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Responding to Collapse, Part 5: finding a small town

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Published on The Easiest Person to Fool on December 28, 2018

 

 

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In my last post I started talking about moving from the city to a small town as a way to make adapting to collapse easier, and I listed a number of criteria for choosing a small town. Today we'll be looking at some of those criteria in greater detail.

As before, credit goes to Don Hayward, Joe Clarkson from the comment section of this blog, and, new this time, to Category 5, from the Dark Green Mountain blog and the Doomstead Diner.

Looking back on the criteria I laid out last time, I can see that I should have divided them into two sections— picking a town where you can live while BAU is still working and then picking a town that will also be livable after BAU is no longer capable of supporting us. For the next while we will find ourselves living in two worlds—trying to make enough of a success of life in BAU so that we can afford to disentangle ourselves from BAU and get something started to replace it.

So, to get started, just exactly how far from the city do you need to be? I am very much a "shades of gray" guy, so my answer will be in terms of a spectrum rather than a single hard number. Here in rural Canada we tend to talk about distances in terms of driving time. I would guess that an hour amounts to around 50 miles. I live about three hours from Toronto, around two hours from many other cities to the south and east of here, and about an hour and a quarter from the small city to the northeast. I am not considering a move to get farther away, so if pressed for a definite answer I would say somewhere between an hour and two hours is a sufficient minimum distance. To be cautious, err on the long end of that range, and of course I'm not saying you shouldn't be more than 2 hours from a city. On the other hand, you may find you need to be close to a city for a while yet and accordingly place yourself at the lower end of the range, while remaining aware of the greater risk that probably entails.

Many cities are quite close together and there are whole areas where there is nowhere far enough from a city to meet my distance criteria. Moving away from your current city but toward another one clearly won't help.

By the time collapse has progressed far enough for this distance to be a real concern, transportation fuels will be in short supply, either because of genuine shortages, market malfunctions or supply chain breakdowns. Initially they will be "rationed by price" to the point where they are not affordable for most of us, or they will be outright rationed by the authorities. Then there will be intermittent interruptions in the supply. And at some point beyond that these fuels will not be available at any price. So the distance from the city would have to be covered on foot or bicycle, making it, in effect, considerably longer. That two hour drive would be a multi-day walk for most people, if they could manage to do it at all.

There are several reasons for wanting to be this far away:

  • in the city there are limited opportunities for adaptation in the face of infrastructure and supply chain failures—the resources you need are just not available locally. You need to be far enough away from population centres that the local resources can support the local population
  • there will be social unrest and civil disobedience (much of it justified) in many cities—violence that you don't want to get caught up in
  • as conditions worsen in the cities, there will occasionally be waves of refugees fleeing from them. I think the aim of people in small towns like mine should to help those refugees, but if there are too many we won't be able to help them and things will go badly for both them and us. So, we want to be far enough away that the distance acts as a filter and reduces their numbers to something manageable.
  • it seems likely that there will epidemics from time to time, especially as public health systems start to fall apart. It would be good to have some distance between you and any city that is being ravaged by an epidemic. A sort of geographical quarantine.

But the main reason you're moving to a small town is for what's there, not what you are trying to get away from.

What size of small town you should be looking for?

Zero is the wrong answer. As Douglas Ruskhoff says, "being human is a team sport." You can't accomplish much, especially in the long term, as an isolated individual or family. Even a group of a few families will find themselves struggling just to survive. In my opinion, remote, isolated survivalist compounds or even lifeboat eco-villages have little future. More people means a greater range of skills and talents and more redundancy in the support systems you need to set up.

I don't think there is much hope of retreating to the wilderness and surviving by hunting and gathering, either. There is very little wilderness left and what is left is not so completely untouched as it once was. The effect of this is to make hunting and gathering more difficult and it is, in any case, a skilled and demanding lifestyle, especially if you weren't born to it. Learning those skills, when you aren't living in a group where most people already have them, would be very challenging.

What you really need is a community that is viable now, as part of "Business as Usual", and which can adapt as collapse progresses and then still be viable under post collapse conditions.

Now I will agree that for some activities a lone individual is best, and for others 2 to 5 people is ideal. But these are specific, short duration jobs within a larger context.

At this point some of you are probably thinking of "Dunbar's number"—"the cognitive limit to the number of people with whom one can maintain stable social relationships—relationships in which an individual knows who each person is and how each person relates to every other person." That number is somewhere between 100 and 250 people, and there is definitely something to the idea. But I would say that this is more like the lower limit on size for a viable community. Larger communities are made up of smaller, overlapping circles of people who know each other in the "Dunbar" sense.

The upper limit on the size of a viable community is determined by how many people the surrounding geography can support without fossil fuel powered agriculture and shipping. Typically that would be a few thousand people, possibly as many as 10 to 20 thousand in ideal circumstances. A counter example would be Edo (now Tokyo) during the days of the shoguns, which grew to over one million people without the benefit of fossil fuels or modern technology. But these days climate change is reducing the carrying capacity of almost every area, and you must remember that the size of small towns will increase first as former locals return from the city and then again as refugees arrive. Set your upper limit around ten thousand to begin with.

So, distance and size will help narrow things down somewhat, as will the climate change based criteria I mentioned previously. But still, which town to pick?

Probably the most important consideration is connections in the community. If you grew up in a small town, if you still have family there, or even close friends, then that town has to be very high on your list of places to consider. If you have limited resources, those connections may prove vital in making your move possible.

Next, I think you have to be looking for a place where you can find accommodations and earn a living in the short run while "BAU" is still in operation. As Category 5 suggests, once you have found a likely looking small town, it would be a good idea to live there in rental accommodation for a year or two in order to get to know the place better. It takes more than a few brief visits to really size a place up and figure out how to fit in. And for those with limited resources, renting on an ongoing basis may in any case be a better alternative than taking on a mortgage you can't really cope with. In today's uncertain market, it's wise let your landlord take the risk of investing in real estate.

Financial considerations also have to be very high on your list of priorities. Eddie at the Doomstead Diner has written an excellent article entitled "Some Inconvenient Truths About Collapse Economics". He challenges the idea, common among kollapsniks, that the only things worth investing in are preparations, gold, silver and farmland. At some point in the future that may be true, but you have to have a plan for surviving in the meantime, and that will likely involve taking part in an economy that you know has a limited shelf life—even putting some of you money into conventional BAU style investments in the short term.

I'll be going into more detail on this in a future post, but some degree of preparation is a very good idea and you should spend some money on it, but not every cent you have. It is also good to have some ordinary cash on hand, and even some actual physical gold and/or silver carefully hidden where you can get at it if you need it. Farm land, while it is tempting, is currently very expensive per acre and since it comes in large chunks, likely to be out of reach for most people. Remote farms may cost less, but leave you too isolated.

When I talk about "collapse progressing", it may sound like I am envisaging a uniform run downhill, but my regular readers will know this is not the case. Collapse progresses unevenly, unsteadily and unequally. This is good news if you are thinking of moving, because there is likely some place where things are better than where you are now, especially if you are flexible and willing to adapt to a new situation. There are "eddies" in the stream of collapse, places where things occasionally stand still or even improve somewhat for a while.

I think this is very true of both real estate and employment considerations.

A great many cities are experiencing real estate bubbles today. Accommodation costs a lot to buy or rent there and the situation is only getting worse. This is less about the demand for housing and more about malfunctioning markets and people with money trying to find somewhere to invest it at a good rate of return. But since there is no real demand to justify those real estate prices they will eventually decline, and decline precipitously. The trick is to get out with your assets intact before that bubble bursts.

Aside from high prices caused by investment bubbles, there is also often a clear relationship between distance from good employment opportunities and the cost of housing. Housing in small towns away from big employment centers (which are almost always in cities) is very likely to be less expensive. So if you don't mind a longer commute, if you can telecommute, or if you can make the big leap of finding work away from the city, you will likely find housing that costs less.

But I've read that in the United States towns with more affordable housing also offer jobs that pay less, so moving there may not solve your problems. It seems to me that this will be determined by what level the minimum wage is pegged at, if there is one. So states (provinces here in Canada) with a decent minimum wage would be a good place to look for work.

Handymen and skilled tradesmen are most always in demand, as are skilled professionals. Even small towns have a few relatively unskilled jobs in service industries and there will be seasonal work in agriculture and tourism. One of the few justifiable reasons for delaying this move is to find a job to support you in your new location. Just don't make this an excuse for not moving.

I live in a small town that is in an economic eddy, being a bedroom community for a nearby nuclear plant which employs several thousand people. (It's one of the largest nuclear generating developments in the world.) This is "energy sprawl", where lower EROEI energy sources require a lot more infrastructure, and just happen to create jobs building, operating and maintaining that infrastructure in the process. So such opportunities do exist.

How you approach these opportunities will largely depend on your own personal circumstances—your socioeconomic class, in particular.

The Upper Class

If you are a member of the upper class—the "one percent"—you can do as you please, at least for the moment. But in a really serious financial crash, your wealth is likely to evaporate, and you probably don't have the sort of skills that will be needed in the aftermath. For all I care, you can jump out a fortieth floor window and end it all quickly. But if you hope to survive, you'd better be prepared to fit in and keep a low profile, among people who are likely to be resentful of the rich, who they see (correctly) as responsible for the mess the world is in.

No doubt though, you will be focusing on ways of keeping BAU rolling along and maintaining your status within it. Good luck with that.

The Middle Class

Indeed, a willingness to let go of BAU should probably be seen as the distinguishing difference between the middle and upper classes. Though currently, especially in the U.S., many middle class folk mistakenly think that if they support policies that benefit the upper class they will themselves eventually be able to ascend into that class. Of course, the upper class does everything they can to encourage that attitude, with no intention at all of benefitting anyone but themselves.

There are two traps here: one is thinking that you have much chance of joining the upper class and the other is thinking that it would do you any good if you did. If you're currently in the middle class, you likely have enough resources to respond to collapse in a fairly effective fashion. Don't miss the opportunity.

If you already own a home or at least have quite a bit of equity in it, you may well be able to sell it, buy a house in a small town and still have enough cash left over to retire early and invest in preparations. You should do this soon, before the real estate bubble bursts. If you are already retired, you can probably do the same thing and end up in better financial shape than if you'd stayed in the city.

If you are middle class but younger, you are likely working at a job that is keeping you in that class, and this will make the proposition of leaving the city much harder to consider seriously. But perhaps you can commute or even telecommute from a small town. Or find a small town with a local industry that needs people with your skills. If you are renting or have only recently bought a home and don't yet have much equity built up in it, then renting in a small town may cost you substantially less than your current rent or mortgage payments. Don't make the mistake of believing that real estate prices will keep going up forever.

All middle class people should look ahead to days of further economic contraction and consider taking a "deliberate descent" approach to life. That is, learn to live with less, so that when that is all you have left, it won't be so much of a shock. As John Michael Greer has said, "collapse now and avoid the rush." And of course, living frugally will make your resources last longer.

The Lower Class

It can be difficult to see where the line should be drawn between the middle and lower classes, so I am going to simplify things and lump everyone who has a somewhat decent, secure job with benefits, and who owns a home or is renting while saving with a reasonable expectation of being able to buy a home in the foreseeable future, into the middle class. We'll leave other assets and debts as an issue for another day.

Below that is the lower class which for the purposes of this discussion includes, at the upper end, those who have a job and can afford accommodation and a vehicle to drive to work, down through those who have to choose between accommodation and a vehicle, and may end up working but living in a vehicle, through to those who are jobless and homeless. The majority of these people, if they have a job, are members of the "precariat". That is, their job is not in any way secure and does not pay enough to make the rest of their lives secure either. If you are a member of the precariat, you don't need to be told about "deliberate descent"—you're already living it, though I would guess not willingly.

No doubt it is somewhat presumptuous on my part, as a relatively "fat cat" middle class guy, to offer advice to lower class people. Though I did grow up on a small family farm in a family that was just barely middle class at best. And my kids have certainly spent their share (and more) of time in the precariat. But I don't really have a lot of experience at being poor and when I have problems, I am accustomed to using money to solve them. For people in the lower class that’s rarely an option.

Nonetheless, I have a few things to say that I hope may be of help. Lower class people are, I think, farther along the collapse road than the rest of us, and may well be less bothered as things fall further apart—it will all just be more of the same shit to them. Psychologically they are quite resilient but, materially speaking, they have very limited resources to deal with specific problems as they arise, and in that sense they will be harder hit. So, for lower class people, the need to get out of the cities is no less, but the challenge of doing so may be greater.

Many of the problems faced by people in the lower class come from the degree of isolation in which they find themselves. I think there are great possibilities for small groups of disadvantaged people to get together and share housing, food, transportation and so forth. Sadly, we have largely forgotten the skills for getting along in such circumstances, or have been convinced by those who are in power that such skills are worthless. The neo-liberal approach of using money to mediate all relationships between people leaves us at the mercy of those who control the money and that of course is exactly what they want. I think there is a lot of potential in various sorts of co-operative ventures to break out of this trap.

I've been doing a bit of reading at Sharable, a website that "aims to empower people to share for a more resilient, equitable, and joyful world". This is essentially what I am talking about here. It would certainly be a move in the direction of the adaptations we'll have to make down the road in order to succeed in small isolated communities.

Well, I think that's enough for now. Next time we'll continue with this, looking closer at criteria for choosing a small town as place to live as BAU goes further downhill and we can no longer rely on it completely for the necessities of life

Responding to Collapse, Part 4: getting out of the city

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Published on The Easiest Person to Fool November 21, 2018

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Responding to Collapse, Part 4: getting out of the city

 
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In my last post I talked about the economic contraction that is being caused by declining surplus energy and the collapse which that contraction, combined with the effects of climate change (covered in the post before that), is likely to cause.

My conclusion was that we will have a good bit of adapting to do and it will be much easier to do in rural areas than in the cities. So I advised that, if you currently live in a city, you should be considering a move to the country. But I didn't go into much detail about this moving and adapting and now I intend to remedy that. I should give credit in advance to my friend Don Hayward for sharing with me his thoughts on the subject, and taking part in many good conversations that have allowed me to clarify my own thoughts. Similar credit is due to "Joe", from the comments section of this blog.

It will no doubt be obvious to my readers that I am figuring this out as I go along. Whether I've got it right is, of course, open to discussion. I also reserve the right to change my mind as I learn more.

In a post some months ago I expressed the opinion that the reduction in our impact on the planet following a major financial crash would be mainly a matter of drastically reduced levels of consumption, particularly in the developed world, and that there would not be a major reduction in population at that point. After considerable reflection, I have to say that especially in large cities, the combination of climate change and supply chain interruption following a global financial crash will lead to greater loss of life than I had previously thought. Of course it is hard to predict, but I think this will lead to an actual reduction in population, perhaps by a few billion people.

I still believe that planetary resources will still be sufficient to fuel some sort of recovery as we rebuild the virtual organizational systems lost in the financial crash on a smaller, more local scale. But if we don't learn to live sustainably, that recovery will see us plowing through the remaining resources and there will be another crash, an agricultural one, mainly effecting the more populous areas and reducing the population to a few hundred million. One thing I am pretty sure of is that the predictions of a world population of 9 to 10 billion later this century are not going to pan out.

I am still expecting a slow and irregular collapse. Even without the localized catastrophes that will no doubt happen, the contracting economy will lead to a slow crumbling of industrial civilization.

But now let's return to our scheduled programming, so to speak. The question for today is what sort of adapting am I talking about and why do I think it will be easier in well chosen rural areas?

For most people the hardest thing about collapse is facing up to the end of progress. Adapting to this big change in how we think about the world, and our lives in it, is challenging. But it can be done, and most of the effort takes place inside your head. So it doesn't much matter where you are for that part of the process. It does help if you have a supportive family and community around you, though of course that is true of anything you try to do.

But once you've decided that life is still worth living, you're faced with the many practical issues of staying alive in a collapsing world.

For most of us, staying alive means taking part in the economy—having a job or collecting a pension or the proceeds of investments, so as to have the money needed to procure the necessities of life. Since the economy is contracting fewer jobs are available and many people are unemployed, or "under employed" at best. Pension and investments are under some stress but not doing so badly, though a financial crash would certainly change that.

At the same time, in many locales, housing is getting more expensive and the ranks of the homeless are swelling with the unemployed and even the working poor, many of whom are living out of their vehicles.

That contracting economy also means that less money is being spent on maintaining infrastructure, which is gradually decaying as time passes. And in an effort to keep the economy growing, regulations intended to protect the environment are being repealed and efforts to cut back on the release of greenhouse gases and reduce climate change are being abandoned.

This means that what were once minor inconveniences will grow into catastrophes. Here is a brief and probably not complete list of such events:

  • The degradation of the natural environment due the load placed on it by the human race, mainly manifesting as climate change, ocean acidification and various other pollution related problems, as well as degradation of the environment due to resource use and habitat destruction.
  • Failures of the physical built human environment, mainly infrastructure— water supplies, the power grid, and transportation and communication infrastructure.
  • Failures of the virtual built human environment—economic contraction, financial crashes, failure of the credit systems which make commercial enterprises possible and have largely replaced cash for individuals, breakdown of governments as economic contraction starves them of financial resources, degradation of the fabric of our communities, social unrest, and war.
  • In some sense food is at the intersection of our natural, built and virtual environments, and as such, we can expect there to be problems in production, processing and distribution of food. These will lead to famines in many cases.
  • It also seems likely that there will be an increase in severe epidemics. I am not as well informed as I'd like to be about this, but it seems that hunger, poor sanitation and crowding in slums and refugee camps will be contributing factors.

So, we are going to find ourselves poorer and adapting to getting by with less. Less energy, less stuff and less stimulation, to borrow a phrase from John Michael Greer. This will mean a significant reduction in our level of comfort and convenience but given the high level of consumption in the developed world, there is quite a bit of room for this sort of adaptation. I think there is good reason to believe that many of us will survive, find a livelihood and maintain a sense of self worth even with drastically reduced consumption of energy and material goods.

When it comes right down to it, the bare necessities are energy, food and water. All three are going to be in short supply as collapse progresses over the next few decades, and those shortages will frequently lead to crises. The term "necessities" implies you can't adapt to such shortages, at least not in the long term. All you can do is try to be where they are less severe.

Cities rely on supplies shipped in from other locations. Before fossil fuels, the largest cities had populations of one million or a little more, and that only in ideal circumstances where water transportation made it possible to bring food in from a large enough surrounding area to feed that many people. Cities today rely on complex infrastructure powered by fossil fuels to supply their inhabitants. They will be in deep trouble as collapse progresses.

On the other hand there are many rural locations where:

  • adequate energy can be had locally in the form of firewood, which can be cut by hand if necessary
  • potable water can be accessed from already existing wells that can be converted to hand or wind driven pumps, or surface water that can be used with fairly simple filtration or treatment
  • sufficient food for the local population can be grown on existing farmland within walking distance of town, without fossil fuel powered machinery
  • the population is small enough that organizing such alternate arrangements will not be impossibly difficult to do when it becomes necessary.

This is the essence of why I think we will have a better time adapting to collapse in rural areas. Yes, it will require some degree of advance preparation and a willingness to accept a less affluent lifestyle, but it is all quite doable. As always, what I am recommending here as a viable response to collapse will only work if relatively few people follow my advice. But somehow, I don't think that will be a problem.

The standard trope in discussions of collapse and in collapse fiction is that the most extreme sort of catastrophe happens very quickly, widely and early in the process of collapse. Things break down pretty much completely over a period of days, and people are left thirsty, hungry and freezing in the dark. The sort of perfect storm it would require to have all this happen at once all across even one city, much less a whole country or continent is pretty unlikely in my opinion, though it does make for exciting stories.

After this fast and drastic collapse it is assumed that there will be roving hordes of hungry people leaving the cities to engage in looting and other violence in the countryside, leaving a trail of destruction behind them. But we should bear in mind that, even in the unlikely event of such a collapse, people can't walk far on empty stomachs, especially when they aren't used to walking much at all. Thirst and hunger are debilitating and in a fast collapse most people, caught unawares and unprepared, would not think to head out until they were already in pretty desperate shape. If this really were to happen, what you would end up with is piles of corpses along the sides of the roads, gradually thinning out as you get farther out of the city.

But of course, that is not the way I see it happening at all. Long before things have broken down completely, economic contraction will leave fewer and fewer people with jobs to keep them in the city. At the same time, infrastructure and supply chain failures will become more frequent and more lengthy, providing the nudge that people need to get them moving. First there will first be a trickle of people leaving the cities, mainly those who left the country to find jobs in the city in the recent past. Later on, there will be a wave of refugees leaving the cities following each new disaster.

While governments still have the wherewithall to do so, many of these people will end up in refugee camps. But as economic contraction eventually starves governments to the point where they simply don't have resources to do much of anything, those camps will stop being serviced and people will be left to their own devices, both in the cities and in the camps. And by the time things have broken down completely, there will only be a few people left in the cities.

The actual facts about how people respond to disasters paints a very different picture from what most people expect. There is a deep human need to come together in crises to take care of each other. And contrary to the horrific picture of typical reactions painted by the "disaster mythology" (especially points 2, 3 and 4 in that article), in fact communities often do come together to help themselves in the most extraordinarily positive ways. This works best in communities where people already know each other and where things haven't broken down to the point where there are hostile factions that are basically at war. And of course, it requires at least a minimum of the resources needed to keep people alive (energy, food, water). These resources are far more likely to be available outside the cities.

It has also been suggested, that when the financial sector crashes, the commercial sector must fall apart too for lack of working credit arrangements, and with catastrophic results. I don't agree—even a worldwide financial collapse will hit some areas harder than others and will proceed, as I have said before, unevenly, unsteadily and unequally.p>

From personal experience in agriculture and the power industry I would predict that the people at the workface in critical industries will simply refuse to set down their tools when the results would be disastrous, just because banks are no longer doing their part. Alternate credit arrangements will be set up, involving handshakes, records kept on paper and promises to straighten it all out after the dust settles, rather than let people freeze and starve in the dark if there is any alternative at all.

Make no mistake, I don't mean to suggest that "Business as Usual" can continue on after a major financial collapse using jerry rigged credit arrangements. But there is a vast distance between BAU in all its glory and complete collapse where everything quits working. There is a lot of inertia in the systems which we most need to keep working: the power grid, industrial agriculture, the various systems by which fuels, especially diesel fuel, are distributed, and transportation and communication. This sort of thing will mitigate to a degree situations that would otherwise be thoroughly catastrophic.

So, anyway, you're going to move to the country, to position yourself where surviving collapse is the more doable.

The first thing to decide is when you should make this move. Many people, who live in sheltered circumstances, don't realize that collapse has already been happening for quite a while and that parts of many cities are already nicely along their way in the process of collapse. And it appears that we are in for another financial crash that will make things much worse. You want to leave well before your personal resources have become so depleted that you can't make the move successfully.

So this is more urgent than you might think. Still, I'm not suggesting you leave in a panic today. But do start preparing right away, and leave as soon as you can do so in an orderly fashion with a workable destination already arranged. You don't want to end up in one of those camps. Nor do you want to end up as one of a large wave of refugees arriving in a rural community, especially if that community is unprepared for you arrival, as will likely be the case.

This is more than just a matter of getting out of the cities before things get really miserable there. It's going to take some time to get set up where you are going and to become integrated into your new community. At the moment, people are still leaving small rural towns to find work in the city, but the day will come when that flow reverses. You want to be seen as a relatively old hand in your small town when that happens.

One of the challenges of the slow and uneven collapse that I am predicting, and which has indeed been going on for several decades now, is that there is never going to be a day when you can say at bedtime, "yep, industrial civilization collapsed today." Looking back years later it will be more obvious that collapse has been happening, but still hard to pin down a specific date for when it happened, even in any one location.

If you are at ground zero for one of those catastrophes I listed, there will usually be somewhere else where things are better and you can go as a refugee. But waiting to be a refugee, or worse yet a victim of catastrophe, is exactly what I recommend you don't do. As I have said before, the only real choice you have is to be part of the influx of refugees or to be among of those who are welcoming that influx. I would say that the latter role is very much preferable. A timely move, before things get serious, can put you on the right side of things.

But where to go? In the second post in this series I identified a number of criteria for selecting a new location, based on avoiding the worst effects of climate change:

  • well above sea level
  • not at the top of a bluff overlooking the sea that is being gradually eroded away
  • not situated so as to take the full brunt of tropical storms
  • not in the floodplain of a river
  • not in a desert or semi-desert that relies on water from fossil aquifers that are being depleted faster than they are replenished or rivers fed by melt water from disappearing glaciers
  • not subject to hot season temperatures or heat waves that are not survivable if the power goes out or you can't afford air conditioning
  • receiving enough rain to allow for agriculture largely without irrigation
  • with a growing season and soil that will support agriculture

Now based on the need to get out of the city and find a location where adapting to post-industrial collapse conditions will be easier, we can add a few more criteria:

  • far enough from the city to avoid the worst of what's going to happen there and so that the waves of refugees will be largely spent and small in number when they arrive at your location, and to be isolated from epidemics as well
  • in a small town (a few hundred to a few thousand people) or on a farm near such a town
  • where the surrounding agricultural area can support the local population using low tech, sustainable agricultural methods
  • where there is still some standing timber, mainly for firewood, but also for all the many other things that can be done with wood
  • where the ground water or surface water is potable or can be made that way with simple filtration
  • where you have connections in the community, or where you can make those connections with some work hard
  • where you can initially earn a living or set up to live off your savings/investments/pension

There are a few things that such a community needs to be prepared to do and you should work toward being in a position to encourage that preparation. At some point the trucks are going to stop running. You'll need to get by on local resources.

  • Many small towns have a water treatment plant that relies on chemicals that are shipped in on a "just in time" basis. A stockpile of those chemicals and/or a plan for moving to an alternate source of potable water will be critical.
  • You will need a plan to feed the populace when the grocery store shelves are empty, using local farm products, so that people don't panic and start helping themselves to, and in the process destroying, the stock and crops on local farms.
  • It will only be a matter of time until your connection to the power grid fails. Firewood, wood burning stoves, lanterns and so forth will be in short supply and you'll want to be prepared.
  • While perhaps not quite so urgent, some thought should be given to how welcome refugees. This is on humanitarian grounds, if nothing else. A community that is willing to drive refugees away at gun point, will eventually be willing to treat its own member just as harshly. Your remote location should ensure you won't be overrun, that a manageable number of refugees show up. Your aim should be to treat these folks as well as you treat yourselves and, without abusing them, to turn them into a resource rather than a burden. You will be switching over to a lifestyle where people are needed to replace automation, so that shouldn't be too hard.

It would be excellent if the existing authorities were aware of what's coming and had plans to deal with it, but I should think that is pretty unlikely in most small towns. Better to get to know some of the locals, particularly farmers, well enough to be able to get together with them and organize what's needed when the time comes. If you set a good enough example, others will follow.

More on that, and other practical considerations, next time.

 

Responding to collapse, Part 3: Declining Surplus Energy

 

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Published on The Easiest Person to Fool on October 26, 2018

 
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In my last post I talked about responding to changes in our "natural" environment caused by climate change. Today I'll be talking about responding to changes in the human part of our environment, the part that we have created, both the "built" physical environment and the social environment.

We are social animals and also technological (tool using) animals. For the last few million years our ancestors evolved to live in groups and use technology. In one way of looking at it, our techniques for working together in groups are an organizational technology that greatly amplifies what we could do alone.

At any rate, for a long time now we have been dependent on technology—we certainly aren't much good alone, naked and empty handed. Technology needs energy to make it work and for most of our history that energy has come from food via muscles (human or animal), biomass (mainly firewood), and to a lesser extent wind, moving water and the sun. But over the last couple of centuries we've added cheap and abundant fossil fuels to that mix of energy sources. We've gradually become dependent on a global network of complex technology powered by those fuels for the very necessities of life.

This is a cause for concern—what if energy were to become more expensive and/or less abundant? As it certainly seems likely to do in the near future. Well, in short, the way we live would have to change, becoming less energy intensive, and it seems very likely that the planet would no longer be able to support so very many of us. It can barely support the number of us that are alive today, so this would mean a significant dieoff of the human population. And the climate change related problems we talked about last time will only make this worse.

Of course this is nothing new. I've discussed the ideas of carrying capacity, overshoot and dieoff many times over the years on this blog. But the devil, as they say, is in the details and if we are to discuss strategies for living through collapse, we need to look closely at those details.

The economy is a major and critically important part of the modern human environment and one that is fueled by energy, so I see depletion of fossil fuel energy resources (often referred to as Peak Oil) as the major challenge as far as the human built environment goes. To really understand that challenge, it is important to understand a bit about "biophysical" or "surplus energy" economics. Have a look at those links for more detail, but I'll try to explain in brief.

First, why is energy so critical to the functioning of the economy? Modern industrial processes are significantly more productive than the cottage industry of just a few hundred years ago, and it requires a lot of energy to make them work. The energy that drives these processes is worth far more in terms of the goods it produces than the price that industry pays for it. As such, energy is far more than just another commodity. And it must be abundant and cheap, if industry is to be profitable and the economy is to continue growing.

Second, why are fossil fuels such an important source of energy? Basically because they have been abundant, cheap and convenient to use. When I say cheap, I am not just talking about the cost in dollars, but in the amount of energy it takes to access fossil fuel energy. This is defined as the "Energy Returned on Energy Invested" (EROEI). Early in the twentieth century, when oil came into prominence as an energy source, it took just one barrel of oil to get 100 barrels of oil out of the ground—the EROEI was 100. The "surplus energy" was over 99% and this was a tremendous stimulus for economic growth.

Since we have developed fossil fuel resources on a "lowest hanging fruit" basis, the easiest to access, highest quality sources have gradually been used up. Modern oil discoveries rarely have an EROEI better than 10. Unconventional sources of oil, such as fracking and tar sands, have even lower EROEIs. And sadly, the renewable energy sources that are being considered to replace fossil fuels also have very low EROEIs. Even lower if you add in the energy storage required if intermittent sources like wind and solar are to be put into practical use.

The important thing to understand here is that there is a very clear link between the average EROEI of a country's energy sources and the strength of its economy. As that average EROEI goes down, industry starts to become less and less profitable. Below 15 this gets very serious—it becomes difficult to raise capital to start new endeavours and existing businesses find it hard to stay profitable. As the average EROEI decreases further, infrastructure replacement and even routine maintenance of infrastructure becomes difficult to fund. Industrial civilization starts to crumble and the kinds of heroic efforts it would take to save it are beyond its capabilities.

Conventional economists are blind to this and assume that as one energy source runs out, demand will successfully fuel efforts to find a substitute. Without a clear understanding of EROEI, evaluating the merits of such substitutes can be very difficult. Already we are seeing "energy sprawl" as wind turbines and solar panels are springing up everywhere, but with such low EROEIs that they are actually lowering the average EROEIs of the systems they are being added to.

Some people argue that there are huge reserves of unconventional fossil fuels, enough to last for centuries, "so where's the problem?" The problem is that these unconventional hydrocarbons have such low EROEIs that they are not a solution—pursuing them just makes things worse.

The same is true of nuclear fission—lots of fuel, but such a low EROEI (around 9) that it's no help. If at some point we manage to design practical fusion reactors, it is pretty clear that they will be so complex that their EROEI will be even lower than fission reactors, making the abundance of fusion fuel a moot point.

The essence of our situation here in the early twenty first century is that the problem of declining surplus energy doesn't have a solution. Of course, in addition to that underlying and insoluble problem, there are lots of things wrong with our social/governmental/economic systems that make the situation even worse. Definitely it would help to fix these problems, but it is important to keep in mind that, even if they were all fixed, everything wouldn't suddenly be OK—the main problem would still exist. And because of declining surplus energy, it's going to get harder and harder to fix anything.

So, what to do? Well, we just have to adapt to these new realities. Here I am going to borrow some ideas from Prof. Jem Bendell's essay "Deep Adaptation", particularly his three Rs.

Bendell is mainly concerned with climate change and after doing a review of the current findings of climate science, he concludes that "collapse is inevitable, catastrophe is likely and extinction is possible". Considering declining surplus energy and the resulting economic contraction as well as climate change leads me to the same conclusions, maybe more so. Even without any catastrophic events, the slow collapse of industrial civilization, brought on by the falling EROEI of its energy sources, is surely an inevitability. And we should be planning our response to such a slow and tedious collapse, which will require a great deal of adaptation to our new circumstances.

There are many forms of denial that people fall into when faced with the certainly of collapse. Not surprisingly, most people see their continued livelihood and their feelings of self-worth as being dependent on the possibility of ongoing material progress. This is the "religion of progress" which is so central to our modern society. Collapse, of course, means the end of material of progress, and immersion in a complex predicament beyond our control. Admitting this is even possible has, at least initially, a crushing effect on most people.

But, for those who have overcome their denial, Bendell's three Rs hold the key to successful adaptation.

First comes "Resilience". This means having the personal resources—emotional toughness to keep going in the face of collapse and the willingness to adapt to conditions that we have been taught are simply unacceptable (involving a significant reduction in our level of comfort and convenience). I am currently reading Resilience, by Rick Hanson, which gives an abundance of advice on achieving a greater degree of personal, internal resilience.

The alternative is to continue with denial, or having accepted the reality of the situation, give up and abandon any attempt to adapt. To do so is a great pity, since the situation is potentially survivable. Not to minimize the rigors of collapse, especially of the kind of dieoff we will eventually be facing, but there is good reason to think that some of us will survive, find a livelihood and maintain a sense of self worth even with drastically reduced consumption of energy and material goods.

In order to be among those who survive, resilience also involves having accumulated some physical and social resources which will tide us through when the system that currently supports us falls apart, allowing us to hang in there long enough so that we have a chance to adapt. These are the things we will decide we do really need to keep in order to meet our basic needs—safety, satisfaction and connection. Our ancestors did this for millions of years without the help of industrial civilization, so I think there is some chance we can do so as well.

Next comes "Relinquishment". This means deciding what we need to let go of in order to not make matters worse. Clearly, many aspects of modern industrial society cannot be sustained and will have to be abandoned.

Lastly comes "Restoration". This means deciding what can we bring back to help us with the coming difficulties and tragedies. In building our modern world there is much that we have set aside, old things that can brought back and put to good use in our low energy future.

I could spend one or more posts looking at the details of these three Rs, and it is likely that I will. I think there are many different approaches that should be tried, and of those, quite a few that will be successful to some degree. The main thing is that people actually give it a try.

So, we started out to have a closer look at the details of collapse in order to gain a better perspective on strategies for living through collapse and after it. I think an understanding of surplus energy's role in economics and the three Rs outlined above is a good start. But to delve deeper into this, I think we need to take a look at mankind's disturbing tendency to group together in ever large settlements. We tend to focus on the advantages of living in cities and to ignore what it takes to make a city work, how it can stop and what might happen when it does.

Cities rely on long supply lines and extensive infrastructure to supply their inhabitants. Our failure to maintain that infrastructure and its resulting decay is already leading to intermittent outages of services for which there is no local alternative. At some point the line between outage and catastrophe blurs and not long after that it becomes unavoidably clear that collapse is really happening.

Now I am a country boy, so perhaps I am biased, but it is my contention that cities are going to be very hard hit by collapse, even the sort of slow collapse that I am talking about. I think that escaping to a more rural area before collapse progresses much further would be a good idea.

The key question, though, is why do I think things will be any better in rural areas?

There is no doubt in my mind that the crises related to supplies of energy, water and food (the basic necessities), which will no doubt occur as industrial civilization crumbles, will effect rural areas just as much as urban ones. People in rural areas are just as much a part of "Business As Usual" as people in the city, just as dependent on long supply chains and complex systems. And when there are disasters, relief efforts are likely to be focused on large population centres, ignoring the rural areas just on the basis of what will help the most people with the least effort.

But we are already seeing the US federal government tapering back on relief efforts in response to hurricanes and passing the responsibility off to the private sector. There is little reason to believe they will do any better. And not far down the road local communities, be they urban or rural, will find themselves essentially on their own when the going gets tough.

The good news is that there are many rural areas where:

  • adequate energy can be had locally in the form of firewood which can be cut by hand
  • potable water can be accessed from already existing wells that can be converted to hand or wind driven pumps and surface water that can be used with fairly simple filtration or treatment
  • sufficient food for the local population can be grown on existing farmland within walking distance of town, without fossil fuel powered machinery

Sure, it will require some degree of advance preparation and a willingness to adapt our lifestyles, but it is all quite doable. This is not the case in the city, where local resources for self-sufficient living are simply not available.

When I speak of rural areas, let me make it clear that I am talking about small towns of a few hundred to a few thousand people, surrounded by farmland, not isolated farmsteads. It will take more than a single family or two to make this work. Indeed isolation is one of the most debilitating conditions that you can find yourself in as a human being.

During the last few decades neoliberalism, in its endless search for profit, has done its best to monetize every human relationship and to isolate individuals from each other. The declining economy is leading to increased under employment and unemployment, poverty and homelessness all of which stresses our communities and isolates their individual members. And civil unrest is growing as inequality between the upper and lower classes increases and the degree to which the lower classes are being abandoned becomes more obvious.

But many small towns are a long way behind cities on that curve and their communities are still intact enough that co-operation is possible when it becomes clear what is required. And during a slow collapse it will gradually become more clear what the situation really is. To enough people, at least, that those advance preparations will get made. Collapse aware people have an important role to play there.

For a long time now, young people have been moving from areas like the one where I live to the cities in order to get an education and find work. The day will come (as I understand it already has as conditions have worsened in Greece) when the situation in the cities will be so bad, they will start to come home to take advantage of the somewhat better situation in the country. They will be able to pitch in and help their families adapt to collapse.

So far I have been talking about adapting during a slow and steady collapse. But of course catastrophic events can by no means be ruled out. In particular, our financial systems are largely virtual and as such are subject to extremely fast collapse when they fail. They will be the first to go, and that will have a negative effect on everything else.

It appears to me that most real economic growth ended in the 1990s and since then growth has largely taken the form of financial bubbles, fueled by debt instead of energy. Those who have money are desperate to find somewhere to invest it at a good return, but profitable, growing businesses are becoming rare, so instead they invest in ever more speculative endeavours. That's fine as long as the price is going up, but every such bubble is looking for a pin to burst it. A few months ago I said that we can expect a financial crash of greater magnitude than 1929 or 2008, sometime in the next few years and nothing has happened since then to change my opinion.

Already we have had a minor spike in the price of oil, trouble for the currencies of emerging market countries, and some indication that the long running bull market may be coming to an end. We are in the middle of this and it isn't yet clear if this is the start of a recession, or if the economy will rally and put off the big crash for some months or years yet.

When that crash does happen, I think that even in cities most of the population will survive the initial days of a financial collapse, mainly because of heroic efforts on the part of individuals in shop floor and low level management positions in supply chain and infrastructure organizations. The people at the tops of those organizations will be largely paralyzed, or at worst doing exactly the wrong thing. But even a worldwide financial collapse will hit some areas harder than others and will proceed, as I have said before, unevenly, unsteadily and unequally. And that's a good thing, because it means when things get really bad locally, there may well be someplace to go where things are better.

I expect there will be some reduction in our population due to supply chain failures following financial crashes. But the big dieoff that lies ahead of us will happen when industrial scale agriculture (both conventional and organic) comes hard up against resource limits—mainly fossil fuels and mineral fertilizers.

Still, it is possible that in the wake of a financial crash the stereotype of a city full of people starving in the dark with no help in sight will occur occasionally. For the vast majority of the unprepared people in that city this will not a survivable scenario. For anyone who really has no other choice but to stay in the city for now, it might be best to have a few weeks of food, water, etc. on hand and plan to stay at home during such a situation, keeping a very low profile, until things settle down and only then head for the country.

But you and I, of course, will have long since moved to a small town at a safe distance from the city. The standard trope in discussions of collapse involves our little town being overrun with roving hordes of hungry people engaged in looting and other forms of violence. I think this is unlikely. The key is to be farther away from the city than most of its population can walk on empty stomachs, which is not that great a distance. Thirst and starvation are debilitating and most people will not think to head out until they are quite desperate.

A few people will no doubt make it through though. It is my opinion that it would be better for everyone involved to welcome them with food and medical assistance, rather than fight them off with guns. It will be a bit of a trick to be set up to do that and in my next post I will look at the practicalities of moving to a small town in the country and getting ready to cope as the pace of collapse increases.

 

Preparing for Collapse, A Few Rants

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Published on The Easiest Person to Fool July 25, 2018

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For a while now I been promising that when I got some other things out of the way, I'd actually talk about preparing for collapse. And that is just what I'm going to be doing in this and the next few posts.

Unfortunately, my crystal ball isn't any better than anybody else's, probably worse than some. What I'll be recommending will reflect my own biases and weaknesses. But even so, I think I do have some insights that will be of value to many people.

Among these insights are a few things that I feel the need to rant about. Let's get that out of the way first.

Rant 1: A Fast and Hard Collapse, NOT

I should admit that by using the phrase "preparing for collapse" I am really being somewhat misleading. As I see it, collapse is not a single event that will occur at some point in the future, but a process that has already been going on for several decades, since the oil shocks of the 70s. Progress has been coasting slowly to a stop while collapse gains momentum. This will continue.

I certainly don't buy into the whole idea of a hard, fast, apocalyptic collapse. That is a fantasy that allows us to imagine getting rid of many of the less pleasant aspects of modern life all at once. Get it over with and start fresh, so to speak. In particular, I think many people see the complete and final collapse of the financial system as freeing them from oppressive debts and jobs they hate. A pretty drastic way to solve those problems….

And of course many of us have been influenced by apocalyptic fiction. A sudden and cataclysmic event certainly sets the stage for a dramatic story. But let's try to keep reality and fiction clearly separated in our thinking here.

At any rate, what I want to talk about is how to survive the slow and unsteady collapse that I believe we are experiencing, so that is what I'm going to do. There is much less to be said about surviving hard, fast, widespread collapse because it is much harder to do and there are fewer strategies that are likely to succeed. Still, much of what I have to say would apply to some extent, should I turn out to be wrong and things all fall apart all at once.

As I have said before this that collapse has been and will continue to be uneven geographical, unsteady chronologically, and unequal socially. Certainly there will occasionally be sudden downward bumps, but in some locations more than others and effecting various social strata differently. And then there will be a partial recovery and things will carry on for a while, somewhat worse than they were before.

This will continue on for quite a few more decades before we finally reach the bottom and the dust begins to settle. At that point, in a few lucky locations, there will still be people arguing that nothing much has really changed. For most of us, though, it will be clear that a great deal has changed and not for the better. Already the world is significantly different than it was when I was young and the strategies that served well in those days are not something I would recommend now.

Perhaps most importantly, we'll need to recognize that collapse is happening and act appropriately rather than carrying on doing the same old thing, trying to fine tune a system that is fundamentally broken and wondering why things don't improve.

Rant 2: Lifeboats and Eco-Villages, NOT

For quite a while yet it will not be feasible for most of us to completely sever our ties with BAU (Business as Usual). We'll find ourselves going in two directions at once, trying to prepare for collapse while still being dependent for many of the necessities of life on the very system that is collapsing. Of course, part of our preparation will consist of reducing key dependencies. But it is challenging to reduce those dependencies when BAU can supply our needs for less than they can be produced locally. This makes it hard to earn much of living as a local, sustainable producer—the prices you have to charge mean that only those who are well off can afford to indulge themselves with your products.

Many have suggested setting up a lifeboat community or an eco-village in a remote location and waving BAU goodbye. Some days it is tempting, but there's a long list of problems with that approach. It's hard to find a group of people who are both interested, willing to sever their ties with BAU and competent. It costs a lot of money to set up such a project. There are getting to be fewer and fewer remote areas that BAU has not claimed and/or spoiled, and where the locals would welcome you. Those that are left are less than ideal (to cold, too hot, too dry, too wet, poor soil, etc.). In any area where farming is feasible, there are likely to be property taxes and building codes. So you can't completely withdraw from the money based economy if you are going to pay your taxes, and it may be difficult to build the way you'd like to without running afoul of the building code.

Better to reconcile ourselves to having a foot in both worlds for now, and whole heartedly become a part of the communities in which we find ourselves living. We can quietly prepare for the day when BAU is more obviously faltering and local production can compete successfully. Of course some communities are more suitable for this than others.

Rant 3: Renewable Energy and Eco-Modernism, NOT

There are some people who recognize problems like peak oil and climate change but think they can be solved by switching over to high tech, low-carbon renewables (mainly wind and solar) and re-organizing things to be more efficient, allowing us to go right on with a green washed version of BAU, and keep the economy growing. These folks don't understand the economic problems with the low EROEI of renewable energy sources, or the degree to which those energy sources are dependent on fossil fuels for their manufacture, installation, operation and maintenance.

Eco-modernism is a particularly egregious example of a plan to fix our problems using technology. It relies on the idea of absolute decoupling. That is, being able to reduce our impact on the resource base and environment while still improving our standard of living and allowing the economy and our population to grow. So far, our best efforts have only achieved a small amount of relative decoupling. That is, at best, increases in population and standard of living have led to slightly less than proportional increases in impact, but nothing approaching decreases in impact.

Looking realistically at what technology can do, I find it hard to see how it could be otherwise and expect that collapse will force us to reduce both our population and level of consumption. At such lower levels of consumption, energy use and technology, renewable energy sources such as biomass, wind, moving water and passive solar will no doubt supply essentially all of the energy we use. But nowhere near enough to support the sort of high tech industrial civilization we have today.

Rant 4: Violence, NOT

Violence is another area where ideas based on apocalyptic fiction are likely to lead you astray. Conflict is necessary to make a story move along, and a long tradition of collapse porn saturated with interpersonal and inter-group violence has lead many people to see that as the only way things can unfold. Food becomes short, the "have-nots" go after the "haves" and mayhem ensures. This may make good reading, but it's not so much fun in reality, and certainly not something I'm interested in.

So, I am not a survivalist, and you won't find me talking much here about security and defense. There are lots of other sources of that sort of information, if it interests you. I'm more interested in not being where the fighting is likely to break out and setting things up in the community where I am so that co-operation is a more likely outcome than serious conflict. Like giving people better alternatives than violence, meeting them with food rather than guns. The trick is being able to do so.

Rant 5: Back to the Good Old Days, NOT

A number of well known voices in the "collapse sphere" have claimed that recent advances in social justice such as feminism and equal rights for LGBTQ people are likely to be rolled back during collapse. The argument is that these freedoms are possible only in a society with lots of surplus resources. These guys are men who are obviously uncomfortable with what they see as disadvantageous changes to the power structure of our society. They have a socially conservative fantasy of collapse putting them back in charge. But really, that is not the way it works.

First of all, while we will be returning to levels of energy use and material consumption that were common one or two or even more centuries in the past, it isn't really possible to go back to the way things were then. We are starting from a different place, we know a lot of things now that we didn't back then, and formerly oppressed people who have been given a chance at equality aren't going to give it up so easily.

Second, if you look across the world and throughout history, the patriarchy is far from universal and many societies working at very much lower levels of consumption than ours have functioned quite well as matriarchies or anarchies. A patriarchy is neither the most natural way to organize human societies nor the most efficient.

I am an old white guy too, if I can accept social changes, so can you.

Rant 6: Saving the World, NOT

Some have accused me of being out to save the world. It's pretty clear that by the world, they mean "Business As Usual" and in my opinion that world needs not to be saved, but to be shut down as quickly as possible. Sadly, this isn't going to happen voluntarily. Too many powerful people and institutions have a vested interest in keeping things going as they are. Heading straight toward collapse, in other words. A collapse that will see a drastic reduction in human population and consumption of resources per capita. This isn't going to be much fun to live through and many of us won't. The only good thing about it is that it will be the undoing of the very system that caused it. And when it is over it may be possible to continue on in a more modest, less destructive way.

Rant 7: Crunchies and Woo

I've noticed lately that posts on this blog often draw positive comments from people who go on to make it clear that they are "Crunchies" who believe in one sort or another of idea that isn't supported by the evidence, that isn't reality based—what I call "woo". After they've said such nice things to me, I always feel bad having to break it to them that I don't agree. Most of these folks are organic farmers or gardeners, who have bought into the "naturalistic fallacy" and think that everything that's natural must be good for you. In fact the products of organic farming and conventional farming about equal in terms of safety these days. That's good news for the many people who can't afford pricey organic food and don't have a garden to grow their own. The bad news is that both conventional and organic farming are also about equally unsustainable, mainly due to their reliance on energy from fossil fuels. We need to develop a "sustainable farming" that's based on science, not woo.

The tagline for this blog is "A reality based approach to life in the age of scarcity." When I use the terms "evidence based" or "reality based", I mean ideas that are supported by the scientific consensus. Many people today unfortunately believe that the scientific consensus supports BAU, and that's no wonder since BAU does its best to encourage that view. Fortunately, it's not true. The scientific consensus support some things on the Crunchy side and some things on the BAU side, because those things happen to be true. The scientific method is an excellent tool for filtering out biases, political or otherwise. There really isn't any good reason for ignoring its results.

But to be clear, comments from Crunchies of every sort are welcome here, just be aware of what the project of this blog really is and, that if you are pedlling woo, you'll get a gentle but firmly negative response.


But enough ranting for now. Time to talk about what we can do to prepare for the continuing process of collapse. We need to anticipate where current trends are taking us, and harder still, when things as likely to reach a tipping point and changing more drastically.

First off, I'd say that if you are new to this, give it a year or so to sink in before making any big decisions, and don't do anything rash in the meantime. Then you may want to consider some changes in the way you are living. What those changes might be will be the subject of my next few posts.

We'll be considering the following subjects, and probably a few more:

  • where you want to be—where bad things are less likely to happen
  • who you want to be with—people you know, trust and can work with
  • what you are doing—something that can support you, and allow you to develop the skills and accumulate the resources you will need

While waiting for my next post (these things often take a while), here are a few links to articles which may be of help:

On this blog:

Sharon Astyk hasn't been very active as a writer lately, but her earlier writings are a great source of practical advice on "Adapting in Place", which is exactly the sort of preparation I'd advise you to do.

An asteroid called “Peak Oil”

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Published on Cassandra's Legacy on September 13, 2016

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– the real cause of the growing social inequality in the US

 

In a recent article on the Huffington Post, Stan Sorscher reports the graph above and asks the question of what could have happened in the early 1970s that changed everything. Impressive, but what caused this "something" that happened in the early 1970s? According to Sorscher,

X marks the spot. In this case, “X” is our choice of national values. We abandoned traditional American values that built a great and prosperous nation.  

Unfortunately, this is a classic case of an explanation that doesn't explain anything. Why did the American people decide to abandon traditional American values just at that specific moment in time?
 

In reality, the turning point of that time has been known for a long time. The first to notice it were Harry Bluestone and Bennet Harrison with their 1988 book "The Great U-turn: Corporate Restructuring And The Polarizing Of America." They noted that a lot of economic parameters had completely reversed their historical trends in the early 1970s, including the overall inequality measured in terms of the Gini coefficient. For nearly a century, the US society had been moving toward a higher degree of equality. From the early 1970s, the trend changed direction, bringing the US to an inequality level similar to that of the average South-American countries.

So, what was that "something" that changed everything in the early 1970s? Nobody really knows for sure, but at least there was a major measurable change that took place in 1970: peak oil in the US. (image below, from Wikipedia).
 

It was a true asteroid that hit the US economy and that changed a lot of things. Possibly the most important change was that the US ceased to be an oil exporter and became an oil importer. That change was "user transparent," in the sense that the Americans who were filling up the tanks of their cars didn't know where the oil that had produced their gasoline was coming from (and mostly didn't even care). But the change implied a major transfer of capital from the US to foreign producers, while a large part of it returned to the US in the form of investments. It was the "petrodollar recycling" phenomenon that mainly affected the financial system; all that money never really trickled down to the poorer sections of the US society. That may well explain the increasing inequality trend that started in the early 1970s.

But, if the oil peak of 1970 explains the inequality trends, shouldn't the new reversal of the trend – the "shale oil revolution" change everything again? Perhaps surprisingly, there is some evidence that this may be the case
 

 

 

 

The data from the World Bank indicate that the Gini coefficient for the US has peaked in 2006 and has remained constant, or slightly declining, ever since. Again, that makes some sense; one wouldn't have expected a return to the low inequality values of the 1960s since the great shale oil boom didn't transform the US into an oil exporter. At present, with the recent peaking of the Bakken field, it looks like that the good times of half a century ago will never return.

All this would require a lot of work to be better quantified and proven. But it is not a surprise that our life depends so much and so deeply on the production of that vital black liquid that we call "crude oil". And with the probable downturn of the US production that seems to be starting right now, we are going to see more, and more radical, changes in our society. What these changes will be, we have to see, but it is hard to think that they will be for better equality. 

 

Peak oil by any other name is still peak oil

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Published on Cassandra's Legacy on September 8, 2016

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One of the most compelling charts I have ever seen is the “Growing Gap” chart that used to appear in every ASPO Newsletter. This is the one from the last ASPO Newsletter, written by Colin Campbell and published in April 2009.
 
 
Since then, more than seven years have passed, and peak oil has disappeared from the mainstream press headlines–almost. On August 29, Bloomberg published a story alerting to the fact that conventional oil discovery has reached a 70-year low. It published a very interesting chart, using data provided by Wood Mackenzie, the oil consulting firm, to show that fact. Unlike the ASPO chart, Bloomberg's chart only goes back to 1947, the year before Ghawar was discovered.
 
 

 

 

 

I thought I would reproduce the “Growing Gap” chart using Wood Mackenzie's data.

 

Neither Wood Mackenzie nor Bloomberg make public the data behind the chart, but I used a digitization program, WebPlotDigitizer, to extract data from the chart. The results are not perfect, of course, but give a good enough estimate. One must keep in mind that discovery data are not precise and may have a significant margin of error.

 

In order to obtain conventional oil production, I subtracted US tight oil production and Canadian tar sands production from the EIA's global crude plus condensate number. I know I must also subtract the extra-heavy production from the Orinoco Belt, but it is hard to find data for it. In any case, this is a very good estimate. According to data gathered by Jean Laherrère, the Orinoco extra-heavy production is only around 1 Mb/d today.
 
The following chart shows the digitized Wood Mackenzie conventional discovery data and the production data described above. According to the data, since 1980, when the gap between production and discovery began to appear, humanity has extracted about 47 percent more conventional oil than it has discovered.
 
 
And the following chart shows a three-year moving average of discovery, to replicate the ASPO chart. Notice that discovered volumes are generally larger than Campbell's data, but the drop since 2011 is more precipitous than he anticipated.
 
 
 
 
According to the Bloomberg story, this shortfall in discovery will be felt 10 years from now, when it begins to “hinder production.”

Peak oil by any other name is still peak oil.

Maps Made in Summer

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Published on Pray for Calamity on August 18, 2016

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She bends low in the dark.  Her index finger and thumb clumsy as they meet, she pulls from the waist and the stalk she holds rises out of the hummus eagerly, offering no resistance.  Her hand is dwarfed by the firm yet undulating orange blossom.  The sun’s remaining light barely penetrates the gauntlet of trees that stand sentry across the rise and fall of the ridge line.  Tangerine daubs speckle through the here and there breaks in the thick ceiling of maple and oak leaves.

“Say, ‘thank you, Chanterelle.’ ”
“Thank you, Chanterelle.”

Her small voice is sincere because I am sincere.  She watches her feet as she steps high over sticks and briars heading back towards the trail where her mother stands smiling.

“Remember to shake it.”

She passes the mushroom side to side, moving it from her shoulder instead of her wrist.  I follow behind her with long slow steps, my hat in my hand, it is full of chanterelles.  Holding the bill like the handle of a small skillet, I gently bounce the mushrooms to release their spores.  The rains have finally passed and the trail is soft beneath our feet.

—-

Summer is an incredibly busy time on the homestead, which usually means I put away the effort of writing in favor of merely ruminating as I attend to the constancy of the tasks before me.  This has been our most productive year yet insofar as providing our food is concerned, which is encouraging as we have accomplished this yield while living off site until our septic system installation is completed. The abundance of foods like tomatoes and green beans has been overwhelming, and the high heat has made the effort of canning very unappealing.  Fortunately, we have friends willing to can for us if we are willing to share the end product, and there are even local restaurants eager to buy our produce.

Squash bugs infested my yellow crook necks and zucchini, and they killed off my Crenshaw and cucumber vines.  I collected a satisfying quantity of fruit from all of these plants over the past couple of months so it is with even temper that I yank them by the root, shake them, and place them in a compost pile.  When the space is clear I walk over to a wooden gate and lift the chain that holds it closed.  As I pull it open a single file line of Rouen ducks comes marching out, quaking proudly as they all make their way to the now bare space before lowering their beaks and feasting on the slow moving squash bugs.  I lift my feet high to avoid stepping on the kudzu like sprawl of sweet potato vines and make my way to the garden gate where I pause to wipe the sweat from my forehead.  It’s hot.  Humid and hot at four in the afternoon.  I think on what else I can get accomplished today.  We will be moving back into our home soon and there are still jobs to finish up before doing so, mainly rigging the cistern to the gutters, and installing a hand pump in the kitchen to draw from the cistern.  That and cutting another few ricks of firewood.  And slapping walls on the barn.  And laying the flooring in my daughter’s bedroom.  And planting the winter garden.

I could “and” for days.  Instead I take a breath and look back at my little girl as she giggles watching the ducks.  Its hard to not feel rushed and I make a conscious effort to be present, to be content with the work already done instead of always existing in the stress of that yet to do.  The moist air is stagnant, and as I take a moment to scan the spaces around me, noting the tasks big and small that require attention, my mind wanders a bit, and I feel like we are on the edge of something.

This July was globally the warmest month in human memory.  Such headlines are almost blase these days as warming trends continually break records.  Thousands of people in Louisiana have lost their homes in what FEMA has dubbed the worst natural disaster in the United States since hurricane Sandy.  Fires rage in the drought stricken American west from southern California to Glacier National Park in Montana.  Social tensions continue to flare too, as the National Guard was called in to subdue rioters in Milwaukee, and random acts of violence seem to break loose from the percolating underworld of racist authoritarians emboldened by Donald Trump’s presidential campaign.  Venezuela’s economic collapse continues apace, various African nations are succumbing to famine, the war in Syria is drawing larger battle lines between major powers, and despite the best efforts of central banks across the globe, major financial institutions just cannot turn a profit in a world of net energy decline.

For years I have watched the world through a particular lens, and that is the lens of peak oil.  Despite the failures of particular peak oil advocates to predict the future, and despite the inability of even larger numbers of critics to actually understand the peak oil concept before engaging in attacking it and its proponents, I still feel that this is a particularly useful lens for viewing the macro picture of human industrial civilization.  Of late, I have admittedly felt that I am without a map, and I have found myself in my quiet moments attempting to piece one together.  Of course, drawing a map begins with placing a center pin where you currently stand.  So where am I?  Or if I may be so bold, where are we?

I first became aware of the peak oil concept in 2004 when I was twenty-three years old.  After reading the various assessments of the issue that were available on the internet at the time, and of course, being young and impressionable, I took to some of the worst case scenarios presented by outlying bloggers.  By and large, these were not the better experts to trust, and I was convinced that ten years out we would be living in a very different world.  The economic crash of 2008 felt validating in a sense, but the divergence from prediction that followed forced me to begin rethinking how the decline of industrial civilization would play out.  Eight years of very, let us say, creative economics have prevented the full on breakdown of the growth based financial paradigm.  I do not believe I am alone in wondering exactly how long such creative policies can sustain the physical world of the production and distribution of material goods.

To be perfectly clear, I am no fan of the civilized model of human organization, and I have repeatedly stated this in my writing.  But I do my best to be aware of its functionality so I can properly place myself and my family to best buffer ourselves from the swings of forces beyond our control.  The internet is rife with commenters who are eager to bargain with Moloch, hoping to right what they perceive to be the ills of state and capital so that some form of industrial civilization can carry them into the future.  These commenters have altars to different demigods.  Some light a candle to technology while others burn incense for invisible hands and supposedly free markets.  I look out and see dying ash trees and the onslaught of invasive stilt grass and I know in the core of my being that there is no bargaining with civilization.  No vertical farm, no vegan diet, no gold-backed currency, no handing over of the means of production to the proletariat will stop what’s coming.

But it is equally true that it is next to impossible to know exactly what is coming, or when it will get here.  That is why we try to draw maps.  And if we want our maps to be of any use, they should probably start with what we know about the past and the present, so maybe, the best of our efforts can draw lines between the two that give some clue as to the trajectory and direction of the future.

Over the years as I have written on these topics I have been careful to avoid prediction, simply because most people who in engage in it are so often wrong.  What’s worse, is that so many people who make names for themselves as so called “trends analysts” and such, not only are often wrong, but they refuse to acknowledge when they are so, and they just continue with the business of making predictions.  I would rather make a map, a sketch of the terrain we have covered and of that which I can see through the fog in front of me.  As this is a map of the industrial civilization in which we live, there are two compass points which are of extreme importance.

First, is net energy.  All work done requires energy to make it happen.  The primary energy source for this civilization is oil.  This is what makes an understanding of peak oil concepts so valuable.  Oil is the foundation of the lion’s share of the work done in this civilization, even being the foundational energy source behind the manufacture of items like solar panels.  The diesel trucks that mine for metals or that grow the crops that feed workers are all run with oil.  The economic and social architecture of this society requires a growth in the net energy available with which to do work.  This is not necessarily a growth in the amount of barrels of oil available at any given time.  If those specific barrels of oil utilized more energy in their acquisition than usual, we may be in a situation where we have more quantity of oil available yet less total energy.  This will hamper growth, which while good for the ecology of the planet, is a death sentence to financial paradigms where debt is the basis of currency and investment.

The second compass point of importance is the ecological material available to support society.  Drinkable water, healthy soil, viable biomes thrush with life, a stable climate; all are necessary to maintain human life and activity.  Unfortunately, this point is lost on the so-called educated class who think only in terms of capital.  I stress this point because even in the event that a miracle occurs and our energy woes vanish, there is still the issue of our destabilizing climate and over burdened ecosystems.  We need bees and butterflies and ants to pollinate crops.  We need amphibians to keep insect populations in balance.  We need birds to spread seeds.  We need fungus and soil life to make plants viable at all.  Human activity threatens all of these beings and their habitats.

So as I sketch my map I note the peak of conventional oil production that occurred in the 2005-2008 timeframe.  I note the bankruptcies that are tearing through the US unconventional oil industry.  I note the banks across Europe that are on the verge of insolvency.  I definitely note the trillions of dollars worth of debt monetization across the global financial sector which have been an attempt to cover the spread of missing growth that is required to make good on previous loans and outstanding interest.  I also note the shortfalls in needed rain in the American west, the predicted water shortage in Lake Mead, the rising seas and the unprecedented storms.  When I step back at my scrawled lines, I see images reminiscent of times past.  Politically there are movements that seem to rhyme with what came out of the depression era, and economically there are movements that very much remind me of the warnings that began flashing in 2007 as the mortgage industry began to implode.  The page, too, is dotted with the unpredictable lines of natural disaster and ecological calamity.

Simply stated, this is what I see:  A period of economic depression is on the wind.  My gut says we see an undeniable beginning of this period before winter.  Where it all leads is too far out to say.  I think it is simplistic when people draw a timeline of the future that consists merely of one trend-line pointing downward.  There are hundreds if not thousands of trend-lines that together combine to graph the arch of a particular civilization, and some will yet be on the rise.  It is when a majority of the significant trend-lines slump downward that we can say with certainty a society is in decline.  It is my humble position that what we have on the horizon is a period of greater unemployment and struggle on a family by family level here in the “first world west.”  There will be a shake out of never-to-be-solvent again institutions, and a generalized acknowledgement of a paradigm of “hard times” being upon us.  Natural disasters will be harder and harder to recover from as they will strike more often in regions where status quo thinking believes them too unlikely or impossible and this will combine with a financial inability to afford repair.  Politically, people will seek easy and incorrect answers, so on that front we will have nothing new in thinking modality, but we will see new lows in practical application.

Of course, this is a map I am trying to draw for myself so that I can better prepare for the terrain before me and mine.  And I’m just some guy who likes homegrown beets and wild mushrooms, so take anything I have to say with that in mind.  But at least I’m not trying to sell you a pamphlet about gold coins, and you’ll notice there are no ads for gas masks or survival seeds on my web page (unless word press puts them there.)

My personal activity includes shoring up on the basics.  Preventative car maintenance on both of our four wheel drive Jeeps, which each contain tools and flashlights, so that floods and storms are more navigable.  Selling off unneeded items to pay for home improvements as well as a bit more archery gear as I want to take a deer by bow this fall and to make as much jerky as possible.  Buying all of my spring seeds now, and making sure we have plenty of simple things like candles and lighters, lard and honey.  This is all stuff that gets regular use, so there are no regrettable wastes of money.

My index finger presses into the soft soil with ease.  A dried pea falls silently into the hole and I sweep lose earth with the blade of my hand to cover it.  Four inches to the left, I repeat the process, and then again, and then again, all the way down the fence line.  The red cabbage have only just broken through the surface of the dirt in their seed trays, so it’ll be a week or so yet before I move them into the field where right now potatoes are living their final days before harvest.  Parsnip greens are tall, and I mentally make note of which ones I want to leave to winter over before checking on the newly planted kale.  Everbearing strawberries are still putting on fruit, and my daughter is occupied now lifting their leaves and excitedly yanking the plump red berries.

Cicada chatter rises and falls in the nearby tree canopy and again I stand to survey the land.  Tent worms are killing an apple tree.  Sunflowers stand tall in the afternoon heat.  I see dead trees that need felling, weeds that need mowing, fence posts that need straightening, and job after job after job that lay before me.  I have a plenty of time to ruminate, observe, and ruminate again, and will revisit writing again when cold winds blow.  Maybe I will think back to this piece and feel foolish, but I will not be afraid to say I was wrong.  My immediate terrain is so much knowable, even if it is pocked with struggle and strain.  To my left our gravel drive stretches off into the woods, and as I look off to the cool forest there is a flash in my mind of a hunter walking with his bow, and in this moment, I envy him.

Hot Rockin’

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Published on Peak Surfer on August 7, 2016

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"All that is necessary to open up unlimited resources of power throughout the world is to find some economic and speedy way of sinking deep shafts." — Nikola Tesla, Our Future Motive Power, 1931
 

 

 

Like many in the Peak Everything/Age of Limits psychographic, we find ourselves rolling our eyes whenever we hear techno-utopians describing AI implants, self-driving Teslas and longevity DNA-splices. We know all too well that each Google search uses enough energy to boil a cup of water, and that the average cellphone adds one ton of carbon to the atmosphere each year – roughly 3 jet passenger trips back and forth between New York and Cancun.

The insularity of Silicon Valley leads to confirmation bias, to the point where someone like Kevin Kelly, in a recent Long Now talk, can describe the diversification of Artificial Smartness as "alien intelligences" without grasping that we have, right now living amongst us, vastly diverse typologies of intelligence in the biological world, but that our overconsuming, polluting technosphere is killing them off in the Sixth Mass Extinction before we even grok their quantum entanglement.

In Kelly's view we will soon be tapping into artificial, alien intellect like we do electricity or wifi. We will become cyber-centaurs — co-dependent humans and AIs. All of us will need to perpetually upgrade just to stay in the game. And power-up too.

Groan. The digital divide on steroids.

We've opined in many posts here that we thought a rubber-road interface would soon be upon this kind of techonarcissism. Limits will be in the driver's seat again. But oddly enough, it might not be the energy shortfall that pitches all that Teslarati into the ditch.

There is no shortage of energy and there never has been.

Take it back an Ice Age or two. So we discovered fire. Get over it! Being stupid apes, we have become completely obsessed with fire. So now we are burning down the house.

All around us there are much more abundant forms of energy than fire. Consider the gravitational pull of the moon that raises oceans. Consider the spin of the Earth, or the latent heat within its slowly cooling core. Who needs dilithium crystals? We travel through space aboard a dynamo.
 

Nicola Tesla

In the eight years since the post below was originally published in the summer of 2008, it has received a grand total of 68 page views, many of which were doubtless our own. Not wanting to see such gems disappear into the akashic records without at least a few more reads, we're republishing in this summer re-run series.

Bear in mind that Nicola Tesla was a steampunk. In Iceland we can see steam and hydrogen being generated by geothermal heat, but the Teslovian technology being applied — pumped water and steam — is inefficient and self-defeating. It sets up a depletion curve — years to decades — because it cools the magma. Apply today's dielectric alloys instead of steam and you can imagine live current from the temperature differential without cooling the Earth below. But have a look.

Hot Rockin'

Drill, Drill, Drill say the Republicans
Drill, Drill, Drill say the Democrats
Drill, Drill, Drill says McCain
Drill, Drill, Drill says Obama
It polls well.
And, meanwhile, the climate just goes to Hell.

It is interesting to see the major oil companies take on a really tough challenge, like drilling deep continental or deep ocean sites. In order to drill the Bakken formation, where gigatons of carbon deposits are entombed beneath the wheat fields of North Dakota, Montana, Saskatchewan and Manitoba, they are going to have to go very deep, into very hard and hot rock.

Even tougher challenges await Chevron's mega-well, Jack 2 in the Gulf of Mexico, or Petrobras' Saudi-scale Tupi or Carioca fields in the equatorial Atlantic off Brazil. Individual wells in those fields are expected to run $180 million to $200 million each, assuming Big Oil can even solve the impressive technical issues.

Engineers are estimating three decades will be needed to develop alloys for drills and pipes that can withstand the heat 2 to 6 miles down, with 18,000 pounds per square inch of pressure, and temperatures above 500° Fahrenheit (260°C).

Two years ago, Exxon Mobil and Chevron saw diamond-crusted drill bits disintegrate and steel pipes crumple when they attempted to tap deep deposits in the outer continental shelf. Anadarko Petroleum is successfully extracting natural gas under a mere 8,960 feet of water in the Gulf of Mexico, where pressure measures 3,069 pounds per square inch, but it costs a lot to keep replacing imploded joints and ruptured seals.

Pumping oil from the Brazilian fields, parts of which are 32,000 feet (10,000 m) below the surface, will require drilling more than three times the depth of the Anadarko wells and almost twice the world’s deepest Gulf wells, in the Tahiti lease, which cost Chevron $4.7 billion to produce.

But here is the irony. At those depths, the heat is a constant. In energy output worldwide, it measures in the exoWatt range. It could power everything. And you don’t have to sail halfway across the Gulf of Mexico, down into the South Atlantic, or up to the North Pole to find it. Wherever you are on Earth, it is right below you.

We’ve known about this energy source, deep geothermal, for centuries, and we have known how to go about harnessing it, big time, for decades. In 1932, Nicola Tesla wrote in The New York Times, “It is noteworthy that …  in 1852 Lord Kelvin called attention to natural heat as a source of power available to Man. But, contrary to his habit of going to the bottom of every subject of his investigations, he contented himself with the mere suggestion.”

Tesla went on, “The arrangement of one of the great terrestrial-heat power plants of the future (illustration). Water is circulated to the bottom of the shaft, returning as steam to drive the turbine, and then returned to liquid form in the condenser, in an unending cycle…. The internal heat of the earth is great and practically inexhaustible….”

Karl Grossman produced a piece on it for WVVH-TV in Long Island. You can see that on YouTube. An MIT study in 2007 estimated you could produce 100 GWe (the equivalent of 1000 coal plants) for less than the cost of a single coal plant.

So why can’t we see the forest for the trees?

History On Vacation

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Published on the Economic Undertow on July 24, 2016

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What experience and history teach is this — that people and governments never have learned anything from history, or acted on principles deduced from it …

— Hegel

We solved Hegel’s pesky problem in 1998 when Francis Fukuyama posited the prospect of universal liberal democracy, along with it, the end of history:

What we may be witnessing in not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government.

 

 

 

This is not to say that there will no longer be events to fill the pages of Foreign Affairs yearly summaries of international relations, for the victory of liberalism has occurred primarily in the realm of ideas or consciousness and is as yet incomplete in the real or material world. But there are powerful reasons for believing that it is the ideal that will govern the material world in the long run …

 

 

… because that is the futurist narrative in its entirety: to consign whatever it deems obsolete/old/unfashionable including history itself, to the dustbin of history!

By 1998, the narrative made some sort of sense: the outré Soviet Union had crumbled under its own weight even as the Chinese export ‘miracle’ was gathering force; in Europe the ground was being prepared for the euro. The West had triumphed over what it had painted as socialist tyranny — the absence of consumer choices. Gone were the, gloomy, paranoid Stalinist dictators in Russia and across Eastern Europe, swept aside by cheap color televisions and counterfeit Levis, menthol cigarettes and Ronald Reagan. The nuclear boogeyman had been seemingly stuffed back into a bottle then redeemed for a 10¢ ‘peace dividend’. Oil prices were low and American confidence in endless Ponzi wealth was high. Technologies were appearing out of what seemed to be nowhere offering solutions to problems we did not know existed: robots (to replace workers), Internet (to replace more workers) and genetic engineering (to replace the remaining workers). Certainly all of the above would bury history forever … right?

The West was to become a Keynesian paradise of endless abundance and leisure, a suburbanite fairyland of Negro-free gated ‘communities’, of pastel McMansions and luxury SUVs; of gourmet meals crafted from GMO ingredients washed down with magnums of Veuve Clicquot and narcissism. We would play croquet as eternal children under the glorious sunshine of prosperity while ‘disutility’ (labor) would be performed ‘somewhere else’ (Mexico). The waste and destruction associated with industrialization would vanish because we would all be rich enough to hire robots to clean up after us.

There were a few clouds: the tail-end of trivial conflicts in Central America; the ‘War on Drugs’, the Asian finance crisis in 1997 and the collapse of the Russian economy the following year. Long Term Capital Management followed the Russian economy into the toilet in early 1998 necessitating the first ‘rescue us or else’ mega-bailout of Wall Street. These events were diversionary theater: people who could afford it lost some money, bosses who badly needed new jobs lost theirs. All in all the entire reconfiguration process turned out to be remarkably painless.

Looking back, the notion of final geopolitical resolution was naively optimistic, a quaint artifact of a particular zeitgeist, like Beatle Boots or flip cellphones. What was really happening was the ending of the ending: ancient monsters were not vanquished only hibernating so as to take new forms. Now, when we need it most and want it least, history has stormed out of its coffin like a vengeful, blood-hungry vampire, reminding us all why we wanted to be rid of it in the first place.

Enter the new millennium and (quasi-)liberal democracy and finance capitalism are being shellacked and nobody can figure out why. Extreme events are tripping over each other like – add your favorite cliché here – cheese and macaroni. Radicals are ascendant as the status quo proves unable to prevent the consumption utopia from slipping out of reach. Strategies that once bore fruit are revealed as nonsense; military ‘stimulus’, central bank witch doctoring, austerity, institutionalized discrimination, trivial interest rate- and foreign exchange manipulation. The outcome is credit transfers from those with less to those with everything … and fury. With chaos on one side, dithering on the other, the public turns toward autocrats while societies — particularly across the arc of northern- and central Africa to south Asia — blow apart at the seams, writhing in agony, frantic to escape the vice-like grip of ‘less’ and unmet expectations.

This is the terror that dares not speak its name; not to be engulfed by refugees or shot by militants but forced by desperate necessity to become one! Rage is fear by another name.

Events rise up like rogue waves, smash with shocking force … and then vanish. In the space of a month there is the #Brexit vote — against the backdrop of faltering credit — US police shootings, also people shot by police; terrorist truckers, airport attackers, car bombings in city markets, nightclub massacres and more nightclub massacres. There are the coups that aren’t and the rounding up the usual suspects … the droughts and floods, grinding wars, food shortages and millions of desperate refugees, all lingering on Twitter for an instant then … gone. Staring us in the face is the breakup of the Eurozone and the end of the euro, currency- and economic failure in Venezuela and Brazil, environmental degradation and habitat collapse, the deflation of property/asset bubbles worldwide … unraveling is no longer a matter of ‘if’ but ‘how bad’.

Mazama-Turkey 071816

Figure 1: … the status quo proves unable … Mazama Science (click on for big). Turkey has almost nothing in the way of domestic oil resources yet it burns through three-quarters of a million barrels per day, paid for with borrowed euros and dollars. Turkey earns some hard currency from tourists as well as a modest margin from pipeline fees. These last are far from enough: without loans the economy collapses in a hurry, with loans the collapse takes a little longer. The Turks could save themselves by way of stringent conservation but choose instead to wager the rent on a New Ottoman Caliph, betting that utopia can be rationed away from domestic enemies or stolen from its (even more bankrupt) neighbors.

TRY vs USD

Figure 2: Turkish lira relative to the US dollar, chart by XE (click for big). Depreciation of lira is the means by which Turks are forced to conserve against their will. With the passage of time, more liras are needed to obtain the dollars and euros needed to pay for imports. Economic theory suggests that currency ‘values’ run in cycles and that the lira will eventually regain its footing. History suggests the lira is a disposable relic and that markets have not yet ‘caught down’ with reality. Turkey’s currency represents little other than empty gestures and voracious demand. When history was on vacation, symbols and demand were assets to be leveraged; in the new Age of Less these things are liabilities. As the Turkish inter-temporal balance sheet breaks down so does the currency.

Tyrants like Trump and Erdogan (and Clinton) are products of industrial resource capitalism no different from McMansions and automobiles, they are also fetishes. Unlike vicarious pleasure-pussy Taylor Swift, tyrants symbolize power, ruthlessness and control … and increasing surpluses. Their promise to harvest gains by whatever means is the substance of their public appeal. The relationship between tyrant and followers is symbiotic and self-reinforcing. Adherents give form and color to the tyrant’s outline while the tyrant suspends- or outruns institutional restraints, providing the necessary sanction for adherents to act out their own impulses, destructive or otherwise.

The emergence of tyrants like Trump and Erdogan (and Clintons) is suggestive: that technology cannot produce the consumer outcomes we are desperate to preserve. If technology could save us autocrats would not be necessary. They are reductive rather than creative, their first- and last resort is coercion as when governments dragoon pensioners rather than machines to rescue finance.

We are in the middle of a crisis that has been ongoing for over five years: the managers demand the economic system be bailed out. Of whom do they make demands? Entrepreneurs? Innovators? The finest minds of a generation?

A: Pensioners.

The economies must become more productive which means increasing the efficiency of output. Consequently, pensioners are called upon to sacrifice their retirements in the UK, Europe, in the US … in cities and states: pensions everywhere are under attack.

Why not more machines? If machines are productive, wouldn’t deploying more machines solve the economic problems around the world rather than deploying our grandparents? Technology is supposed to save us but the raiding of pensions insists otherwise: the scraping of the bottom of the barrel in real time. It’s an admission that technology doesn’t work, from the people who are in a position to know.

What happens after the retirements are pillaged? Who knows? Nobody has a plan.

The world’s Trumps and Erdogans (and Hitlers) are First Law change agents and as such are integral/inevitable components of national- or supranational surplus aggregation … one of the costs of our ‘success’. History shows us that empires at the point of decline choose rotten emperors and incompetent caliphs. This is analogous to Hyman Minsky’s ‘Financial Instability Hypothesis’ that suggests periods of investment success are by themselves destabilizing w/ speculative malinvestments leading to crashes. Socio-political ‘Minsky Moments’ are products of long periods of dominion by a particular clique or political enterprise which becomes fertile ground for corruption and self-dealing, also malinvestments in perverse reasoning.

Because industrialization has produced outsized surpluses, the rottenness of caliphs (cost) is increased in proportion. Tyrants’ failures are more destructive; so are the failures of well-intentioned elected caliphs. The First Law outcome is invariably surplus reduction, nothing can stop it; conventional policies only makes things worse. Resource depletion is both unpleasant and permanent, the only strategy is to carefully navigate decline; to surf the smashing waves rather than be swept away by them. Depletion cannot be defeated in battle or outmaneuvered, it cannot be negotiated away or paid off. Less can only be adjusted to: unwillingness to adjust leads to exhaustion and ruin. Sadly, no leader, not one … no economist, no central banker or financier proposes to voluntarily make do with less, to embrace the ancient virtues of restraint, patience and modesty; to corral our competitive greed and tread lightly upon our life-support system …

Appearance is higher than mere Being −− a richer category because it holds in combination the two elements of reflection−into−self and reflection−into−other: whereas Being (or immediacy) is still mere relationlessness, and apparently rests upon itself alone.

 

 

 

— Hegel

 

 

“It is only shallow people who do not judge by appearances. The true mystery of the world is the visible, not the invisible….”

 

 

 

— Oscar Wilde

 

 

In the twilight of modernity we have become intoxicated with the idea of power, to have our way at the expense of others who are powerless to do anything to stop us. The idea (appearance) has more potency than does the thing itself, as the exercise of power carries with it consequences.

American Exceptionalism boils down to a kind of property right; to own human and mechanical slaves, to stake claims against the entirety of nature; the plants and animals and water even the rocks under our feet … to possess whatever is in sight like a chair or pair of pants … and with the same degree of accountability/carelessness.

There is our pitiless assault on everything, living and non-living, without which there is no ‘our’. The frenzy is to burn the world before someone else beats us to it, to render and distill and catalyze everything into money. Our precious tycoons will burn that as well … we have gone insane.

The fetishes have us in their thrall: the rifle and machine gun, the tank and the airplane and the hydrogen bomb … also the strip mine, the excavator, the chain saw and the automobile. Also the lies on television.

If we possessed the wits we would be mortified, would beg forgiveness and search for wisdom … As inhabitants of Sodom and Gomorrah we are simply cursed to live out the consequences of our own madness.

Ciao, Britannia!

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Published on the Economic Undertow on June 8, 2016

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Triangle of Doom 062516

Figure 1: Chart by TFC Chartz (click for big): It’s called the Triangle of Doom for a reason, carried through to the end, no outcome is possible other than demise of the automobile industry and its petroleum dependencies. Since 2000, there have been a series of petroleum price surges intended to meet the industry’s exorbitant extraction costs. Each attempt has failed as credit conditions outside the fuel markets deteriorated. As can be seen, many of the credit failures originated within the European Union. These fails, credit shocks and price retrenchments are to some degree, a product of EU structural shortcomings. Now, the British have voted to leave the EU, panic ensues: (NY Times).

‘Brexit’ Sets Off a Cascade of Aftershocks …

 

 

 

Maybe the future does not include flying electric cars after all.

By Steven Erlanger

 

 

 

 

Britain’s startling decision to pull out of the European Union set off a cascade of aftershocks on Friday, costing Prime Minister David Cameron his job, plunging the financial markets into turmoil and leaving the country’s future in doubt. The decisive win by the “Leave” campaign exposed deep divides: young versus old, urban versus rural, Scotland versus England. The recriminations flew fast, not least at Mr. Cameron, who had made the decision to call the referendum on membership in the bloc to manage a rebellion in his own Conservative Party, only to have it destroy his government and tarnish his legacy.

 

 

 

So it goes. There is a huge reaction and certainly more to come as markets digest what has happened … and what is certain to come. In the end it is very simple …

The Brexit vote was inevitable. Britain had no choice but to jump in the lifeboat and abandon the sinking EU Ponzi scheme.

Will it succeed? Probably not but it has to try. If not England it would have been another big European country, perhaps Italy as the first to abandon the scheme. The rest have to wait … but not for long. England’s alternative would be to devolve in a few short years to a petty euro protectorate like Greece or Ukraine begging Russia for fuel and Frankfurt for loans and forbearance. At issue is UK’s massive (£6+ trillion) external balance sheet, its banking liabilities vs. the dubious quality of its assets.

Brexit states unequivocally the City of London is insolvent; at the the point where it cannot finance itself any longer. This is the reason why the establishment rolled out the Brexit referendum in the first place, to save the banks. Think of Brexit as a bailout: the small will pay for the excesses of the great. The City certainly cannot finance the rest of the country and its massive and non-remunerative fleet of gas-guzzling automobiles; something has to give. There are 31.5 million cars in a country of 64 million humans, each car requires the resources of 20 persons. UK staggers under the equivalent human population of 630 millions on a small island … the bulk of those being dented, metal deadbeats. Talk about immigration, no wonder the economy struggles.

The automobiles and their need for fuel imports and infrastructure paid for w/ endless credit issue have bankrupted the entire West, not just England. In Europe: the euro = gasoline. For once — maybe not realizing exactly why and not being entirely happy about it — the British have voted against their cars.

It’s about time!

Brexit: Fall of the Tower of Babel

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Published on Cassandra's Legacy on June 27, 2016

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The Babel Tower: the European Parliament in Strasbourg.

(adapted from a story told by Wouter Diederen)

King of Babel: Minister, faithful minister, speak to me! I hear that there is unrest at the great tower that my workers are building. I hear that some workers want to leave, and I see that the tower is not growing anymore so fast as it was growing not long ago. Minister, tell me what's happening with my tower; the great tower of Babel of which, I, the King of Babel, am so proud!

Minister: King, what you say is true. There is unrest at the great tower of Babel, the workers are clamoring for better pay and a group of them have voted among themselves to stop working at the tower and go back to their land beyond the sea, where they will build their own tower. And because of this, the Great Tower of Babel is not growing anymore.

King: But, minister, why is that happening? Haven't these workers worked for so many years at my tower? Wasn't my tower nicely growing up until not long ago? What's happened that made the workers rebel against me, their master?

Minister: King, you see, we have a problem of energy return on investment…..

King: What?

Minister: King, let me explain to you. In order to build the tower, we need stones from quarries. And it has happened that the nearby quarries have produced so many stones for the tower that there is no stone anymore there.

King: Minister, I was told about this problem. But I was also told that there are many quarries a little farther away that still hold plenty of stone. So what is the problem with getting good stones from these quarries?

Minister: King, you see, there lies the problem. In order to carry these stones from the quarry to the tower, we need a caravan of many mules pulling carts.

King: And what is the problem with that, minister?

Minister: Well, the problem is that we keep extracting stones and the quarries we get it from are farther and farther away.

King: But that just means that the caravans will have to travel farther away, right?

Minister: King, this is the energy problem I was telling you about. You see, mules need energy, in the form of food. And the people driving the mules need energy, too, in the form of food. So, some carts in the caravan must carry food for the mules and for the mule drivers, and therefore these carts cannot carry stones. And the farther the quarry is, the more food loaded carts there have to be in it.

King: So be it. What is the problem?

Minister: It is that the quarries we are exploiting at present are so far away that most of the carts must be loaded with food and only a few can carry stones. And so what you have are long, long caravans arriving from the quarry to the tower, but carrying very few stones.

King: So, make the caravans bigger, then there will be more carts loaded with stones for the tower.

Minister: King, we are doing that, but we are running out of mules. And we also need more caravans to bring wood for the scaffolding of the towers, and here, too, we must travel to far away forests to find good wood. In addition, the bureaucrats managing the tower have been growing in numbers and are now more numerous than the workers. And we need more caravans and more mules to feed the bureaucrats. As a result, the workers are now living on reduced food rations and they are not happy about that. As I said, it is a question of diminishing energy returns. We call this the "Limits to Growth."

King: ………

Minister: So, I think we should start thinking of a sustainable tower, that won't need to grow anymore since it is already tall enough. And we could make a steady state tower that would need just a few stones to replace those that wear out. The energy investment would be much smaller……

King: Close your mouth, unfaithful minister! I do not believe a single word of what you told me. I think this story of the energy return is something you invented in order to confuse me. I think, rather, that the workers have become lazy. That the mule drivers have become lazy. And that the mules themselves have become lazy. And so, what I will do will be to punish the lazy workers, the lazy mule drivers, and the lazy mules as they deserve. And I will severely punish those workers who voted to move back to their island to build their own tower. They will feel the wrath of the king of Babel. Also, I think that my enemies outside the borders are plotting against me. And hence I will enlarge the army and attack them. And they, too, will feel the wrath of the king of Babel.

Minister: ……

King: And, now that I think about that, I also need a new minister.

Battleship

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Published on the Economic Undertow on May 2, 2016

 

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As JP Morgan famously remarked, markets fluctuate; its impossible at any particular moment to pick trends out of the background noise. Nobody can say for sure whether tops or bottoms are in. Trends only reveal themselves in the rear-view mirror, even as they are obscured by non-stop advertising campaigns and PR. By the time a trend is clear it is usually too late for investors — otherwise known as ‘fools in the market’ — to do anything about it, the free lunch is already eaten and the punch bowl taken away …

Triangle of Doom 042916

Figure 1: Is the bottom in? Chart by TFC Charts (click for big). Oil prices have been fluctuating higher in futures’ markets but nobody can be sure whether prices will rise from here or head back for the cellar.

With current prices at- or below the cost of extraction, drillers look to survive by reaching for the plastic, offering themselves and their properties as collateral. This is a medium-sized problem for drillers: along with all the other industries they have been borrowing from the beginning of time. In the good ol’ days they borrowed less, now they borrow more while praying for the trend change that brings that punch bowl back.

Ordinarily, the oil drillers’ customers step forward with their own borrowed funds to retire the drillers’ loans. Customers don’t simply sign over the money to the drillers, they over-pay for drillers’ products. This is what the term, ‘sustainable business model’ actually means; customers pay higher prices for successive rounds of cheaper-to-produce goods; the margin is used by firms for debt service and the retirement of maturing loans. Naturally, as each round of financing is rolled over the firms borrow more. Some of this money flows to executives, by way of this process CEOs become tycoons. Economists gain as well because every increase in borrowing represents GDP growth they can take credit for.

Fast-forward to the present: goods are unaffordably expensive to produce, emptied-out customers are no longer able to over-pay. They have nothing to offer as collateral for loans but their (near worthless) labor and frantic urge to Waste as seen on TV. Because the customers are unable to borrow, they cannot benefit the drillers, the drillers must borrow for themselves and pray …

Because the ‘waste as collateral’ concept is absurd/ridiculous, both the customers’ AND the drillers’ loans are effectively unsecured. This leaves a maturity mismatch between drillers and their customers. Firms are borrowing tens- of billions of dollars even as their customers are standing in line at the food bank. Customers cannot borrow => they cannot overpay => prices crash as drillers have no place to put unsold crude => whatever collateral the driller offers becomes worthless. The customers stiff their lenders => there is nothing for lenders to seize. At the end of the day, drillers, customers and lenders are all ruined … this dynamic is playing out in real time, right this minute, under everyone’s nose, all over our Great Round World.

This is perfect if unremarkable sense; conditions within oil industry finance must reflect resource depletion and it is clear that they do. The non-stop PR campaigns touting driller technology, efficiency and innovation are irrelevant, none of these things touch the customer. Losses cannot be made up with volume. Real returns, solvency and cash flows matter; when customers cannot gain the means to buy fuel industry products there is ultimately no more fuel industry. Redistribution, or giving customers the means to buy fuel is an immediate-term (non)solution. Some expensive time is borrowed until the customers’ financing is exhausted. Because resource waste offers no tangible returns to the waster; his credit will eventually run out, he will waste no more.

Meanwhile, the drillers must borrow or go out of business while lenders hold their noses and lend! The alternative is an output crash; we are caught between a looming crash and conditions that are pregnant with crash possibilities. Credit access becomes a matter of desperate necessity with every borrowed dollar lodged against the lenders’ deteriorating balance sheets. At the twilight of the petroleum age, drillers survive by cannibalizing their bankers who in turn are becoming the global economic link under the greatest strain.

Giant finance firms preserve the illusion of system sufficiency by lending to each other. Self-pleasure here is deadly; the lenders have become zombies rotten with non-performing loans. Growth is stagnating, economies are falling into deflation, turning Japanese. The zombification of the banks becomes both the reason for- and the consequence of extraordinary monetary quackery: the intent is to goad finance into squeezing out every possible loan, to kick that can one more day while hoping for a miracle. For business as usual, there is no alternative: interest rates fall to zero- then negative, currencies depreciate, pensions are looted and depositors bailed in … we must endure these abuses or else! Everywhere in the Westernized world useless industries and sectors are propped up regardless of consequences. Deflation results from the longer-term inability of billions of end-users to gain purchasing power or returns on capital from a mechanized regime that is designed from the ground up to annihilate capital.

No capital, no purchasing power, no problem; we’ve got iPhones, instead!

Blows are starting to rain down on the technology sector. Instead of saving our bacon as its promoters endlessly insist, the industry is having problems saving itself:

AAPL

Figure 2: It isn’t just the energy sector: looking at this pretty chart (Yahoo Finance, click for big): Apple’s decline looks to be part of a longer-running trend rather than a fluctuation. The firm reported earnings, which were terrible; the company is being punished for its customers’ misbehavior.

Rotten Apple: Stock plunges 8% on earnings, revenue miss

Everett Rosenfeld

Apple reported quarterly earnings and revenue that missed analysts’ estimates on Tuesday, and its guidance for the current quarter also fell shy of expectations.

The tech giant said it saw fiscal second-quarter earnings of $1.90 per diluted share on $50.56 billion in revenue. Wall Street expected Apple to report earnings of about $2 a share on $51.97 billion in revenue, according to a consensus estimate from Thomson Reuters.

That revenue figure was a roughly 13 percent decline against $58.01 billion in the comparable year-ago period — representing the first year-over-year quarterly sales drop since 2003.

Shares in the company fell more than 8 percent in after-hours trading, erasing more than $46 billion in market cap. That after-hours loss is greater than the market cap of 391 of the S&P 500 companies.

 

 

AAPL is not some disposable startup at the end of a cul-de-sac somewhere in suburbia, it is (or was) the world’s largest company by capitalization. It is the technology sector’s tech company. When people hear the word ‘progress’, chances are they think robots and iPhones. Yet, markets are becoming unfriendly for the behemoth: its shares presently lurk at a support level, that if breached, would indicate a decline to $55 or so … from $125 per share a little over a year ago. In other words, a slump that mimics the fuel price crash.

This is very serious business. Stockholders are a who’s who of finance: pension funds, sovereign wealth funds, central banks, private equity and hedge funds. Shares are collateral for billions in debt that has been used for stock buy-backs and mergers. The entire tech investment ecology is at risk. Damage from a sixty-percent-ish price decline would be severe. Leverage against the shares applied backward compounds the damage just as it expands returns on rising prices; this puts more pressure on the hapless lenders reeling from their debacle in the oil patch. It isn’t just the money: against a backdrop of hand-wringing and denial, the science fiction narrative of a future running on innovation (and sharp business practices) is falling apart.

Ironically, Apple is constrained by a cleverness shortage: successive iterations of iWhatevers have become predictable variations on now-familiar themes. Offering customers novelty in modest increments at stratospheric prices has consequences; buyers are skipping over the brand and buying cheaper look-alikes. Commodity ‘clone’ products represent the race to the price basement, they can’t generate the marginal returns or snazzy narratives that support inflated share prices. In this sense, Apple is a victim of its own success, it must either compete going forward with its imitators on price or invent the next great must-have-at-all-cost consumer product that will re-establish its position of leadership in the technology firmament.

This is what AAPL has come up with …

bmwi3-800x448

So much for redemptive innovation and technology … Apple aims to reinvent the Dodge Caravan. It turns out all roads lead to more and more roads. Why not battleships, instead?

Battleship1

HMS Dreadnought, a brilliant technological achievement in 1906, it was rendered obsolete before its keel was laid by the airplane.

Apple cannot be serious! In choosing the car, AAPL lurches in the direction of the hapless Japanese, who make brilliant cars (made brilliant battleships) but cannot return value to the cars’ users (neither do battleships). The auto (battleship) industry is a subsidy hog, it twists in the wind even as it is on life support. By way of its actions, APPL admits its customers can no longer subsidize the company and its lenders, it looks instead toward the government (just like battleship manufacturers), to gorge at the public trough.

ATSLA1

Figure 3: TSLA, another investors’ darling, (click for big). Strapped customers can afford the cars by bellying up to their friendly sub-prime auto lender for eight-year loans. Even this absurd financing is inadequate without billions in additional subsidies. These in turn can only come from finance, the same industry under so much solvency pressure from resource depletion … resulting from over-reliance on cars (battleships).

And all for what end? Nobody connects the big picture dots behind the empty gestures; battleships, Teslas and iPhones are status symbols, worth little- or nothing outside their self-generating, hubristic narratives. “In the long run,” said Keynes, “we are all dead”, it seems certain that we have to humiliate ourselves first.

Foiled by Oil

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Published on Peak Surfer on February 14, 2016

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"Pemex revenues are down 70% in the past 18 months. That is what Peak Oil looks like."
 

 

 

"Oil in the ground is wealth only on paper – you may own that oil, but it earns you nothing until you recover and sell it. Yet paper wealth is still wealth. It goes on your balance sheet as an asset that you can sell. You can use it as collateral to borrow cash and buy other assets." 

People do use their oil shares to buy houses, cars, planes and college educations. When crude oil prices hit $140 per barrel, pension funds and college endowments rejoiced.

Our 2006 book, The Post-Petroleum Survival Guide and Cookbook was published just as conventional hydrocarbons struck their all-time global production top and began to decline (a picture that emerged only years later). The book challenged readers to consider how they might cope with $20 per gallon gasoline and the absence of public transit alternatives.

It also described the undulating top we now see, where high price destroys demand, which crashes price, which boosts demand, which raises price, and so on. Think of this part as the whoop-de-doos after the roller coaster cranks its way to the top and lets gravity take over.

Lately there have been a spate of articles in the financial press beating up on Peak Oil theorists for being so widely wrong in their predictions. They point to charts showing global oil production rising from 86.5 million barrels per day in 2008 to 96 million in 2015. Of course, they are mixing apples and oranges. What peaked, right on schedule in 2006, was conventional liquids.

After 2006 Big Oil played its hole card, unconventional oil and gas. Those inside the sector had been telling the Peak Oilers about this all along, but it still caught some incautious prophets out on a hoisted petard. "Our community would concede that we underestimated or didn't quite understand this whole fracking thing," said Jan Lars Miller of ASPO-USA (Association for Study of Peak Oil). "It exceeded everyone's expectations."

Not everyone's.

What Big Oil did not tell the pundits was that the unconventionals are a Ponzi scheme, too expensive to compete with renewable energy, made up mostly of a great credit bubble and churning real estate plays. Like all such schemes, unconventionals run on a short fuse that is only as long as the credibility of its grifters. As long as the con can keep up an appearance of legitimacy, people still buy houses, cars, planes and college educations riding on cascades of fraud.

On Big Oil's books, proven reserves of oil are presently estimated at 1,700 billion barrels. Just in the past 18 months, and accelerating after the Paris Agreement, the decline in value has been $70 per barrel. The value of oil shares, therefore, has been reduced by $119,000,000,000,000. That is 119 trillion. It is only a matter of time until the market catches up to that peg. It is already on its way. Maudlin said, "The lost value in crude oil is equivalent to a couple of hundred Googles and Apples going up in smoke."

But lest we forget, we are not just over the top of Peak Oil, we're at Peak Everything: coal, natural gas, iron, copper, zinc, nickel, lead, palladium, platinum, silver, and aluminum – all suffered double-digit percentage valuation drops in 2015.

One of our earliest blogs here on this site was published August 14, 2007. It was called "The Mexican Trigger." We still do not know if what we prophesied then will yet come to pass, but it is worth looking at. We laid it out more completely in September, 2007 for Energy Bulletin:

In 2004, Pemex was pleased to announce that its oil wealth would continue for many years to come. Pemex's head of exploration and production, Luis Ramirez, was quoted in the daily newspaper El Universal as saying that Pemex had mapped seven new offshore blocks with large pools of oil and natural gas, likely in the range of 54 billion barrel-equivalents, more even than México’s proven plus probable reserves at that time.

“This will put us on a par with reserves levels of the big players like Iraq, United Arab Emirates, Kuwait or Iran,” Ramirez said. “What's more, we would be in a position to reach production levels like those of Saudi Arabia, which produces 7.5 million barrels per day, or Russia, which produces 7.4 million.”

Just 3 years later, Pemex's tune had changed. It had reckoned the cost of unconventionals versus conventionals and fully understood that high prices would be required if it was going to become a big league star. As we described in our post, on July 27, 2007, Raúl Muñoz Leos, Director General of Pemex, warned that México had less than seven years before the country would run out of conventional oil. Not seven years until it peaked. Not seven years for Cantarell, its super field. Seven years, and Méxican production would run dry.

Let's see. 2007 plus 7 equals 2014. So what happened?

What happened was that Mexico did the same thing as the United States did in 1970. It deployed technological advances, it went unconventional (first offshore, later shale and fracked gas), and it imported to fill the gaps. When Enrique Peña Nieto was elected he quickly moved to privatize the national oil company. Pemex stopped being a public agency and became a "State Production Enterprise." Thanks to Peña Nieto's government, Pemex is now authorized to attract foreign investment of $8.5 billion dollars by selling parts of itself to private companies, including the US oil cartel.

Fast forward to 2016.

30 January: With budget cuts, the abandonment of the oil installations on land and in the Campeche Sound, it appears that the Federal Government is determined to liquidate Petroleos Mexicanos (Pemex) and return to where we were before the oil boom, which would create an economic and social catastrophe for the oil states like Campeche….


Por Esto, the newspaper of Yucatán

The government, which previously milked Pemex oil revenues to pay for breathtakingly rapid development of the country, found itself having to now raise taxes from tourism and other sources to keep Pemex afloat. In 2015 it cut what it spent on Pemex by 340 million dollars. Pemex shed 11,735 jobs and did not replace 80% of those retiring. It canceled $10 billion in pensions for those in retirement.
 

Mexico: Oil Production 1960-2015

Editorials in the Mexican press say the crisis was "the most important in the sector since the 1938 constitutional change [nationalizing energy companies]."

What is still not being widely recognized is that the crisis in oil is the main reason for the crisis in the finances of Mexico. The crash of the peso against the dollar — 20% per year since 2013 — is seen as good for tourism. How tourism will fare when the national grid fueled by petroleum cannot provide power to beach resorts is not discussed.

In January, 25 Pemex buildings had no electricity service for a period because the Federal Electricity Commission (CFE) cut off service for nonpayment. Some workers ran to the hardware store and bought portable generators so they could continue monitoring critical functions like pipelines and offshore drill rigs.

The average price Pemex received for oil in 2015 was $49/bbl. It is now below $25. Some analysts estimate that government, in full-blown financial free-fall, may cut investment in Pemex by $3 billion in 2016, which would take production to 2.0 million barrels per day, down from 2.27 million last year and 3.4 million at the peak in 2004.

Low oil prices do not mean oil is not going to peak any more than a snowstorm means that global climate is not warming. In fact they only serve to prove the peak oil theory.

Pemex revenues are down 70% in the past 18 months. That is what Peak Oil looks like. Mounting debt for exploration, which must be paid in dollars to US companies, is $11.7 billion, or 63.8% of the present value of Mexico's declining proven reserves. Remittances — money earned abroad and sent back to the families – are now one-third larger for the Mexican economy than oil revenues. Will those be used to pay Pemex's foreign debt service, 65% of which is due in dollars, and 15% in euros, yen and yuan? Or perhaps the government just can switch to legalizing and taxing marijuana?

This month Mexican Association of Petroleum Industry (AMIPE) Chairman Erik Legorreta told potential investors:

"Petróleos Mexico is and remains the ideal for Mexican companies and foreign participants in the sector, and this is the time to invest in it, to seize the coming period of rising prices, that are historically cyclical." He said Pemex was among the most competitive companies in the world .

In January Pemex issued a tranch of 10-year junk bonds valued at 5 billion pesos, roughly 300 million dollars, with promised interest rates of 6.9%, or 491.6 basis points over comparable US Treasuries. Standard & Poor's rates them BBBB. Those are still for sale. Want some?

And, lest we forget, Mexico was until recently the largest source of crude oil flowing to the United States. Its share was down to just 9% of US imports in 2015 and the flow will change direction in 2016. But then, the US no longer needs to import oil, right?

Shale oil fields, by their nature, are easy to turn on and off. If your oil costs $40 a barrel to produce and you can sell it for only $35, you can cap your wells and wait for higher prices. Canada, which supplies 37% of oil imports to the US, is doing this now.

However, if you borrowed or fleeced gullible investors for the money to drill your wells you need cash to service debt and pay dividends. You will keep pumping even if you only break even or run a loss, as long as you can pay the debt. The alternative is default. Bondholders are the only ones getting quick liquidations from drilling — in bankruptcy court. Oil patch bond prices have collapsed.

Fracked gas is a different story. Once you drill you have to extract. If you are not fast enough, you can wind up with a methane gusher like Porter Ranch (or Deepwater Horizon's Macando blowout). So you have a monkey on your back. It doesn't matter what you paid to drill the well, you have to sell at a loss, as North Dakota fracker Hess Oil recently discovered to the tune of negative $875 million (forcing it to sell off all its retail gas stations to Marathon and shares of its stock it had only just purchased at twice the price, in exchange for a couple more quarters of solvency and hope).

Current Depletion Projections by Industry Analysts


We suggested here in 2007 that if Pemex went down, it could take the US economy with it. Since then, however, the US economy has weaned itself of dependence on Mexican oil. Instead, it grew its own (and Canada's) unconventional fuel capacity on a foundation of financial fraud. That became the US's main economic driver — extending by pretending — and a growth industry it could export.

Fraud is a fragile mistress that likes to be pampered. She does best with the trendy urbane who imagine that to the clever, reward comes without work and that pushing paper between desks, or electrons through the ether, is the same as growing potatoes or pounding nails. She avoids being seen around reality-based communities, preferring to find dark embrace where the fog of deception is thick and judgments are clouded by greed.

As Frederic Bastiat reminded us, "When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it."

In his documentary, Capitalism: A Love Story, Michael Moore observed that during the Bush Recession when the auto industry laid off much of its workforce and shut down most its lines, it wasn't because it could not make and sell cars. It was because the Bank of America would no longer loan it money to upgrade its production lines. Mexico is able to extend the illusion of development only as long as someone loans it money. The same is true of the United States.

What if the banks would or could no longer loan money? That day may be nearer than most economists believe, but then, predictions of peaks, or a systemic crash, are a risky proposition.

 

 

 

 

 

 

 

 

 

 

 

Repricing Reality

bizbuddha_6_10_flat gc2smFrom the keyboard of James Howard Kunstler
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Originally Published on Clusterfuck Nation February 15, 2016

 


It ought to be a foregone conclusion that Mr. Obama’s replacement starting January 20, 2017 will preside over conditions of disorder in everyday life and economy never seen before. For the supposedly thinking class in America, the end of reality-optional politics will come as the surprise of their lives.

Where has that hypothetical thinking class been, by the way, the past eight years? Don’t look for it in what used to be called “the newspapers.” The New York Times has become so reality-averse that the editors traded in their blue pencils for Federal Reserve cheerleader pompoms after the Lehman incident of 2008. Every information-dispensing organ has followed their lede: The Recovery Continues! It’s a sturdy plank for promoting the impaired asset known as Hillary.

Don’t look for the thinking class in the universities. They’ve surrendered their traditional duties to a new hybrid persecution campaign that is equal parts Mao Zedong, the Witches of Loudon, and the Asylum at Charenton. For instance the President of Princeton, Mr. Eisgruber, was confronted with a list of demands that included 1) erasure of arch-segregationist Woodrow Wilson’s name from everything on campus, and 2) creation of a new all-black (i.e. segregated) student center. He didn’t blink. Note: nobody in the media asked him about this apparent contradiction. That’s how we roll these days.

Don’t look for the thinking class in business. The C-suites are jammed with people still busy buying back stock in their own companies at outlandish prices with borrowed money. Why? To artificially boost share price and thus their salaries and bonuses. Does it do anything for the fitness of enterprise? No, in fact it makes future failure more likely. Why is their no governance of their insane behavior? Because they’ve also bought and paid for boards of directors composed of a rotating cast of praetorian shills, with fresh recruits entering the scene weekly through the fabled “revolving door” between business and government regulators.

Oh, and then there’s government. Anyone viewing the boasting-and-defamation contests that the cable TV networks call “debates” knows that these spectacles are based on the opposite of thinking. They are not only reality-optional, they’re thought-optional. Hence, it appears for now that America is fixing to elect either a primal screamer or a road-tested grifter to preside over the epochal collapse of our hobbled, exhausted, way of life.

The recent carnage in the stock markets will probably see a retracement after the President’s Day hiatus. They’re bouncing up in other parts of the world today, the triumph of hope over all the available evidence that something fatal has happened out there in Tom Friedman’s supposedly permanent global economy. Some observers suspect that it has something to do with the price of oil, because the oil futures market and the stock indexes seem to go up and down in tandem. But they don’t really get it.

How hard is it to understand that A) that something adverse happens to oil companies when it costs them $70-a-barrel to hoist the product out of the ground and then sell it for $30-a-barrel? And B) that all of the infrastructure of techno-industrial civilization was designed to run on oil under $30-a-barrel and founders when the price goes higher? That’s how it is. That’s your basic reality.

We’ve been trying to work around this vexing problem — the non-linear manifestation of the supposedly bygone predicament called “peak oil” — since the early part of this century. Mainly, we worked around it by borrowing money that wasn’t there. Having created this matrix of borrowed money, we’ve also created an expectation in market obligations that it must be paid back. In fact, the process of paying back money owed is the only thing that supports confidence in a system based on that essential trust — even if that expectation was unreal to begin with. When it is violated, terrible things happen in markets and economies.

Those terrible things are underway. We’re going to be a much-distressed and poorer so-called republic when this year is done with us. The markets will crack and the trade relations that comprise globalism will fall apart as nations and regions of nations struggle to survive. We’ll move inexorably to a very possibly disastrous election. We’ll face the basic choices, as distressed societies always do, of freaking-and-acting-out (usually in the form of war), or opting for a reunion with reality and its mandates. So far, it’s not looking good for the better option.

If you are a thinking person, the months ahead might be your last chance to protect whatever wealth you have and to move to some part of the country where, at least, you can grow some of your own food and become a useful part of a social and economic network that might be called a community.

 


James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

Community in Death

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Published on Peak Surfer on February 7, 2016

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"Denial is common among our kind of sapient apes and faith in the supernatural — angels, aliens, and economists — exposes our deeper fear of overdue reckonings."

 

 

 

 
When a person you know dies, a part of you must go too, like a thread being cut and a part of yourself unraveling. We are a weave of such threads, we two-leggeds, and our knits are a biochemical, emotional, electrical and microbial gestalt. We interweave with each other in ways that are seen and unseen, forming a fabric that we call, for lack of precision, "community."

We have been spending some winter months in recent years in a small village on the North coast of the Yucatán Peninsula. When we first arrived it was a not atypical coastal town with dirt streets and thatched or tin roofs. It is secure within one of Mexico's largest nature preserves, and it is here because the village pre-existed the reserve, so it was allowed to remain as long as it behaved, and then even when it didn't. Development has been very cruel to this region in recent years, has made it socially, economically and ecologically more fragile, and has set it up for a big fall in the not very distant future. 

We are much more comfortable wintering here than in the cold north, in Tennessee, or in touristy trendy spots like Mazatlan, Puerto Vallarta, Cabo San Lucas or Playa del Carmen. Here we can find the quiet time we need to gather and sort our lost or jumbled thoughts, recover from our summer labors and travels and prepare for the work to come. We have written 5 books here and substantially contributed to at least twice that many more.

Before there was Cancún or the state of Quintana Roo, this had been just one more fishing village — a few hundred souls. It was known mainly for the quality of its hammocks and the beautiful seashells that washed up on its beaches. Because of its position along Cabo Catoche and the Straits of Cuba, it receives annual migrations of fish, birds, sea turtles and marine mammals and the biodiversity runs deep. The name of a nearby town is the Mayan word for manatee. The name for this place in Mayan is "black hole," a reference perhaps to the freshwater Yalahau cenote that for more than five centuries attracted whalers, pirates and explorers to refill their water casks. Among the older family lines you can recognize Russian, Nordic, Moorish, Maori and Portuguese lineages in facial hair, skin complexion, physical build and other features that are neither Yucatec nor Mestizo.

Here, where it is so full of life, is a strange place to think of death, but there come times when everyone needs to. Mexico has very different customs regarding death than its neighboring countries to the North. As Octavio Paz wrote in Labyrinth of Solitude:

"The Mexican … is familiar with death, jokes about it, caresses it, sleeps with it, celebrates it. True, there is as much fear in his attitude as in that of others, but at least death is not hidden away: he looks at it face to face, with impatience, disdain or irony."

When Hernan Cortes conquered the region that is now Mexico City, his conquistadors noticed a local ritual of making offerings to the goddess Mictecacihuatl, Queen regnant of Mictlan, the underworld, ruling over the afterlife. In the Aztec codices, Mictecacihuatl is represented with a defleshed body, jaw agape to swallow the stars during the day. Cortes' priests were quick to link the Aztec rituals to the Catholic observances of All Hallows Eve, All Saints' Day and All Souls' Day, just as they brilliantly connected the dark-skinned indigenous Madonna, the Virgin of Guadalupe, to the corn goddess, Chicomecoatl. Unlike the masses for the dead celebrated elsewhere, however, Dia de los Muertos is a happy occasion, with a carnivalesque atmosphere.

For the south of Mexico and in rural areas, death holds far greater social and cultural significance than in the north and large cities; families and communities may spend large parts of the year in smaller rituals and processions and it is not uncommon to find an altar in every home with images of the departed. The pre-Columbian concept of life and death was as part of a broader, never-ending cycle of existence, which dovetailed neatly with Christian and Asian traditions of veneration of the deceased, afterlife and reincarnation. In places and periods where unnatural death is a regular feature, as it was in much of Turtle Island after European contact and for 500 years, death becomes engrained as a cultural expression. As the artist Diego Rivera said in 1920: "If you look around my studio, you will see Deaths everywhere, Deaths of every size and color."

Our neighbor across the way on Calle Gonzalo Guerrero is Capitán Carmelo, a fisherman and whale shark diving guide. He is part of an old family in the town and an "abuelo" now, with grandchildren in their teens. A day ago his wife, Maria Coral de Sabatini, died and today the community laid her to rest. We are going to spend a few moments now describing that process, because it has a lot to say about the power of community, how it is built, how it is held, and how it passes between generations.

We started noticing Maria's cough a few years ago. She sort of shrugged it off, sitting as she did in her chair in front of her home every day, but we couldn't help but notice as it became deeper, more throaty and more painful. We suspected that because she and Carmelo neither drink nor smoke and neither does anyone else in their house, that it was not likely lung cancer but more probably tuberculosis. Her family simply called it las garras (the claws, or what we might call the grip). When we returned last year it had gotten so severe that she had lost a lot of weight and could not sit outside on dusty days. When we returned this year she was gone. We asked after her and Carmelo said she was in the hospital.

Then on Christmas she returned home. We asked her about her health and she said she lived day to day, “poca a poca,” little by little. We understood her to be dying. She had come to do that at home, among friends.

The knowledge that a person will die, combined with the uncertainty of not knowing when the event will happen, can be very stressful for family members and we witnessed this as the family drew together over the holidays. Then she seemed to recover, was up and about, and we were happy to see her walking to the corner store for eggs or fruit again, frail but smiling. The family dispersed again, the kids back to school, Carmelo and his son-in-law to fish each morning before sunrise.

A few days ago Maria's condition worsened and the family was pulled back together. Then one morning she suffered an arrest and the paramedics were summoned, followed by the police with the village pickup truck that doubles as an ambulance. We watched from our home and after an hour or so, the medics and police left and soon the village priest arrived.

Maria was given last rites by the priest and anointed with holy oil. If she was able, the priest heard her final confession, provided communion and offered absolution. Then began the vigil.

The vigil was attended mostly by immediate family, close neighbors and friends and lasted a day and a night, until Maria passed, peacefully, in her sleep. In the morning the family closed off the street and erected a tent. Chairs were brought and placed in a circle. A white coffin arrived, and Maria was bathed, dressed, and placed in it, on a pedestal in the front room of her home. For the next 24 hours, everyone who knew her came to pay their respects and say goodbye. They filed into the home and then out to the tent, where they sat, told stories, ate, sang. Musicians — different ones, separately and in groups — came with instruments, some several times. Choirs appeared and serenaded. Prayers were recited. Children came and sat with their elders or wandered in to stare at the body in the open coffin. Candles were lit. Elders were helped in, touched her, held her hand, said a prayer and were helped back out to the street. More candles were lit. More hymns, more prayers.

The wake continued through the night. A heavy rain fell, the heaviest of the winter so far. The songs got louder to drown the rain. Because Carmelo and Maria were teetotalers, there was no alcohol. This was a time for friends and family members to share memories of the past, to speak of their concerns for their own families, the village, the future. It is a moment when the fabric of the tribe is being woven. Lost threads are recovered. Wrongs are forgiven. Apologies are made. Expressions of friendship, kinship and love patch tears in the fabric. The children witness it all. This is part of their formative experience.

Maria was royalty. She bears the family name of José María Sabatini, for whom the annual fishing tournament is named. Her family, and the family of Carmelo, go back to the group that endured the great hurricane that swept away the original village on the Southwest point of the peninsula and made new islands there. They migrated their ejido southeast and built the village that is here now. There are a few names that appear most often in the cemetery that mark these families: Moguel, Ancona, Betancort, Avila, Nuñez, Rosado, Coral, Sabatini. Notice that these are not Mayan names and some are also not Spanish.

At sunrise a pickup truck fords the deep puddles and backs up to the house. The coffin and flowers are raised into the truck bed and the procession of mourners follows it at a walking pace to the church. There the coffin is unloaded, brought to the front of the nave and opened for viewing again. It is 8 am. Now the village gathers.

Capitan Carmelo is a vicar in the church and normally it would be his duty to prepare the way, usher the family to seats, read part of the scripture, and make the collection. Instead, he takes his position in the front row with his family while his fellow deacons, dressed in white, perform those functions. A choir forms at the vestry door and sings energetically at various points in the service. Loudspeakers in the nave make their small number seem larger than it is, but they sing in a style that is definitely homespun and authentic, not canned.
 

The cement angel motions the dead to hush up and sleep

Midway through, the town's power is lost, a not uncommon daily occurrence in this place. The priest does not even pause to acknowledge the loss. Lit through stained glass and with acapella choir, his mass does not miss a beat.

After communion, the pallbearers return to stand beside the coffin and Carmelo leans in to plant one last kiss on Maria before the lid comes down. It is a touching moment.

Then the coffin and flowers are carried back onto the bed of the pickup, which gets stuck turning around in the mud, and once unstuck, the long procession passes slowly through town and out to the cemetery in a light rain.

In Mexico it is said the dead return on certain days of the year. Those days they are remembered through special ceremonies. The body must be buried, not cremated, for their return to occur. Because we are on the sandy coast, the cemetery consists of aboveground vaults, cemented and tiled to protect from the sea. During Hurricane Wilma, the entire cemetery, and the town, went a meter or more under the waves and although the cemetery wall had to be repaired, relatively few of the vaults were badly damaged. Maria's family names, Coral and Sabatini, are on several of headstones.

Afterward, the mourners gather back in our street for a meal and reception. This is a time for levity, good food, and comforting those who are still dealing with their grief. Then, after two or more days awake, the family gets to sleep a short while and Maria Coral de Sabatini is gone but not forgotten.

The tent remains for the next 8 days, and each day there are visitors. Twice each day the front room of the house is filled with voices raised in hymn and the recitation of the rosary. On the final day, it is an all-night ceremony.

The cemetery is particularly poignant because this is a town that is built on the coral sand of a barrier island. The highest point of land is no more than 3 meters above the sea. Wetlands approach the edge of the cemetery and trash is being dumped there to fill the sinkholes. Some of that trash includes old monuments and broken crypts of the departed whose names have been forgotten, the marks on their stones and crosses rubbed out by time and salt air.

It might be denied by the government or wishful thinkers, but this is an entire town on death watch. The vigil begins every June, when it enters hurricane season, because one more Wilma could erase everything but the memories. Already regular tides that coincide with the moon are bringing seawater inland to places it has not reached in the memory of the elders. Many seawalls that were constructed after Wilma are now nearly obsolete. The population here continues to grow on the strength of tourism and Catholic fecundity, but where it will go when the town vanishes is anyone's guess. It is likely that many of these families could break apart. This is a community of place.

How long does it have? That's anyone's guess too. It could be a decade. Maybe two. Three seems unlikely, because both the Caribbean and the Gulf of Mexico are warming dramatically and molecular thermal expansion of the water, combined with the westerly currents at this latitude which dictate that sea level rise here will be stronger and faster than most other parts of the Earth. Southeastern Mexico, Galveston, New Orleans and Miami are on the front lines of climate change. Miami Beach, like here, has been sinking one inch each year, one foot every 12 years, and that is accelerating.

Some here believe that some supernatural event will spare this place its preordained fate. Denial is common among our kind of sapient apes and faith in the supernatural — angels, aliens, and economists — exposes our deeper fear of overdue reckonings. Still, not even the most hopeful provisions of The Paris Agreement can alter the fate of coastal cities and low islands now.

In the not-too-distant future the only way to visit Maria will be with a mask and snorkel. Unless the government decides to relocate everything, an unlikely prospect, she will still be here, and probably alongside Carmelo, when the rest of us have moved to higher ground. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

President Trump

Il Duncegc2reddit-logoOff the keyboard of Albert Bates

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Published on Peak Surfer on January 31, 2016

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"From here this presidency sure looks like an unqualified success."

 

  It has been more than a year now since The Donald moved into 1600 Pennsylvania Avenue and he continues to be thwarted at every turn by that do-nothing Congress and the Democrat Party.

We all had expected that by now the Asian countries that have dumped their goods here and almost bankrupted our country by causing our trade deficit would have felt the bite of tough new rules, but the Trans Pacific Partnership tied Donald's hands on that one.

Mexico still won’t keep its illegals — the source for Americans’ drugs — on their side of the border. NAFTA prevented the border closing there. It wouldn't even take those Mexican tractor-trailers off our roads, and who knows how many of them are filled with illegals being dropped off in Ohio and Pennsylvania? Still, we are pouring concrete for a bigger wall all the time, whether Mexico pays for it or not. They should because they created this problem, but so far Donald has not gotten a single peso from the ingrates.

And, of course, the Muslims have always been fighting us when they are not too busy squirmishing between themselves. The Donald's executive order closed all our borders to refugees from Syria, Libya, Egypt, and Afghanistan; countries populated by still more ingrates who are unwilling to pay for the wars that we started on their behalf. And wouldn't you know? That is now going to the Supreme Court, challenged by the Democrat Party as unconstitutional. As if the President of the United States, as Commander in Chief, doesn't have the power to keep all the riffraff out. That wishy washy Supreme Court is not conservative enough! The Donald will get his chance to change that, soon, with real right-winging, bitter-clinging, proud clingers of our guns, our God, and our religion, and our Constitution.

Solving our trade deficit wasn't as simple as ending the supply of cheap Chinese stuff. Donald got around Congress and the TPP by calling that retailer CEO summit at the White House. But it still comes in from places protected by those bad trade deals negotiated by idiot presidents who didn't know the first thing about the art of the deal. Now the Chinese stuff goes to Australia and gets rebranded before the container ships take it to WalMart. That is why the prices we pay didn't change much, so I guess we can be grateful. The Chinese and Koreans should be too, but are they? No way.

When the Donald sent the marines to grab Iraq’s oilfields last month there was a big uproar at the UN but what could they do, the toothless liberals? Donald just vetoed any Security Council resolution they passed. Now we control a significant supply of the world’s oil and can set prices where we like, and not just where the Saudis want them, in the basement. We all have to put up with higher prices at the pump now, but rising crude prices have stopped the slump in fracked gas futures and got us back on the path to the energy independence that made America strong.

If the Saudis gripe about that, Donald says he is ready to send a bunch of oil sheiks to his reopened Guantanamo just to let them know who's in charge. Sure, he hasn't gotten rid of ISIS yet, but give him time. He will get their oil too, and you can take that to the bank. The marines are just settling into Iraq now. Syria is a quick hop.

Donald's poll numbers are quite good, and it is long past the honeymoon stage. People are calling him the Second Great Communicator. Doubters have to eat crow. Our military is stronger than ever, and we are respected again, whether foreigners like it or not.

We will know soon whether that do-nothing Congress passes the President's energy plan and American builders can get started on those 100 new nuclear plants. That will be a real shot in the arm for the economy, as well as making energy cheap again. People say the President is a climate denier, but those new nukes will do more to stop climate change than anything Obama did in Paris. Put a trillion dollars into nuclear power, like we will, and your other countries can be energy independent too, you UN people.

People criticize the President for ordering the National Football League to move the Super Bowl to New Jersey, but now that more than a third of the teams have relocated to California, it seems only reasonable that the East Coast should get its share of the action. Some of the best football we've ever seen was played in snow.

When the Donald took office the economy was in shambles. Stocks were getting schlonged. Oil, coal, and car companies were talking bankruptcy and wanting bailouts. The Donald doesn't do bailouts. How about that?

The Donald met with all the banks and cut them checks. He refinanced the country. Remember: this is a guy who knows what it is to go bankrupt and still wind up with high-rise penthouses and golf courses. That's exactly what he did for America. Who cares what the dollar is now worth in Timbuktu? We will soon have legal casinos in every city and every state, and they won't be run by Indians, either.

We are still only a year into this presidency, but from here it sure looks like an unqualified success. We guess that's only to be expected when you buy the best.
 

“I’m Donald Trump and I endorse this message” — Trump for President 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Paris Gravity Well 2: Trillionization

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Published on Peak Surfer on January 24, 2016

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Discuss this article at the Environment Table inside the Diner

"We will not suddenly convert steel mills, cement kilns and road surfacing machines to operate on sunbeams."
 

Charlie said, "That's the trouble. You see it the way the banking industry sees it and they make money by manipulating money irrespective of effects in the real world. You've spent a trillion dollars of American taxpayers' money over the lifetime of the bank and there's nothing to show for it. You go into poor countries and force them to sell their assets to foreign investors and to switch from subsistence agriculture to cash crops. Then, when the prices of those crops collapse, you call this "nicely competitive" on the world market. The local populations starve and you then insist on austerity measures even though your actions have shattered their economy….

"You were intended to be the Marshall Plan, and instead you've been carpetbaggers."

— Kim Stanley Robinson, Sixty Days and Counting: Science in the Capitol (2007).

“With fundamentals changing slowly and risk appetite falling rapidly, the stage is set for a longer period of risk asset underperformance,” Jabaz Mathai, a strategist at Citigroup Inc., said.  “There is no quick fix to the headwinds facing global growth.”

"Similar periods of weakness have occurred in only five other instances since 1985: (1) the majority of 1988, (2) the first half of 1991, (3) several weeks in early 1996, (4) late 2000 and early 2001, and (5) late 2008 and the majority of 2009 … all either overlapped with a recession, or preceded a recession by a few quarters."

There has been a storm brewing since the last trifle with full-on collapse in 2008-2009. The extend-and-pretend debt balloon was reinflated and stretched to new enormities as Keynesian cash infusions fueled a Minsky Moment, if not a Korowicz Crunch.

The instability in finance is compounded by the instability in demographics. In Mexico City, Bogata and Rio they call them NINIs — the millions of youth between 15 and 24 who neither study nor work. They are now about a fifth of the population in the underdeveloping world, responsible for higher rates of homicide, gangs, and unwed pregnancy. Of those born to NINI mothers, there is a 22.3% greater likelihood of becoming a NINI, according to the World Bank. All this tinder simply builds, bides its time, wanders the streets, waits for a revolutionary spark.

As we said here last week, the trigger for the markets' sudden move may have been what happened in Paris but could not stay in Paris. When it filtered out from the December summit that 195 countries had actually done the unimaginable and set a goal of carbon neutrality, meaning phasing out net fossil fuel emissions by 2050, the financial sector was at first caught dumbfounded. The World Bank guys flinched.

Now it has sunk in. The Guardian reports:

Former OMB Chief David Stockman's recap

Investors face a “cataclysmic year” where stock markets could fall by up to 20% and oil could slump to $16 (£11) a barrel, economists at the Royal Bank of Scotland have warned. In a note to its clients the bank said: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” It said the current situation was reminiscent of 2008, when the collapse of the Lehman Brothers investment bank led to the global financial crisis. This time China could be the crisis point.

Government subsidies are about to undergo a titanic shift. Many governments spend more on fossil-fuel subsidies than they do on health and education, more than a trillion dollars. Consumer benefits such as subsidized fuels and cheap finance add $548 billion per year. Government support for companies to expand production add another $542 billion just in G20 overdeveloped countries, and a mere top 8 of those will spend $80 billion of this kind every year, four times the investments going to renewables globally.

Tomorrow those same Big-8, and 188 others, will begin spending several times those trillions subsidizing renewables. Jeremy Leggett, founder of Solar Aid and Solarcentury, calls it "trillionization." It won't begin to fill the energy gap that the switch will create, but the psychology of sunk investment will be in charge from thereon out.

Oil producing states and countries are aghast. The "clear signal" that Paris sent was not what they were expecting. In Alaska, the Permanent Fund has been running in the red and the legislature is talking about an income tax. Had the Paris Agreement not come together, they might hope for a rebound of fossil prices and investments in drilling the North Slope and Arctic Refuge.

Petroblas, the national oil company of Brazil and wellspring of the Brazilian Economic Miracle, is now cash negative. It will be forced to turn to the government for a bail-out, but to where will its government turn?

In Mexico, the deficit is running 100 billion and the peso has dropped from 12 in 2014 to soon-to-be 20 against the dollar. If you have dollars you can get a meal in a good restaurant or a room for the night for 5 or 10 of them. So far in January the price rise of food for the average Mexican is alarming. Onions are up 19%, poblanos 15%, bananas 10%, tomatoes 9%.
 
The national oil company, PEMEX, came out on Monday saying it is not true that its operating with losses, but below the $26 per barrel it would be. On Tuesday the price dropped to $24.74. It closed the week at $22.77 but as we write this you can buy a barrel in Mexico City for as little as $20.32. Mexico's federal budget is entirely dependent on oil money and don't look now but Mexico, when it was petrodollar flush, became a net importer of most staple foods and many other essential commodities, which helps explain the grocery dilemma. Mexico now buys onions, poblanos, bananas and tomatoes from California. Also beans, corn and rice.

Gotta love those World Bank guys.

Venezuela, which surprised everyone by signing the Paris Agreement at the final hour, declared an economic emergency on January 15. France, which foolishly drank too much atomic kool aid thinking it might spare itself from petrocollapse, has a budget shortfall of 2.2 billion dollars and declared national economic emergency on January 17. The jobless rate in France, the eurozone's 2d largest economy, is above 10%, compared with a 9.8% EU average.

Andrew Roberts, RBS’s credit chief, said:

European and US markets could fall by 10% to 20%, with the FTSE 100 particularly at risk due to the predominance of commodity companies in the UK index. London is vulnerable to a negative shock. All these people who are long [buyers of] oil and mining companies thinking that the dividends are safe are going to discover that they’re not at all safe.

We suspect 2016 will be characterized by more focus on how the exiting occurs of positions in the three main asset classes that benefited from quantitative easing: 1) emerging markets, 2) credit, 3) equities … Risks are high.

Zero Hedge reports:
 

"For dry bulk, China has gone completely belly up,” said Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo, talking about ships that haul everything from coal to iron ore to grain. “Present Chinese demand is insufficient to service dry-bulk production, which is driving down rates and subsequently asset values as they follow each other.”

“China’s slowdown has come as a major shock to the system,” said Hartland Shipping’s Prentis. “We are now caught in the twilight zone between shifts in China’s economy, and it is uncomfortable as it’s causing unexpected slowing of demand.”

The continued collapse of The Baltic Dry Index remains ignored by most.

According to  Zero Hedge:

The North Atlantic has few to nil cargo traveling in its waters. Instead, the giant container ships are anchored. Unmoving. Empty.

Commerce between Europe and North America has literally come to a halt. For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America. All of them (hundreds) are either anchored offshore or in-port. NOTHING is moving.

This has never happened before. It is a horrific economic sign; proof that commerce is literally stopped.

The slow response to the Paris outcome has been a complete portfolio review by every actuary and bean-counter in the biggest banks and investment houses, pension funds and mutuals. Hedge fund managers are scratching and sniffing for places to park billions being lifted from soon-to-be-stranded fossil assets. The clean-tech market, signaled first by China, is reacting by recycling cash out of fossil holdings.

Peter Sinclair of ClimateCrocks.com reports:

The Energy Information Administration calculates in its 2015 analysis that the average U.S. levelized cost for new natural-gas advanced combined cycle plants is 7.3 cents per kilowatt-hour — the same as solar.

However, to compare accurately, we have to add about 10 percent to the cost of solar to firm up this variable resource. So we’re close to cost parity, but not quite there.

At $1 per watt, the levelized cost falls to just 5.7 cents per kilowatt-hour, well below cost parity with new natural-gas plants. With two-axis trackers and the best solar resources, which increase the capacity factor to 32 percent, that cost falls to just 4.5 cents per kilowatt-hour. We’re headed to $1 per watt as an all-in cost in the next five to 10 years.

Bloomberg New Energy Finance reported last summer that wind power was the cheapest source of power in the U.K. and Germany in 2015, even without subsidies. The article’s tagline reads: “It has never made less sense to build fossil fuel power plants.” The same article highlights the feedback loop that solar and wind power have in terms of reducing the cost-effectiveness of fossil fuel power plants due to the dispatch order of renewables versus fossil fuel plants.

The solar singularity is indeed near (here?) in the U.S. and increasingly around the world. I described previously that 1 percent of the market is halfway to solar ubiquity because 1 percent is halfway between nothing and 100 percent in terms of doublings (seven doublings from .01 percent to 1 percent and seven more from 1 percent to reach 100 percent). The U.S. will reach the 1 percent solar milestone in 2016. We’re halfway there. Buckle your seatbelts.

There are plenty of unemployed oil workers ready for retraining. James Howard Kunstler: 

So, in 2015, the shale oil companies laid off thousands of workers, idled the drilling rigs, and kicked back to pray that the price would go back up. Which it didn’t…. The landscape of North Dakota is littered with unfinished garden apartment complexes that may never be completed, and the discharged construction carpenters and roofers drove back to Minnesota ahead of the re-po men coming for their Ford F-110s.

To see what does well in the new, post-Paris domain, watch stocks like First Solar (FSLR), Renewable Energy Group (REGI), SolarCity (SCTY) and Siemens (SIE) over the next quarter, and mutuals like Firsthand Alternative Energy (ALTEX), New Alternatives (NALFX) and Guinness Atkinson Alternative Energy (GAAEX). Some of these know their audience and have vowed to screen for social justice. Gabelli SRI AAA says, for instance:

The fund will not invest in the top 50 defense/weapons contractors or in companies that derive more than 5% of their revenues from the following areas: tobacco, alcohol, gaming, defense/weapons production….

There is a psychology that sets in once the corner is turned on fossil investments that may make a big difference in the political debate about climate change. For more than half a century the GOP, the Fossil Lobby and Wall Street have blocked, cut or delayed investments in renewables and papered it over with greenwash. Forced by pledges made in Paris — and a legally-binding agreement with the word "shall" used 143 times — and the emergence of a huge new global competition to begin not only unchaining the clean-tech sector, but to actively promote it with subsidies, research grants and moonshot-scale deployments, the psychology of chasing after sunk investments will drive an apolitical energy conversion.

Moreover, 350.org and Greenpeace are ramping up campaigns to make sure the promises made in Paris are kept.
 

No pipelines, no mines. You said 1-point-5!
No pipelines, no mines. You said 1-point-5!
No pipelines, no mines. You said 1-point-5!

Clean energy will not deliver a 1:1 replacement for fossil fuels. Get over it. We will not suddenly convert steel mills, cement kilns and road surfacing machines to operate on sunbeams. But the investments we do make, and the worsening weather, will drive us to make even more and ever larger investments, in a forlorn search for a full replacement. While wasteful, it is not nearly as wasteful as the industrial and military investments of the past century or more.

Persian Gulf wars, going back to antiquity, have never been fought over sunlight. As David Stockman recently recalled:

[A] 45-year old error … holds the Persian Gulf is an American Lake and that the answer to high oil prices and energy security is the Fifth Fleet.

***

That doctrine has been wrong from the day it was officially enunciated by one of America’s great economic ignoramuses, Henry Kissinger, at the time of the original oil crisis in 1973. The 42 years since then have proven in spades that its doesn’t matter who controls the oilfields, and that the only effective cure for high oil prices is the free market.

The switch to sunlight will make the lives we are living better for many, especially those on the front lines of the oil wars, even as we continue towards an Anthropocene Armageddon with little sign of being able to change that trajectory.

Guy McPherson is fond of reminding us, after University of Utah professor Tim Garrett's deft analysis, that industrial civilization is a heat engine.

In a well-read article in Climate Change in November 2010, Garrett ran the simple arithmetic:

Specifically, the human system grows through a self-perpetuating feedback loop in which the consumption rate of primary energy resources stays tied to the historical accumulation of global economic production — or p×g — through a time-independent factor of 9.7±0.3 mW per inflation-adjusted 1990 US dollar.

If civilization is considered at a global level, it turns out there is no explicit need to consider people or their lifestyles in order to forecast future energy consumption. At civilization’s core there is a single constant factor, λ = 9.7 ± 0.3 mW per inflation-adjusted 1990 dollar, that ties the global economy to simple physical principles. Viewed from this perspective, civilization evolves in a spontaneous feedback loop maintained only by energy consumption and incorporation of environmental matter.
 

Unsold cars sit on receiving docks all over the world

Because the current state of the system, by nature, is tied to its unchangeable past, it looks unlikely that there will be any substantial near-term departure from recently observed acceleration in CO2 emission rates. For predictions over the longer term, however, what is required is thermodynamically based models for how rates of carbonization and energy efficiency evolve. To this end, these rates are almost certainly constrained by the size and availability of environmental resource reservoirs. Previously, such factors have been shown to be primary constraints in the evolution of species


What this means is the same thing that Gail Tverberg, Richard Heinberg and many others have been saying for a very long time — modern economies are a product of cheap energy. Take that away and they crash and burn. That’s the good news. Garrett says there is no other climate remediation model that works. Civilization is a heat engine whether it is powered by nuclear fusion or photovoltaics. The global economy must crash for humanity to stand a chance. McPherson would take it a step farther and say it is already too late, enjoy what time you have.

The famous Fermi paradox raises the question: why haven’t we detected signs of alien life, despite high estimates of probability, such as observations of planets in the “habitable zone” around a Sun-like star by the Kepler telescope and calculations of hundreds of billions of Earth-like planets in our galaxy that might support life. To produce a habitable planet, life forms need to regulate greenhouse gases such as water and carbon dioxide to keep surface temperatures stable. Early extinction, before interstellar communication, solves the Fermi Paradox. So does merely the extinction of civilization capable of interstellar communication without the same degree of trauma. No civilization, no heat.

But wait! Can that excess heat civilization is producing be turned into air conditioning for the planet? Is there a permacultural decroissance that could rescue our genome? Stay tuned, but first, next week, we play the Trump card.

 

 

 

 

 

 

 

 

The Paris Gravity Well 1

Peak-Exxon-OIlgc2reddit-logoOff the keyboard of Albert Bates

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Published on Peak Surfer on January 17, 2016

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"The idling of rail, barge, ship and pipeline traffic is the biggest change of its kind in 30 years."

 

   The World Bank Guys talked about rates of return and the burden on investors and the unacceptable cost of the doubling of the price of a kilowatt hour. Everyone there had said all of this before, with the same lack of communication and absence of concrete results.

Charlie saw that the meeting was useless. He thought of Joe, over at the daycare. He had never stayed there long enough even to see what they did all day long. Guilt stuck him like a sliver. In a crowd of strangers, 14 hours a day.

The bank guy was going on about differential costs. "And that's why its going to be oil for the next 20, 30 and maybe even 50 years," he concluded. "None of the alternatives are competitive." Charlie's pencil tip snapped.

"Competitive for what?" he demanded. He had not spoken until that point and now the edge in his voice stopped the discussion. Everyone was staring at him.

He stared back at the World Bank guys. "Damage from carbon dioxide emission costs about $35 per ton. But in your model, no-one pays it. The carbon that British Petroleum burns per year by sale and by operation runs up a damage bill of $50 billion dollars. BP reported a profit of $20 billion so actually its $30 billion in the red, every year.

"Shell reported a profit of $23 billion but if you added the damage cost it would be $8 billion in the red. These companies should be bankrupt. You support their exteriorizing of costs so your accounting is bullshit. You are helping to bring on the biggest catastrophe in human history.

"If the oil companies burn the 500 gigatons of carbon that you are describing as inevitable, because of your financial shell games, then two-thirds of the species on the planet will be endangered, including humans. But you keep talking about fiscal discipline and competitive edges and profit differentials. It's the stupidest head-in-the-sand response possible."

The World Bank guys flinched at this. "Well, we don't see it that way."

 

— Kim Stanley Robinson, Sixty Days and Counting: Science in the Capitol (2007).

 While the story coming out of the White House Press Room this week was phrased as a temporary moratorium on new coal mining leases on federal lands, the bigger story was in the details of the review that the President had ordered. Like Robinson's character in Sixty Days, the White House recognized that the real cost of coal is not currently accounted for in its price, so the new review will tally the environmental impacts, including destruction of public lands from air and water pollution from strip mining and failed mine reclamation, public health impacts from transporting and burning coal, damage from ash spills, greenhouse gas emissions and climate change. It will set a price on future leases based on this thoroughgoing review that brings the cost of coal in line with the reality of the actual costs.

If this had to be run through Congress, powerful coal-state Senators like Mitch McConnell would derail it before it got out of committee. As merely Bureau of Land Management regulatory policy, it falls under the Executive Branch, where the President's is the only opinion that counts.

Tomorrow senior politicians, digiratti activists and Hollywood stars ski into the Swiss resort of Davos for the annual World Economic Forum. The theme was to have been the 4th Industrial Revolution – robots, AI and the  biotechno singularity — but the buzz is all about the latest crash of the world economy.

The trigger for all this change may have been what happened in Paris but could not stay in Paris. In December we reported from the United Nations climate meeting where many of these same characters — John Kerry, Leonardo DiCaprio, Justin Trudeau, Angela Merkel — were on stage. We described then how an amazing role reversal was in progress and how it had transformed COP-21, midway through the second week of deadlocked negotiations.

The roles that switched were between the dominants, like Exxon-Mobil, Shell and BP, and the submissives — the entire renewables industry. Renewables are largely a digital world, enjoying advancements in crystal structure, solid state controllers, neodymium and other rare earth metallurgy that follow the proscribed arc of Moore's law, doubling in efficiency and halving in cost at close intervals, driving exponential adoption and dissemination.

Fossils, in contrast, are an analog industry, trying to wring the last drops of intoxicating elixir from the carpet of the pub after closing time. In 2015 those two curves crossed, and renewables are now cheaper (even free at some hours for select consumers in certain markets) while coal, oil and gas are queuing up outside bankruptcy court.
 

Salvaging beer from the bar floor after last rounds

The US Department of Energy reported this week:
 

The Short-Term Energy Outlook (STEO) released on January 12 forecasts that Brent crude oil prices will average $40 per barrel (b) in 2016 and $50/b in 2017. This is the first STEO to include forecasts for 2017. Forecast West Texas Intermediate (WTI) crude oil prices average $2/b lower than Brent in 2016 and $3/b lower in 2017. However, the current values of futures and options contracts continue to suggest high uncertainty in the price outlook. For example, EIA's forecast for the average WTI price in April 2016 of $37/b should be considered in the context of recent contract values for April 2016 delivery, suggesting that the market expects WTI prices to range from $25/b to $56/b (at the 95% confidence interval).

The decline in oil price is too little, too late. It cannot keep pace with the price decline we are seeing in the clean tech revolution. Consequently, more people now work in the US solar industry than in oil and gas at the wellhead. In 2015, for the third straight year, the solar workforce grew 20 percent. Clean tech employs far more women than fossil, and 5 percent of the workforce is African American, 11 percent Latino, and 9 percent Asian/Pacific Islander.

At the same time, rear-guard action by the Coal-Baron-selected legislatures in Arizona and Nevada —  states that could be leading the nation in solar power production — have led to layoffs in the renewables sector. The pushback over solar and wind fees by grid owners, punitive taxes, and net metering promise to keep those states in the Dark Ages, as they did the United States for the past four decades.

In a famous L'il Abner cartoon, Pappy Yokum tells L'il Abner, "Any fool can knock down a barn, it takes a carpenter to build one." To which L'il Abner replies, "Any fool? Let me try!"

Listening to the Republican presidential candidates debate is like watching a Fox-den full of L'il Abners.
 

US Solar Power 2010-2015

So it is not surprising that at the stroke of a pen, three Republican appointees on the Nevada Power Utility Commission decided the fates of millions of ratepayers when they killed solar feed-in-tariffs in that state. It was not unlike Michigan governor Rick Snyder deciding to kill and maim thousands of Detroit residents by switching their water to a polluted source and then covering up the damage. You might say no-one gets killed or maimed from solar energy, and that's closer to true, but plenty more get poisoned every year from the fossil alternative.

The numbers being parsed in Davos will be puzzling to many attending that meeting. From a peak in January 2015 to last October, movements of crude by rail declined more than a fifth. The research group Genscape said rail deliveries to US Atlantic coast terminals continued to drop to the end of the year and the spot market for crude delivered by rail from North Dakota’s Bakken region “is at a near standstill.”

Just 5 years ago investors clamored for more tank cars to pick up the slack from overwhelmed pipeline capacity. Now those cars sit idle on sidings and no one is ordering more. Pipelines are idle too, as refineries on the coasts have found that it is cheaper to buy crude of higher quality than shale oil, shipped by ocean tanker from Canada, Nigeria and Azerbaijan.
 

Junk bond sales are all that supports
the fracked gas Ponzi scheme.

A Congress desperate to please its oil masters in an election year abolished four-decade-old restrictions on exporting domestic crude. While some tankers now take crude from the Gulf Coast to refineries in Venezuela, where the heavy sludges and half-formed keragens can be more economically processed because of fewer environmental restrictions, the US then imports back the finished products at a hefty mark-up.

The idling of rail, barge, ship and pipeline traffic is the biggest change of its kind in 30 years. And while the shift away from coal-powered energy, the long recession, and the petering out of the fracking and shale Ponzi real estate play would obviously lead to fewer tons, barrels and cubic feet being moved, it doesn't explain the full depth of the stoppage. The rail and barge slowdown is now spreading to more consumer-oriented segments. Intermodal carloads typically related to consumer goods fell 1.7 percent in the final quarter of last year.

"We believe rail data may be signaling a warning for the broader economy," the recent note from Bank of America says.
 

"Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over-year basis. While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week’s -10.1 percent decline, has not occurred since 2009."


“When people get hungry, governments fall” — Stuart Scott, Through A Dark Portal, Radio Ecoshock, January 13, 2016

If you can read the tea leaves, or even if you can't, we are now in the long slide. We will examine the financial road ahead, and the Paris Effect on that, in greater detail next week.

 

 

 

 

 

 

 

 

 

 

 

 

Peak Oil has ARRIVED!

oilwellgc2reddit-logoOff the keyboard of Gail Tverberg

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Published on the Doomstead Diner on December 21, 2015

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We are at Peak Oil now; we need very low-cost energy to fix it

This past week, I gave a presentation to a group interested in a particular type of renewable energy–solar energy that is deployed in space, so it would provide electricity 24 hours per day. Their question was: how low does the production cost of electricity really need to be?

I gave them this two-fold answer:

1. We are hitting something similar to “Peak Oil” right now. The symptoms are the opposite of the ones that most people expected. There is a glut of supply, and prices are far below the cost of production. Many commodities besides oil are affected; these include natural gas, coal, iron ore, many metals, and many types of food. Our concern should be that low prices will bring down production, quite possibly for many commodities simultaneously. Perhaps the problem should be called “Limits to Growth,” rather than “Peak Oil,” because it is a different type of problem than most people expected.

2. The only theoretical solution would be to create a huge supply of renewable energy that would work in today’s devices. It would need to be cheap to produce and be available in the immediate future. Electricity would need to be produced for no more than four cents per kWh, and liquid fuels would need to be produced for less than $20 per barrel of oil equivalent. The low cost would need to be the result of very sparing use of resources, rather than the result of government subsidies.

Of course, we have many other problems associated with a finite world, including rising population, water limits, and climate change. For this reason, even a huge supply of very cheap renewable energy would not be a permanent solution.

This is a link to the presentation: Energy Economics Outlook. I will not attempt to explain the slides in detail.

Slide 1

 

 

 

Slide 1

 

 

 

Slide 2

 

 

 

Slide 2

 

 

 

Some people falsely believe that energy supplies are “only needed for industrial purposes.” Energy supplies are, in fact, needed for many things: cooking our food, keeping our homes warm, and creating the clothing we expect to wear. It would be impossible to feed, house, and clothe 7.3 billion people without supplemental energy of some kind.

Slide 3

 

 

 

Slide 3

 

 

 

Slide 4

 

 

 

Slide 4

 

 

 

Slide 4 suggests that the world economy is heading into recession, because recent growth in the use of energy supplies is very low recently. Another sign that we are headed into recession is that fact that CO2 emissions fell in 2015. They usually don’t fall unless a global crisis exists. Emissions fell when the Soviet Union collapsed in 1991, and they fell during the economic crisis in 2008. Perhaps the world economy is hitting headwinds that are not being picked up well in conventional calculations of GDP growth.

Slide 5

 

 

 

Slide 5

 

 

 

Slide 5 shows a chart I put together, using data from several different sources, showing how growth in energy consumption has compared with growth in GDP. Growth in GDP tends to be somewhat higher than growth in energy consumption.

Economic growth (and growth in energy use) was low prior to 1950. There was a big jump in economic growth immediately after World War II, in the 1950-65 period. There was almost as much growth in the 1965- 75 period. Since 1975, economic growth has generally been slowing.

Slide 6

 

 

 

Slide 6

 

 

 

Between the years 1900 and 1998, the use of electricity rose (black line) as the cost of electricity fell (purple, red, and green lines). Electricity consumption could rise because it was becoming more affordable. Rising electricity consumption allowed the economy to make more goods and services. Workers (with the use of electricity) were becoming more efficient, so wages could rise. With higher wages, workers could afford more products that used electricity, such as electric lights for their homes and radios.

If electricity prices had risen instead of fallen, it seems doubtful that this pattern of rising consumption could have taken place.

Slide 7

 

 

 

Slide 7

 

 

 

The comments in Figure 7 represent my own view. It is based on both theoretical considerations and historical relationships. Many who have studied the economy believe that energy is important for economic growth. In my view, the real need is for cheap-to-produce energy, not just any energy. If cheap energy is not really available, then adding more debt can somewhat make up for the high cost of energy production.

Debt is important because it makes goods affordable that would not otherwise be affordable. For example, having a loan for a house or a car makes a huge difference regarding whether such an item is affordable.

Even when energy products are cheap, debt seems to be needed to get oil or coal out of the ground, or to make a new device such as a wind turbine. Part of the problem is the cost of the capital equipment needed to extract the oil or coal, or the cost of the wind turbines themselves. Another part of the problem is paying for factories to make devices that use the energy product. A third problem is making it possible for users to afford the end products, such as houses and cars. It is much easier to borrow the money for a new tractor, and pay the loan off as the tractor is put to use, than it is to save money in advance, using only the funds earned when farming with simple hand-held tools.

Slide 8

 

 

 

Slide 8

 

 

 

I mentioned the need for $20 per barrel oil on Slide 7. This is a very inexpensive price. Slide 8 shows that the only time when oil prices were that low was prior to the mid-1970s. (Note that the amounts in Slide 8 have already been adjusted for inflation, so my $20 per barrel target is an inflation-adjusted amount.) The cost of oil production is now far above $20 per barrel. The sales price now is about $37 per barrel. This is below the price producers need, but still above my target price level.

Slide 9

 

 

 

Slide 9

 

 

 

Slide 9 explains where I got my $20 per barrel price target. Back prior to 1975–in other words, back when oil prices were generally low, $20 per barrel or less–the increase in debt more or less corresponded to the growth in GDP. Once prices rose above $20 per barrel, the amount of debt needed to produce a given amount of GDP growth rose dramatically.

Slide 10

 

 

 

Slide 10

 

 

 

Slide 10 shows interest rates for US debt with 10-year maturity. These interest rates often underlie mortgage rates. As interest rates fall, homeowners can afford increasingly expensive homes. If shorter-term interest rates fall as well, auto loans become cheaper too.

Slide 11

 

 

 

Slide 11

 

 

 

The value to society of a barrel of oil is determined by how many miles it can make a diesel truck go, or how far it can make an airplane fly. This value to society is more or less fixed. The only change is the small increment each year from efficiency changes, making a barrel of oil “go farther.”

In the 2000-14 period, the cost of new oil production was increasing very rapidly–by more than 10% per year, by some estimates. The rising cost of oil production occurred much more quickly than efficiency changes. The result was a falling difference between the value to society and the cost of production. When oil prices are high, oil-importing nations tend to suffer recession. When oil prices are low, oil-exporting nations find it hard to collect enough taxes to support their many programs.

Slide 12

 

 

 

Slide 12

 

 

 

The fact that we need energy for economic growth means that we somehow must obtain this energy, even if doing so costs more. The big run-up in oil prices is a major reason for the historical run-up in debt levels. China’s big build-out of homes, roads, and factories was also financed by debt.

The higher cost of oil affects many things that we don’t think are related, including the cost of building new homes, the cost of building cars, and the cost of building roads. As consumers are forced to buy increasingly expensive homes and cars, and as governments find that the building of roads is increasingly expensive, more debt is used. The terms of loans are often longer as well, to hold down monthly costs.

If we still had cheap oil, this oil by itself could provide a “lift” to the economy. An increasing amount of debt can “sort of” compensate for the absence of cheap oil.

The problem we encounter is that neither cheap energy nor the continued run-up of debt is sustainable. Cheap energy tends to change to expensive energy, because we use the cheapest sources first. The continued debt run-up becomes more and more difficult to handle, unless interest rates fall lower and lower. At some point, interest rates can’t fall enough, and the whole pile of debt tends to collapse, like a Ponzi scheme.

Slide 13

 

 

 

Slide 13

 

 

 

I gave this talk on December 15; the first increase in interest rates took place on December 16. With rising interest rates, we suddenly have “the prop” that was attempting to hold up economic growth taken away.

We need ever expanding debt–that is, debt rising faster than GDP levels–to try to keep the world economy growing, so that the whole pile of debt doesn’t fall over and collapse. If we are to have non-debt growth in the future (because we are reaching limits on debt), it needs to again come from cheap energy alone. We need to get back to something similar to the low-cost energy that fueled the economy before the debt run-up.

Slide 14

 

 

 

Slide 14

 

 

 

Most of us have heard the Peak Oil story, and assume it represents a reasonable view of where we are headed. I think it is close to 180 degrees off course.

Slide 15

 

 

 

Slide 15

 

 

 

M. King Hubbert talked about a very special situation–a situation where another cheap, abundant fuel took over, before fossil fuels began to decline. In this particular situation (and only in this particular situation), it is reasonable to assume that production will follow a symmetric “Hubbert Curve,” with half of the production coming after the peak, and half beforehand. Otherwise, the down slope is likely to be much steeper.

Many peak oilers missed this important point. We certainly are not in a situation today where another very cheap fuel has taken over.

Slide 16

 

 

 

Slide 16

 

 

 

Slide 16 represents what I see as the predominant “Peak Oil” view of the oil limits situation. Some individuals will of course have different opinions.

Slide 17

 

 

 

Slide 17

 

 

 

Peak oilers certainly did get part of the story right–at some point, the cost of oil extraction would rise. What they got wrong was how the whole scenario would play out. It turns out, it plays out pretty much the opposite of what most had supposed–that is, with stagnating wages, loss of buying power, and prices of all commodities falling because of lack of “demand.”

We seem to be hitting energy limits, right now. That is why debt is such a problem, and it is why prices of many commodities, including oil, are far too low compared to the cost of production.

Slide 18

 

 

 

Slide 18

 

 

 

Slide 18 shows the fall of commodity prices up through 2014. The fall in commodity prices has continued in 2015 as well. The story we frequently hear is about low oil prices, but there is also a problem with low natural gas prices. Coal prices are low now too, and, in fact, many coal producers are near bankruptcy. Prices of iron ore, steel, copper, and many other metals are very low, as are prices of many kinds of staple foods traded internationally.

Slide 19

 

 

 

Slide 19

 

 

 

The problem with low commodity prices is that there are many loans that have been taken out to support their production. There is a significant chance of default, if prices remain low. Also, low commodity prices affect asset prices–for example, prices of coalmines, or prices of agricultural land. As the prices of commodities fall, the price of the land used to produce those commodities falls. When this happens, it becomes difficult to repay the loans on the property.

Slide 20

 

 

 

Slide 20

 

 

 

Peak Oilers were right about the cost of production continuing to rise. What they missed was the fact that prices would at some point fall behind the cost of production because of affordability issues. Low prices would then bring the economy down, as it did in the Depression in the 1930s, and in quite a few earlier collapses.

I think of increased demand, provided by debt, as being like a rubber band. Just as a rubber band can stretch for a while, the price of oil can rise for a while, fueled by more and more debt. At some point, debt can’t rise any higher–the rate of return on investments made using debt is too low, and defaults become too frequent. Instead of continuing to rise, commodity prices fall back. Market prices of commodities fall to much lower prices than the costs of production.

In order to get oil prices up higher, the wages of factory workers, restaurant workers, and other non-elite workers need to rise, so that they can afford to buy nice cars and nice homes. Commodities of many types are used both in making homes and cars, and in operating them.

Slide 21

 

 

 

Slide 21

 

 

 

If space solar (or for that matter, any renewable energy) is to be helpful, it needs to be very cheap, so that products made using renewable energy are affordable.

If the replacement energy source is cheap enough, perhaps there will not be a huge run-up in debt to GDP ratios, to finance the new devices used to provide electricity or other energy.

We are encountering problems now, so we need a replacement now, not 20 or 50 years from now.

Slide 22

 

 

 

Slide 22

 

 

 

We cannot expect the cost of electricity production to be more than the current wholesale selling price of electricity. Thus, it needs to be four cents per kWh or less. Ideally, the price of electricity should be falling, as in Slide 6.

Another consideration is that we need to be able to operate our current vehicles using a liquid fuel, made with electricity, because of the time and materials involved in switching over to electric vehicles. This requirement likely reduces the maximum cost of electricity even below four cents per kWh.

Slide 23

 

 

 

Slide 23

 

 

 

It is possible to run into many different kinds of limits, over a period of time. In my view, the first limit we reach is an affordability limit. We can tell we are hitting this limit when high prices reverse to low prices, as they have done since 2011. The fact that prices are continuing to fall is especially worrisome.

Slide 24

 

 

 

Slide 24

 

 

 

There has been a popular myth that it is OK for energy costs to rise. We will just choose the least costly of the high-priced alternatives. This approach doesn’t really work, because wages do not rise at the same time.

Also, we have to compete with other countries. If their energy costs are cheaper, their manufacturing costs are likely to be lower.

Slide 25

 

 

 

Slide 25

 

 

 

If conditions existed that allowed oil prices to rise endlessly (in other words, rising wages of non-elite workers together with debt that could spiral ever higher, as a percentage of GDP), we wouldn’t really have a problem–we could afford increasingly expensive substitutes.  Unfortunately, the story of ever-rising oil prices is simply fiction. It is a pleasant story, but not really true. I explain some of the issues further in “Why ‘supply and demand’ doesn’t work for oil.”

 

 

 

 

 

 

Climate Tactics Redux

climate_change_action_protest-537x356gc2reddit-logoOff the keyboard of Steve Ludlum

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Published on the Economic Undertow on December 10, 2015

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The most effective policy is to pay people to conserve: to offer a basic income conditioned to meeting conservation standards; to pay citizens who do not have children or own cars.

co2_data_mlo

Figure 1: CO2 content of the atmosphere increases, now over 400 ppm. NOAA and Scripps Institution of Oceanography (click on for big).

Right now thousands of the world’s bosses and their underlings are meeting in Paris in an attempt to wrangle some sort of global reduction of warming gases without actually doing anything, from CNN:

COP21 climate change summit: ‘Never have the stakes been so high’

Leaders of 150 nations, along with 40,000 delegates from 195 countries, are attending the conference, called COP21. COP stands for Conference of Parties, an annual forum to try to tackle climate change on a global political level.

The leaders have one mission: Agree on legally binding reductions in greenhouse gas emissions meant to hold global average temperatures short of a 2 degrees Celsius increase over pre-industrial global temperatures.

 

 

The cognitive dissonance is head-spinning: the delegates are flown first-class into Paris or in their countries’ official jetliners; they meander in long convoys of armored limousines from Five-star hotels to Michelin-rated restaurants where they are stuffed like geese destined to become foie gras. Eventually, the meetings end and the delegates jet off to other conferences elsewhere. Filling the otherwise boring interval between flights and limo rides is mindless pontificating and empty promises, all of it paid for by the same sorts of industries that emit most of the carbon pollution in the first place!

One would think bringing relief from what is becoming a runaway global meltdown would be an all-hands-on-deck emergency. You would be wrong … because the only action that will make a difference is to reconfigure our Westernized, garbage-producing society from the ground up, to ditch the gangrenous American Way and its polluting industries and their ‘products’ at once, starting with the hundreds of millions of worthless, non-remunerative automobiles. But the bosses and their minions are like children with their hands caught in the cookie jar; they refuse to give up anything even if it means total destruction. Their strategy is to end pollution is to wait until after everyone as become rich, countries will then be able to afford expensive pollution-remediation technology, that so far nobody has been able to produce.

We live in ridiculous times: bosses are working against themselves. The newer, less-polluting industries are subsidized by legacy versions. Because these standbys — such as coil-fired power stations — are critically important, they are given a continuous lease on life. The output of new and old added together increases ‘economic growth’ that cannot be willingly surrendered. As it is, when the growth fails to materialize on its own, every effort is made to gain it, regardless of consequences. Regardless of consequences. Regardless of consequences. regardless of consequences!

François Hollande’s 34 projects aimed at sealing France’s ‘industrial renaissance’

 

 

 

Driverless cars, nanotechnology and electric aeroplanes – François Hollande launches 34 projects aimed at sealing France’s “industrial renaissance”.

François Hollande denied he was returning France to a bygone age of state interventionism as he launched 34 state-aided projects aimed at sealing the country’s “industrial renaissance” – from futuristic fast trains to electric-powered satellites.

Unveiling the state-subsidised “industrial battle plans”, the French president insisted cutting edge research into “energy transition”, health and food and new technologies would help return France to its glorious industrial past in a globalised world.

Projects include plans to develop a car that can run 60 miles on two litres of fuel, electric aeroplanes, driverless cars, nanotechnology and “intelligent” fabrics, such as incubators made of a material that “cures” jaundice without medical intervention.

 

 

… and more pontification and empty promises. What the bosses refuse to understand is there will be the reduction of climate gases; this is an absolute certainty. The process appears to be underway, but not for the reasons often cited. Rather, it is resource constraints/peak oil, deleveraging, breakdown in credit infrastructure, bankruptcies and increases in poverty, ‘Conservation by Other MeansTM‘ whereby citizens are reduced to penury and are unable to afford resources in any form … no matter how low the prices go.

The fundamental problem of any emission-reduction strategy is the benefits and risks are in the future while costs accrue in the immediate present. It makes business sense to do nothing and push the costs into the future even though doing so causes them to multiply. An alternative strategy would be to de-emphasize the frontal assault on carbon and target other forms of pollution, by doing so mitigate carbon emissions indirectly. The idea is to break the main problem into smaller components and deal with them in detail. For instance there are multiple heat-trapping items besides carbon dioxide; there is soot, also nitrous oxides, hydrofluorocarbons, methane- and related, perfluorocarbons and sulfur hexafluoride: some of these emissions are controlled, others such as carbon gas emissions have been reduced to some degree within the US and Europe by shifting manufacturing to other countries.

  • The means to manage pollution are familiar and have been deployed successfully for decades, such as the regulatory requirement to produce and market diesel fuel without sulfur. This requirement is uncontroversial, there are no arguments against it. The means to produce sulfur-free fuel exist now and have been proven cost effective. Management is relatively simple because diesel fuel is the product of a relative handful of large, centralized industrial facilities which can be monitored. If the facilities don’t produce the correct diesel they are easily shut down. After the introduction of sulfur-free fuel there are visible benefits both in the form of lower fuel user costs and cleaner air, the diesel fuel producers’ margins aren’t effected.
  • Administrative and technical tools to limit emissions can be perfected against more commonplace forms of pollution. Over time these tools can be improved enough to be effective against carbon emitters.
  • As components of the climate problem are chipped away, the problem shrinks, it becomes underwhelming. The final reduction of the carbon problem becomes a relatively modest exercise.

There is low-hanging fruit to harvest by reducing smog in developing countries where it is considered to be a naturally occurring by-product of progress. As Americans and Europeans discovered in the 1950s, the costs of smog can be unbearable. Clean air and non-polluted water are not luxuries but a basic requirement for a functioning country.

Once there are visible pollution ‘victories’ — whatever they might be — it becomes easier to produce follow-on victories. Right now there is nothing to the climate dilemma but one administrative failure after another … managers are perceived to be inept and untrustworthy, each failure making it more difficult to take effective action in the future.

  • To do nothing is to allow resource depletion and energy deflation to sharply diminish fuel consumption which will in turn reduce the output all hydrocarbon fuels including coal. Mining coal on an industrial scale is no longer a pick-and-shovel operation but requires vast amounts of petroleum. The coal customer must bear these costs otherwise, the coal remains in the ground. Resource depletion is the default solution to climate problems and is underway. The only word one must be mindful of regarding depletion is cost.
  • The world-wide increase in suburbs, cars, developments, infrastructure, mines and oil wells ironically renders carbon fuels too costly and valuable to waste. Cost is a hard school, but accelerated development is the most likely cure for climate ills because it is the most certain. The conjecture that billions of tons of fossil fuel resources are immediately available for conversion into climate gases is false, these resources are not affordable in a world visibly going broke.

Kobane 1

Kobane, Syria, 2015. Image by AFP Photo/Bulent Kilic: default climate gas management in action. Pollution is not emitted from these buildings. Consider changing the economic paradigm and look to Syria rather than Europe or the United States as the model customer for alternative energy. The shattered country filled with desperately impoverished people is somehow supposed to afford expensive replacement prime movers when they can barely afford what they have now.

  • Climate scientists are overexposed in the media and elsewhere, they should step off the public stage. Questions about climate should be answered with a terse, “no comment”. Climate change should become a hip and trendy insider secret, accessible by only a privileged few. This is strictly a cynical marketing ploy as the businessmen would rush to fill the information vacuum with obvious, self-defeating lies. Events and word-of-mouth would do the heavy lifting. Ominous silence from the science community would be terrifying … perhaps enough to stir individual action.
  • All climate scientists should get rid of their cars and other polluting luxuries: drive them to the junkyards and crush them. The scientists are either serious or they are not. If not, why should anyone else be?
  • Focus on ‘other’ ordinary pollution culprits: ozone, nitrous oxides, volatile hydrocarbon photochemical smog, soot, methane and chlorofluorocarbon gases used in refrigeration, perfluorocarbons and sulfur hexafluoride.
  • The primary components of smog are particulates, nburned fuel and nitrous oxides. Ordinary smog is reduced by the use of catalytic converters and fuel management systems. The catalyst combusts the unburned fuel in the stream of engine exhaust gas. Unburned fuel, nitrous oxides in the presence of sunlight produces ozone which is poisonous to vegetation. This in turn accelerates the release of greenhouse gases from agriculture lands and forests. Attacking ozone is a tactic to attack carbon emissions indirectly.
  • There is a long history or successful management of photochemical smog sourced from vehicles, this effort should be expanded laterally … to countries without effective smog controls … and vertically … to include all kinds of engines. This includes fixed sources of ozone producing pollution such as generators and industrial prime movers; ship power plants and aircraft engines.
  • Catalytic converters should be retrofitted to older engines. Those that cannot be retrofitted should be removed from service and scrapped. A country-by-country approach or by way of the WTO, the setting of requirements for manufacturers; all of these approaches would be effective and non-controversial. Half of the world operates engines equipped with with these converters and does so at low cost, the use of them in the other half represents a manageable expense. The public benefit is cleaner air, fewer pollution-related health problems and less damage to agriculture. The private benefit is the sales of catalysts and replacement engines.
  • Soot- and soot-like particles are important components of climate change and is sourced from coal- and oil fired boilers, auto tire wear, brake- and clutch linings, diesel exhaust and from poorly performing gasoline engines, also from wood-burning and forest fires. Soot can be managed by using cleaner fuels, reducing open fires and using particulate traps on prime movers.
  • Eliminate chlorofluorocarbon refrigerants that are produced and sold in developing countries. CFC’s are potent greenhouse gases: production and sale of bootleg refrigerants is a marginal activity whose loss would not effect national economies at all. Unlike narcotics and other contraband, CFCs are produced only in a few large factories which can be shut down or modified to produce non-destructive products. What is needed is the administrative impulse to do so.
  • Institute a universal ban on 2-cycle engines including those which burn lubricating oil along with gasoline. Unburned oil and diesel fuel in the exhaust stream contaminates catalysts in catalytic converters; the poorly combusted oil is also a source of soot. There are four-cycle alternatives that do not burn lubricating oil, that allow the use of catalytic converters. A short phase-in period would retire or replace all 2-cycle engines including outdoor equipment, chain saws, scooters and mopeds.
  • Ban carburetors on gasoline engines. Carburetors are obsolete and generally only found in the US on smaller engines used off-highway such as portable generators and lawn mowers. Carburetors do not allow fuel to mix completely with the air and are a source of photochemical smog. Carburetors are replaceable with electronic fuel management systems such as fuel injection.
  • End the export trade in older vehicles and prime movers from the West to developing countries. Older vehicles are a large source of pollution. Ending this trade would be a step away from the proposal that every human is entitled to personal automobile transport without regards to the consequences. There are hundreds of millions of 2-cycle engines, carburetors and antiquated junkers in the world, removing them would make a noticeable difference at very low cost or even provide a return as the use of these things is subsidized.
  • End the trade in partially-refined and unblended low quality fuels including but not limited to leaded gasoline and high-sulfur diesel. There should be an industry agreement regarding fuel quality; an international standard to meet. This standard would cost a modest amount of money to implement; like CFCs, fuels are the products of a few large factories that can be managed.
  • Mandate the switch to low-sulfur fuels, gas scrubbers and catalytic converters on all ocean-going ships.
  • Mandate only up-to-date electric generating plants which use low-sulfur fuels and pollution reducing technology … all of which is readily available. A schedule to update power stations should be agreed to reduce then eliminate non-carbon waste gases … doing so would indirectly reduce the carbon emissions. Non-performing prime movers would be scrapped even those that are relatively new. A fifteen year old thermal plant that produces excess waste gases can be scrapped the same as the fifteen year old merchant ship that falls into the same non-performing category. ‘Forced updating’ is cost-free as the new plant uses less fuel than what it replaces.
  • Any sort of conservation policy is low-cost and highly effective. Conservation is the cheapest form of power generation as the plant not built represents billions of dollars of credit effectively earned. At the same time, tackling smog, particularly in developing countries, would demonstrate that managing carbon emissions is possible.
  • The most effective policy is to pay people to conserve: offer a basic income conditioned to meeting conservation standards; pay citizens who do not have children or own cars.
  • Eliminate fuel subsidies in all countries! This would accomplish a number of goals; a) reduce sovereign expenses in countries currently being bankrupted by their fuel subsidies; b) fuel consumption would be reduced along with auto fleets. This is because subsidies are more useful to those with sub-standard vehicles, c) carbon emissions would be indirectly reduced as there would be less fuel consumed: fuel pricing is a form of rationing.
  • Ending subsidies risks aggravating motorists. Drivers and their entitlements will have to be dealt with sooner or later, easy way or hard: the ongoing world-wide bailout of motorists is unaffordable. Once government gains any sort of ascendancy over drivers it becomes a far simpler matter to bring the hammer down on them with regards to climate gas emissions as well as fuel waste. The default strategy to constrain drivers is to do nothing. This leaves fuel shortages caused by drivers’ bankruptcy to do the dirty work.
  • Implement a world-wide moratorium on forest clear cutting. This is another easy fix that is practically cost free except to gangsters/Chinese who traffic in bootleg lumber. Commandos would earn their keep by killing loggers who would be otherwise paid not to log. Implementation would suggest a hard limit: this and no more! Forest removal and followup agricultural exploitation add only the smallest marginal additions to national GDP at the same time the costs to the environment and ability of the biosphere to absorb carbon are extraordinarily high. Deforestation by itself is a greenhouse gas emitter.
  • Implement and fund a world-wide program of re-forestation, wherever possible. The cost would be modest, the returns would be felt in areas where deforestation has led to degraded soils and watersheds. Reforestation can also be a jobs-providing platform.
  • It is important to reforest in ways that increase diversity making forests less susceptible to pests.
  • Implement more effective forest-fire fighting efforts. The costs would be modest measured against the increased climate costs of forest fires.
  • Put out coal mine- and coal seam fires. This is more low-hanging fruit.
  • End gas flaring from oil wells, refineries and terminals. Not only do the flares produce carbon gases but they are also tremendously destructive of insect life.
  • Eliminate ‘incidental’ methane leakage from oil and gas wells. Most oil and gas wells do not leak, those that do should be denied connection and ordered plugged immediately at drillers’ expense. Given a few such expensive duds, there would soon be no methane leaks from hydrocarbon wells.
  • Eliminate tax advantages and subsidies for fuel use in the US, the world’s greatest waster of fossil fuels. Accelerated depreciation, depletion allowances for oil reservoirs, income tax deductions for ‘business vehicle’ purchases, favorable royalty rates and low cost access to public lands, access roads by the state(s), borrow-and-spend highway subsidies, mortgage interest deduction, favorable treatment of capital gains, etc. Reforms would not cost anything but would reduce costs, the obstacle is politics.
  • Reformulate plastics so they degrade when exposed to sunlight or sea water. At the same time, place a ‘producer deposit’ — no different from the old-fashioned bottle deposit — on plastic factories for the packaging products they produce.
  • Reform agriculture. CAFO’s — concentrated animal feeding operations or very large feedlots — provide utility the CAFO operator only. These operations with their confined animals contaminate water supplies with animal waste; they also produce massive amounts of climate gases. Shutting down CAFO’s would be a low-cost tactic that indirectly reduces climate gas emissions.
  • Reform agriculture, make wider use of biochar.

 
Temperature trend 1

Figure 2: Warming scenarios from UNEP by way of Robert Scribbler: Efforts to reduce carbon emissions and warming look to fall short, leaving the world to heat up to massively destructive +4°C which would wipe out our agriculture.

  • End biofuel subsidies. Feeding cars and feeding humans together at the same time means that ultimately neither get fed. Biofuels are barely net-energy neutral and subsidy dependent, the beneficiaries are a handful of biofuel tycoons who would ‘lose’ with the elimination of subsidies.
  • Implement a world-wide moratorium on road building. This is yet another easy fix that is cost free, both it and the moratorium on logging are easily enforced by way of satellite surveillance. Another, related step is to eliminate World Bank subsidies for logging, road building, dam building and other environmentally destructive policies that also produce climate gases or reduce the ability of the biosphere to sequester carbon.
  • Electrify railroads and increase both freight and passenger capacity.
  • Ban land-grabbing in undeveloped countries by 3d parties. Much of the so-called ‘new’ farm land becomes biofuel plantations, cash crop industrial monocultures that produce climate gases.

The most effective step is to provide incentives — to pay people — to conserve. Subsidizing conservation provides a direct capital return on investment that remains with the recipient. Subsidizing consumption as we do now leaves consumer without the resource, without the subsidy and his children with a mountain of unpayable debts. He’s older and poorer even if his consumption suggests otherwise.

The most effective tool is good management. Individuals can effect small scale changes on their own, in aggregate they can do much. American cities are being made over by younger people acting as individuals, who have turned their backs on suburbia. Managing at-scale industrial processes and mandating engineering approaches is more effectively done by governments with the wit to take action.

Ironically, government activism here would save the tycoons from themselves: left to their own unrestrained cruelty and greed, the tycoons’ self-serving activities will continue to price resources beyond the reach of their customers. Eventually, both resource- and the tycoon ‘problems’ are ‘solved’.

With a bit of effort it is not hard to think of other, indirect forms of action against carbon gas emitters. The benefit of these alternatives is that they would not cost very much or would provide economic gains. Meanwhile, the climate crisis is deflated by a thousand cuts leaving (hopefully) our descendants to wonder what all the fuss was about.

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