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"It is not possible to continue infinite consumption and infinite population growth on a finite planet.”
-- Michael Ruppert, WSJ, 4/11/09


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Page added on February 19, 2012

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What Happens After ‘Peak Everything’?

Business

Those of us investing in the resource sector are likely to be very familiar with the concept of “peak everything” — the notion that the world is running out of critical natural resources that can be economically mined. Oil, phosphorous, copper, coal, lithium, neodymium, water, and many others have all been prophesied as being past peak production.

A key caveat to the notion of peak everything is the issue of economics. If new technology can be devised to make these resources cheaper to extract, the whole issue of peak everything could be set to rest.

But at least in the immediate sense, the notion of peak everything is alive and well. Peak oil is already here and is driving oil prices higher. Peak water may be here as well. There are lots of others, too, but even if just those two are true — oil and water — the implications are enormous: Higher oil costs could mean higher energy costs all around, and the end of water could easily be interpreted as the end of life. That’s a grim picture — not just for your portfolio, but for everything else too.

So what are the options here? How does peak everything affect the investment landscape?

For Now, Buy the Resources

In the immediate sense, the implications are straightforward: Simply invest in these natural resources as their scarcity faces demand that is only rising, and thus prices are destined to go higher. Uranium (URA), oil (USO), base metals (DBC) and agricultural products (DBA) are easy investment options for those who believe in peak everything. It’s a bit of a grim wager though, as the inevitable outcome here is a decline in standard of living and human population as rising prices is going to lead to some being priced out of the market. It also makes it increasingly likely that resources, and the economy as a whole, will be regulated in the name of resource maximization and social good. This sounds like a communist’s dream come true, but for investors, the threat of peak everything has potential to create an environment where markets come under greater and greater burdensome regulation.

The Rosier Outlook: New Energy Technology Saves Us

A rosier outlook, and one I genuinely believe is the one that will occur, is the realization that peak everything is not true — that in fact there is an abundance of resources at our disposal, and the world can support a significantly higher population that consumes even more energy on a per capita basis. While this outlook is still the underdog — “peak everything” has a much more credible basis when we look at the world around us and the rising prices of natural resources — there are some signs that a world of abundance is emerging. Specifically:

Natural gas. It’s no secret that hydraulic fracking is emerging as a disruptive technology unlocking previously inaccessible gas at economically feasible rates. The price of natural gas is thus plummeting, and the abundance has created a new problem: How to move it all around.

The situation with natural gas shows hope for much of the situation with many other items on the “peak everything” list: Can innovations in technology make economic extraction feasible? I believe so. I think fracking is a prime example that could help us overcome peak oil — and that other innovations in energy, transportation, and mining will help us reach previously untapped resources, like resources in deep sea.

Nuclear power. Nuclear power (NUCL) is on the rise, and small modular reactors are inching closer to widespread usage. Nuclear is the most dense form of energy, and so it is superior to all others. Moreover, the emergence of modular reactors is going to make nuclear power less expensive and more portable. Some adventurous mining firms are planning operations in the Arctic circle or in Antarctica, but as there aren’t roads and power plants there, that’s an especially daunting and perhaps economically an unviable strategy until the necessary infrastructure is created.

So, to put it simply: Advancements in mining and energy technology could make it possible to continue extracting key minerals that are already in the earth at economically feasible prices, thus overcoming the whole “peak everything” issue. This is something to keep an eye on, and what fracking is doing to natural gas is especially worth observing here.

But of course, there is a catch.

A New Governance System is Needed

In addition to the necessary technological innovations, there remains one other necessity: The proper governance environment. What type of environmental safety laws are needed? What about international trade treaties, which are currently being disregarded — what type of reform is needed? Even if the technology were present, who gets to tap into the ocean floor, who gets the rights to Antarctica and the Arctic circle, and who gets to go to outer space and all the aerial rights needed? These questions are real and they need to be resolved if technology is to solve the “peak everything” challenge.

For investors, here’s the bottom line as I see it:

For now, “peak everything” is real and is the dominant investment paradigm. As grim as it may be, I do believe the safest option is to continue buying natural resources that are scarce and on the peak list.

Game-changing technology is coming, though, and in some instances it may already be here — fracking in natural gas is proving that. However, that situation is also highlighting the need for a new global infrastructure and the governance system to make that happen. That governance system will come, I believe, after the sovereign debt crisis gets resolved. From this perspective, I think it will be time to exit the “peak everything” trade as signs of a new governmental infrastructure come closer to reality.

Seeking Alpha



12 Comments on "What Happens After ‘Peak Everything’?"

  1. SilentRunning on Sun, 19th Feb 2012 4:42 am 

    At some point, resources will run out because an infinite population living an infinite energy lifestyle is unrealizable in a finite universe that obeys physical laws.

    In less than 10,000 years every atom in the observable universe has to be part of a human body in order for just 1% exponential growth to be realized. At that point, exponential growth will be forced to stop because the entire universe will have been converted to human beings. (obviously – it would happen long before that point due to many other constraints).

    The end of growth is inevitable. The sooner we come to realize it the better things will go for us.

  2. BillT on Sun, 19th Feb 2012 8:08 am 

    “…If new technology can be devised to make these resources cheaper to extract, the whole issue of peak everything could be set to rest…”

    BS! There is only so much of anything left to ‘extract’. Technology has nothing to do with it. Can technology turn a poor grade of coal into anthracite? Can technology turn tar sands sludge into sweet light crude without an energy investment that makes it a loss? Can technology change the concentration of minerals in ores from 1 part per million to the old 1 part per 1,000?

    The answer is NO. Therefore, technology cannot, and will not, prevent the collapse that is coming.

    “…a new governmental infrastructure come closer to reality…”

    More BS! Have you read Ayn Rand’s ‘Atlas Shrugged”? If not, then you have no idea of what government is likely to do when the going gets tough. The corporate looters, with government ties, looted all the other sources until there were none left and then it all collapsed. They thought ‘someone’ would save them from their own greed and stupidity. Investors are no longer needed in today’s world. Only suckers.

  3. Arthur on Sun, 19th Feb 2012 11:24 am 

    Bill is right of course about resource depletion. I remember from my student days that the party was over from the moment the beer barrel was empty, regardless if it was a left wing party (‘Demos’) or a right wing party (‘The Corps’). It has nothing to do with technology or ideology. Empty=empty. But that does not mean that technology with a low energy footprint can play a role in making post crash life somewhat bearable. I believe in IT as the backbone of the future economy. Another example is heating. An electric blanket consumes 60W. You want to become a millionair? Here is how (I am too lazy to do it myself). Produce electrical clothing. Your behind is the anode, your back the cathode. All you need is a chair that goes with it. With merely 1 kwh/day you can keep yourself warm, without the necessity of heating your entire house. Motor devils use this kind of stuff to keep warm with minus 20 Celcius, while driving 80 miles/hour.

    Modern society is going to collapse. Soon. The car will be gone on a global scale somewhere between 2012-2020. Mass air travel same story. A war against Iran could trigger this process this year. Peak Car is now. What’s interesting is what comes after that. Localized life, local production of food and energy. Every village it’s own windturbine. Energy rationing. Local storage of electrical energy. Solar panels on every roof. Electricity used to keep warm and enable a working and communication life online, some LED lighting. Fridge is already less likely. I remember from my youth during the sixties that the milkman visited our street every day with a cart drawn by a horse. He could return.

  4. Paul on Sun, 19th Feb 2012 12:05 pm 

    “A rosier outlook, and one I genuinely believe is the one that will occur, is the realization that peak everything is not true.”

    Wow!
    What, exactly, are you basing this delusion on?
    Energy forms the basis of everything, technology included. Where will the energy come from to produce and run this new technology?
    Also, you cannot get away from the destructive nature of the exponential growth that we are now experiencing.
    We are in overshoot and about to face a natural die-off, as does any animal population faced the similar problems.
    It’s just nature. It always wins.

  5. Pacman on Sun, 19th Feb 2012 1:10 pm 

    It may be happening but short of a war with Iran it’s not going to be a sudden collapse it’s going to be a slow depressing grind down I’m just glad I’m a sheep farmer that doesn’t need to give the sheep any feeding its a food production system that only just breaks even but shouldn’t be hit in a negative way by reduced fossil fuels I may miss my quad bike though

  6. Beery on Sun, 19th Feb 2012 2:58 pm 

    I’m just happy that there are so many people who refuse to believe in the coming decline. It gives those of us who know it’s coming a distinct advantage, as we prepare while they do nothing.

    So keep on believing, you cornucopians.

  7. jaime on Sun, 19th Feb 2012 2:59 pm 

    this reminds me of a Dio song,’the last in line. we’re up to the witch,we may never,never come home ,but the answer that we find is worth the pain.survive on you’re own two hands and loose the mind so that you can see,so we can see together.greeting to all of you from Anu.

  8. Stephen on Sun, 19th Feb 2012 5:57 pm 

    Basically, after Peak Everything, the world will need to reevaluate each element of life and focus on quality of life and how to manage and mitigate having less resources. The result will be changing priorities and putting basic needs of life and how to make the best life of what is available a higher priority than corporate profits, economic growth, materialism, and mass scale marketing. The life that results will probably involve more re localization, more public transit use, putting farms back into cities again, less imports, etc. As to how much 20th century technology we will have to abandon, that is debatable and will probably depend a lot on what other decisions we make about energy and what resources to stop production of first.

  9. Kenz300 on Sun, 19th Feb 2012 7:54 pm 

    Too many people and too few resources.
    Will we learn the lessons of Easter Island before it is too late?

    Endless population growth is not sustainable yet we added a billion people in the last 12 years.

  10. Rick on Sun, 19th Feb 2012 8:42 pm 

    @Kenz300 — you are correct. I’m glad I never had kids. And it will be too late, for billions.

  11. Rick on Sun, 19th Feb 2012 8:50 pm 

    Note: Seeking Alpha sucks! Pure BS. No different than CNBC.

  12. BillT on Mon, 20th Feb 2012 12:21 am 

    Stephen, while your idea has merit, I doubt that the capitalist / financial world will allow a steady contraction that allows most of us to live out our lives in anything close to today’s world. We will likely start wars and waste what is left trying to keep a dying system going. There is no way we can keep megacities powered up and fed when energy costs double and triple and quadruple. Then just disappear.