other words, treat COVID-19 like a dry-run for the upcoming "big one" [...]

However don't expect strikes and yellow vests to fix underlying problems [...]

So how many more times are we going to hear that this is our last chance to take action in order to [...]

This is definitely not a bona fide post [...]

Daily Doom Photo

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Sustainability

  • Peak Surfer
  • SUN
  • Transition Voice

"If there is no one left alive there is no need for an economy." As the costs of uncontrol [...]

The Great Pause Week 26: Beer Cascades"The Scots forest smallholding system is inherently democratic. It encourages innovation and pr [...]

The Great Pause Week 25: Carbon Negative Beer"Watt recognized, like few others in business, that carbon neutral is not good enough. We have [...]

The Great Pause Week 24: Can we have a hammer and dance for the climate emergency? "If your carbon audit is 5% above where it needs to be, the dance stops and the hammer falls. [...]

The Great Pause Week 23: Toppling Towers"The pandemic is just the sound of one shoe dropping."At 8 am on the morning of August 10, [...]

The folks at Windward have been doing great work at living sustainably for many years now.  Part of [...]

 The Daily SUN☼ Building a Better Tomorrow by Sustaining Universal Needs April 3, 2017 Powering Down [...]

Off the keyboard of Bob Montgomery Follow us on Twitter @doomstead666 Friend us on Facebook Publishe [...]

Visit SUN on Facebook Here [...]

What extinction crisis? Believe it or not, there are still climate science deniers out there. And th [...]

My new book, Abolish Oil Now, will talk about why the climate movement has failed and what we can do [...]

A new climate protest movement out of the UK has taken Europe by storm and made governments sit down [...]

The success of Apollo 11 flipped the American public from skeptics to fans. The climate movement nee [...]

Today's movement to abolish fossil fuels can learn from two different paths that the British an [...]

Top Commentariats

  • Our Finite World
  • Economic Undertow

In reply to Gail Tverberg. As appeared in the comment sections bellow Mauldin's article, there [...]

In reply to Sven Røgeberg. One chart in the article that this quote is from is this one. https://evo [...]

In reply to Gail Tverberg. At about minute 13, Charlie Hall brings up my name. He says something lik [...]

In reply to Kim. It's like there's a wound in the society, and you keep picking at it in s [...]

In reply to Gail Tverberg. whether seamen stuck on ships, or lack of tourists or millions without jo [...]

I was born in 1947. Shortly several billion young people, around the world, will realise that my gen [...]

In reply to Bachs_bitch. Good points. If we have a debt jubilee here, only those who already are in [...]

In reply to Ken Barrows. Back to 10 mpb per day. Recovering from Laura, I guess. [...]

First of all, thanks for the recent back-to-back articles Steve. Always nice to pop in here and know [...]

@sp gp https://www.artberman.com/2020/09/03/stop-expecting-oil-and-the-economy-to-recover/ [...]

RE Economics

Going Cashless

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Simplifying the Final Countdown

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Bond Market Collapse and the Banning of Cash

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Do Central Bankers Recognize there is NO GROWTH?

Discuss this article @ the ECONOMICS TABLE inside the...

Singularity of the Dollar

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Kurrency Kollapse: To Print or Not To Print?

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SWISSIE CAPITULATION!

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Of Heat Sinks & Debt Sinks: A Thermodynamic View of Money

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Merry Doomy Christmas

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Peak Customers: The Final Liquidation Sale

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Collapse Fiction

Useful Links

Technical Journals

The anticipated climate change during the next decades is posing crucial challenges to ecosystems. I [...]

Since the impacts of climate change will last for many years, adaptation to this phenomenon should b [...]

Understanding the variability of rainfall is important for sustaining rain-dependent agriculture and [...]

The Kunduz River is one of the main tributaries of the Amu Darya Basin in North Afghanistan. Many co [...]