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$50 Oil Doesn’t Work


$50 per barrel oil is clearly less impossible to live with than $30 per barrel oil, because most businesses cannot make a profit with $30 per barrel oil. But is $50 per barrel oil helpful?

I would argue that it really is not.

When oil was over $100 per barrel, human beings in many countries were getting the benefit of most of that high oil price:

  • Some of the $100 per barrel goes as wages to the employees of the oil company who extracted the oil.
  • Often, the oil company contracts with another company to do part of the oil extraction. Part of the $100 per barrel is paid as wages to employees of the subcontracting companies.
  • An oil company buys many goods, such as steel pipe, which are made by others. Part of the $100 per barrel goes to employees of the companies making the goods that the oil company buys.
  • An oil company pays taxes. These taxes are used to fund many programs, including new roads, schools, and transfer payments to the elderly and unemployed. Again, these funds go to actual people, as wages, or as transfer payments to people who cannot work.
  • An oil company pays dividends to stockholders. Some of the stockholders are individuals; others are pension funds, insurance companies, and other companies. Pension funds use the dividends to make pension payments to individuals. Insurance companies use the dividends to make insurance premiums affordable. One way or another, these dividends act to create benefits for individuals.
  • Interest payments on debt go to bondholders or to the bank making the loan. Pension plans and insurance companies often own the bonds. These interest payments go to pay pension payments of individuals or to help make insurance premiums more affordable.
  • A company may have accumulated profits that are not paid out in dividends and taxes. Typically, they are reinvested in the company, allowing more people to have jobs. In some cases, the value of the stock may rise as well.

When the price falls from $100 per barrel to $50 per barrel, the incomes of many people are adversely affected. This is a huge negative with respect to world economic growth.

If the price of oil drops from $100 per barrel to $50 per barrel, this change adversely affects the income of a large share of people who formerly benefited from the high price. Thus, the drop in oil prices affects the incomes of many of the people listed in the previous section.

Furthermore, this drop in income tends to radiate outward to the rest of the economy because each worker who is laid off is forced to purchase fewer discretionary items. These workers are also less able to take on new debt, such as to buy a new car or house. In some cases, they may even default on existing debt.

A drop in oil prices from $100+ per barrel to $50 per barrel leads to job layoffs by oil companies and their subcontractors. Oil companies and their subcontractors may even reduce dividends to shareholders.

While oil prices have recently been as low as $30 per barrel, the subsequent rise in prices to $50 per barrel is not enough to start adding new production. Prices are still far too low to encourage new development.

In 2016, other commodities besides oil have a problem with price below the cost of production.

Many commodities, including coal and natural gas, are currently affected by low prices. So are many kinds of metals, and some kinds of food commodities. Thus, there is pressure in a wide range of industries to lay off workers. There are many parts of the world now feeling recessionary forces.

As prices fall, the pressure is for high-cost producers to drop out. As this happens, the world’s ability to make goods and services falls. The size of the world economy tends to shrink. This shrinkage is clearly not good for a world economy that needs to grow in order for investors to earn a profit, and in order for debtors to repay debt with interest.

Growing demand comes from a combination of increasing wages and increasing debt.

The recent drop in oil prices from the $100+ level seems to come from inadequate demand for oil. This is equivalent to saying that oil at such a high price has not been affordable for a significant share of buyers. We can understand what might have gone wrong, by thinking about how demand for oil might be increased.

Clearly, one way of increasing demand is through increased productivity of workers. If this increased productivity allows wages to rise, this increased productivity can cycle back through the economy as increased demand for goods and services. We can think of the process as an “economic growth pump” that allows continued economic growth.

Generally, increased productivity of workers reflects the use of more capital goods, such as machines, vehicles, and buildings. These capital goods are made using energy products, and operate using energy products. Thus, energy consumption is an important part of the economic growth pump. These capital goods are frequently financed using debt, so debt is another important part of the economic growth pump.

Even apart from the debt necessary for financing capital goods, another way of increasing demand is by adding more debt. If a company adds more debt, it can often hire more workers and can add to its holdings of property. These also help raise the output of the company. As long as the output that is added is sufficiently productive that it can repay the added debt with interest, adding more debt tends to enhance the workings of the economic growth pump.

The way governments have attempted to encourage the use of increased debt in recent years is by decreasing interest rates. The reason this approach is used is because with a lower interest rate, a broader range of investments can seem to be profitable, after repaying debt with interest. Even very “iffy” investments, such as extraction of tight oil from the Bakken, can appear to be profitable.

The extent of the decrease in interest rates since 1981 has been amazingly large.

Figure 1. Ten year treasury interest rates, based on St. Louis Fed data.

Figure 1. Ten year treasury interest rates, based on St. Louis Fed data.

Since 2008, additional steps have been taken to decrease interest rates even further. One of these is the use of Quantitative Easing. Another is the recent use of negative interest rates in Europe and Japan.

Falling demand would seem to suggest that the world’s economic growth pump is no longer working properly. This is happening, even with all of the post-1981 manipulations of interest rates to reduce the cost of borrowed capital, and thus reduce the required threshold for profitability of new investments.

What could cause the economic growth pump to stop working?

One possibility is that accumulated debt reaches too high a level, based on historical parameters. This seems to be happening now in many parts of the world.

Another thing that could go wrong is that the price of oil rises so high that capital goods based on oil are no longer cost effective for leveraging human labor. If this happens, manufacturing is likely to move to countries that use a cheaper mix of fuels, typically including more coal. The shift of manufacturing to China seems to reflect such a change.

A third thing that could go wrong is that pollution becomes too great a problem, forcing a country to slow down economic growth. This seems to be at least part of China’s current problem.

If oil prices drop from $100 to $50 per barrel, this has an adverse impact on debt levels.

With lower oil prices, workers are laid off, both from oil companies and from companies that provide goods and services to oil companies. These workers, in turn, are less able to take on new debt. In some cases, they may also default on their debt.

Oil companies with reduced cash flow are also less able to repay their debt. In some cases, companies may file for bankruptcy. The result is generally that existing debt is “written down.” Even if an oil company does not file for bankruptcy, it is likely to have difficulty adding new debt. The trend in the amount of debt outstanding is likely to change from increasing to decreasing.

As the amount of debt shifts from increasing to decreasing, the economy tends to shift from increasing to shrinking. Instead of adding more employees, companies tend to reduce the number of employees. If many commodities are affected, the impact can be very large.

We need oil prices to rise to $120 per barrel or more.

The current price of $50 per barrel is still way too low. A post I published in February 2014 was called Beginning of the End? Oil Companies Cut Back on Spending. In it, I talked about an analysis by Steve Kopits of Douglas-Westwood. In this analysis, Kopits points out that even at that time–which was before oil prices began dropping in mid-2014–major oil companies were beginning to cut back on spending for new production. Their cost of production was at that time typically at least $120 or $130 per barrel, if prices were to be high enough so that companies could fund new development without adding huge amounts of new debt. Oil prices could perhaps be lower if oil companies could fund their operations using large increases in debt. Company management recognized that such a funding approach would not be prudent–it could lead to unmanageable debt levels.

Today’s cost of oil production is likely to be even higher than it was when Kopits’ analysis was performed in early 2014. If we expect oil production to continue to rise, we probably need oil prices in the $120 to $150 per barrel range for several years. Prices at such a level are likely to be way too high for consumers, because wages do not rise at the same time as oil prices. Consumers find that they need to cut back on discretionary expenditures. These spending cutbacks tend to lead to recession and falling oil prices.

We can think of our economy as being like a big ball, which can be pumped up to greater and greater size with either rising productivity or rising debt.

This process can continue to work, only as long as the debt added is sufficiently productive that it is possible to repay the debt with interest. We seem to be reaching the end of the line on this process. Returns keep falling lower and lower, necessitating ever-lower interest rates.

To some extent, the pumping up of oil prices that occurs in this process represents a lie, because the energy content of a barrel of oil remains unchanged, regardless of price. In fact, the energy of coal and of natural gas per unit of production remains unchanged as well. The value of energy products to society is determined by their physical ability to leverage human labor–for example, how far diesel oil can move a truck. This ability is unchanged, regardless of how expensive that oil is to produce. This is why, at some point, we find that high-priced energy products simply don’t work in the economy. If we spend the huge amount of resources required for the production of energy products, we don’t have enough resources left over for the rest of the economy to grow.

Low oil prices, plus low commodity prices of other kinds, seem to indicate that we are reaching the end of the line in the “pump up the economy with debt” approach. We have been using this approach since 1981. At this point, we have no idea what economy growth would look like, without the stimulus of falling interest rates.

The drop in oil prices and other commodity prices since mid-2014 seems to represent a “shrinking back” of our ability to use debt to raise prices to a level sufficient to cover the cost of extraction, plus associated overhead costs, including taxes. This drop in prices should be an alarm bell that something is seriously wrong. Without continuously rising prices, to keep up with ever-rising extraction costs, fossil fuel production will at some point come to a halt. Renewables will not work well either, because prices will not be high enough for them to be competitive.

Of course, once the economy stops growing, the huge amount of debt we have amassed becomes un-payable. The whole system we have built will begin to look more and more like a Ponzi Scheme.

We are blind to the possibility that oil prices of $50 per barrel may indicate that we are reaching “the end of the line.”

The popular belief is that everything will work out fine. Oil prices will rise a bit, and somehow the economy will get along with less fossil fuel. Somehow, we will make it through this bottleneck.

If we would study history, we would discover that there have been many situations of overshoot and collapse. In fact, those situations tend to look quite a bit like the situation we are seeing today:

  • Falling resources per capita, because of rising population or exhaustion of resources
  • Falling wages of non-elite workers; greater wage disparity
  • Governments finding it increasingly difficult to fund needed programs

There is a popular belief that oil prices will rise, if there is a shortage of energy products. In prior collapses, it is not at all clear that prices have risen. We know that when ancient Babylon collapsed, demand for all products, even slaves, fell. If we are reaching collapse now, we should not be surprised if the prices of commodities, including oil, stay low. Alternatively, they might spike, but only briefly—not enough to really fix our current situation.

Too many wrong theories

Part of our problem is too much confidence that the “magic hand” of supply and demand will fix the economy. We don’t really understand how demand is tied into affordability, and how affordability is tied into wages and debt. We don’t realize that the view that oil prices can rise endlessly is more or less equivalent to the view that economic growth can continue indefinitely in a finite world.

Another part of our problem is failure to understand how the economic pump that keeps the economy operating works. Once debt rises too high, or the cost of energy extraction rises too high, we can no longer keep the system going. Price tends to fall below the cost of energy extraction. The quantity of energy products consumed cannot rise fast enough to keep the economic growth pump operating.

Clearly neoclassical economics doesn’t properly model how the economy really works. But the Energy Returned on Energy Invested (EROEI) theory of Biophysical Economics does not model the current situation well, either. EROEI theory is generally focused on the ratio of Energy Returned by some alternative energy device to Fossil Fuel Energy Used by the same alternative energy device. This focus misses several important points:

  1. The quantity of energy consumed by the economy needs to keep rising, if human productivity is to keep growing, and thus allow the economy to avoid collapsing. EROEI calculations normally have little to say about the quantity of energy products.
  2. The quantity of debt required to produce a given amount of energy by an alternative energy device is very important. The more debt that is added, the worse the alternative energy device is for the economy.
  3. In order for the economic growth pump to keep working, the return on human labor needs to keep rising. This is equivalent to a need for the wages of non-elite workers to keep rising. This is a requirement relating to a different kind of EROEI—energy return on human labor, leveraged with various types of supplemental energy. Today’s EROEI theorists tend to overlook this type of EROEI.

EROEI theory is a simplification that misses several important parts of the story. While a high fossil fuel EROEI is necessary for an alternative to substitute for fossil fuels, it is not sufficient. Thus, EROEI analysis tends to produce “false favorable” results.

Lining up resources in order by their EROEIs seems to be a useful exercise, but, in fact, the cut-off likely needs to be higher than most have supposed, in order to keep total costs low enough so that the economy can really afford a given energy source. In addition, resources that add heavily to debt requirements are probably unhelpful, regardless of their calculated EROEIs.


We are certainly at a worrying point in history. Our networked economy is more complex than most researchers have considered possible. We seem to be headed for collapse because of low prices, rather than high. The base scenario of the 1972 book “The Limits to Growth,” by Donella Meadows and others, seems to indicate that the world will likely reach limits about the current decade.

The modeling done in 1972 laid out the basic situation, but could not be expected to explain precisely how collapse would occur. Now that we are reaching the expected timeframe, we can see more clearly what seems to be happening. We need to be examining what is really happening, rather than tying ourselves to outdated ideas of how the economic system works, and thus, what symptoms we should expect as we approach limits. It may be that $50 per barrel oil is one of the signs that collapse is not far away.

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29 Comments on "$50 Oil Doesn’t Work"

  1. Cloud9 on Tue, 31st May 2016 3:27 pm 

    Think of gas prices which reflect oil prices as the blood pressure of the economy. As activity goes up, blood pressure goes up. When gas prices dropped to $1.59, the economy had just had a heart attack. We inject a few trillion into the system and prices reached a bumpy plateau starting in 2010 and going through 2014. Then it took another dive in 2014 to build again in 2015 only to drop again. Now we are seeing another rise in 2016. If prices don’t rise, then it means that economic activity is flat lining. While like the rest of you I don’t want gas to rise again, if it does not rise then the economy is done.

  2. Hello on Tue, 31st May 2016 4:16 pm 

    High oil price benefits the oil and supply-chain of the oil industry at the cost of everybody else. Low oil price benefits all others at the cost of oil&friends.

    It’s wash. What matter is the ABSOLUTE amount of energy used by humans, not it’s cost.

    Give me $400/barrel oil and I give you full employment.

    Prost Kamerad!

  3. John Orr on Tue, 31st May 2016 4:49 pm 

    The 1000’s of princes still get more money than general pleb will ever see….what is the point in the price of oil if that is how it works!!!!

  4. Plantagenet on Tue, 31st May 2016 5:38 pm 

    We’re in an oil glut. Gail can wish for $100 oil all she wants, but until the demand for oil grows enough to use up all the available oil supply, oil prices are going to stay low.


  5. shortonoil on Tue, 31st May 2016 5:52 pm 

    I didn’t read the article very closely. Gail’s 10,000 word dissertations seems to constantly follow the same theme. But it doesn’t take an encyclopedia to figure this out. During 2013 when oil was $98/ barrel, how many producers were generating a 49% profit margin on their gross sales. As far as I know there weren’t any!

    Per unit production costs have also advanced about 7.5% over the last three and a half years. Extraction energy cost went from 625k BTU per barrel to 680k BTU per barrel. The only difference between $30 oil, and $50 oil is that producers are going broke slower than they were.

    That’s a good thing if you enjoy eating regularly.

  6. dave thompson on Tue, 31st May 2016 5:54 pm 

    At this time, if there is an oil glut why is the economy not taking off? Where is economic growth? All this cheap, glut filled, oily goodness and the economy is at a stand still on the verge of collapse in some (Greece,Spain,Portugal,Valenzuela) places. This glut then is more like an unafordable oversupply of energy in a post, peak oil, world.

  7. Plantagenet on Tue, 31st May 2016 6:07 pm 

    @dave thompson

    An oil glut is different from the economy “taking off.” An oil glut simply reflects an excess of oil supply over demand resulting in a price collapse. The current oil glut began in late 2014 when prices fell from 100+ to ca. $26. They’ve recovered to near $50, but there is still currently an excess of oil supply over demand in the global oil market.


  8. IPissOnLoser on Tue, 31st May 2016 6:25 pm 

    This women is an idiot and contribute nothing to help broaden the knowledge of the population in general.

    She is always repeat the same thing over and over. It goes something like this with her: there is too much debt, people cannot afford oil, supply and demand and so on, …

    What refiners actual buy is BTU or Joule of energy. They don’t buy volume of oil or if you want barrels of oil.

    For example, let say the conventional oil contain 100 BTU and a sour heavy crude oil 60 BTU.

    Obviously refiners will pay an higher price for conventional oil instead of sour heavy crude. Refiners seel BTU to consumers not volume of gasoline.

    This is why Canadian synthetic crude oil has a lower price, because it has an lower energy content.

  9. sidzepp on Tue, 31st May 2016 6:32 pm 

    It is also interesting to watch the predictions that come with any change in the political/economic climate of the world. With Venezuela and Nigeria experiencing virtual collapse of their society; with the continued tinderbox that we refer to as the Middle East; with China’s economy slowing slightly from the meteoric increases of the last decade (though many nations would be happy with half of the growth that China is experiencing); with the move towards recession in the EU and the US; and a myriad of other problems facing the world, where oil will go in the next few years is anyone’s guess.

    To compound the matter is the Presidential election in the US and in which new direction our policies will take. The Trump is an uncertainty and Hillary will show her true colors and continue to meddle zombie like in the world, making sure not to offend the Saudis or Israel.

    It will definitely be interesting.

  10. makati1 on Tue, 31st May 2016 6:39 pm 

    IPOL, I agree. It seems Gail is stuck in the same rut and has no new answers or ideas. But, I guess these articles pay the bills. I don’t read them anymore.

    Hello also doesn’t get it. $400 oil is not going to do anything but collapse the system for the last time. The “glut” is because we can no longer afford even $50 oil. We produce more of everything than we can afford to buy. Collapse of the whole system is where we are headed. Not some fairy tale “recovery”.

    Growth is dead! Long live Contraction!

  11. dave thompson on Tue, 31st May 2016 6:40 pm 

    Plantaglut saves us all once more,just in time.

  12. Plantagenet on Tue, 31st May 2016 6:51 pm 

    De nada.

  13. Apneaman on Tue, 31st May 2016 7:38 pm 

    Era of oil nearing its end

    “But would building another pipeline rescue Alberta’s oil sector, which has never pumped more oil, yet has never been in more trouble?

    Jeff Rubin said Alberta’s oilsands producers lose $15 to $25 on every barrel they ship. An Energy East pipeline to New Brunswick will not make the oil profitable. Low international oil prices are the culprit and beyond Canada’s control.

    Enbridge line 9 already brings lots of western Canadian and U.S. shale oil to Quebec’s two refineries. Oil on the Energy East pipeline would be largely surplus to their needs. It is mainly an oilsands export line. Mark Sherman, plant manager at the Irving oil refinery in St. John, New Brunswick, said the Energy East line would send “way more than we would ever use at this refinery, so the bulk of it would all be exported.”

  14. shortonoil on Tue, 31st May 2016 8:46 pm 

    “This glut then is more like an unafordable oversupply of energy in a post, peak oil, world.”

    A proponent of the Etp Model sent us this;

    We returned this:

    Its an energy problem because oil is an energy source. It really isn’t that hard to figure out, unless one is a skeleton with a dried out brain.

  15. Dustin Hoffman on Tue, 31st May 2016 8:59 pm 

    Gail does excellent work and her posts reflect an attempt to explain our modern system, outside of conventional perception. Much like the BW Hill group has done in a different facet. She provides a forum for many commenters and many of her essays have over a 1,000 posts. When it hits that mark, Word Press can’t handle much more.
    We are all in this together

  16. rockman on Wed, 1st Jun 2016 6:08 am 

    FYI: there is no magic oil price that makes development possible. There are projects that are viable at $30/bbl and others that won’t get drilled at $90/bbl. It’s a continuous curve. The only certainty is that the higher the oil price the more wells will be drilled. OTOH a higher rig count won’t see a proportional increase in production: regardless of higher oil prices dry holes and non-profitable wells will be drilled. In fact higher prices have always led to increased economic failure rates…even before a price collapse.

  17. marmico on Wed, 1st Jun 2016 7:01 am 

    More Tverbergian all roads lead to perdition bull shit.

    High oil prices benefit a few (producers) and low oil prices benefit many (consumers).

    U.S. households have now saved ~$150 billion cumulative on gasoline spending since the 2014 Thanksgiving Day Massacre.

    I guess the Tverberg forgot about it.

  18. JuanP on Wed, 1st Jun 2016 7:35 am 

    Russia and Saudi Arabia dump $50 billion in US assets.

  19. Don Stewart on Wed, 1st Jun 2016 9:45 am 

    A small epistle on money and energy and Gail Tverberg’s post.

    Shortonoil recently noted that the Central Banks can create currency, but not money. I don’t think Gail understands the distinction. More broadly, I believe there is quite a lot of confusion on the distinction…including some of my own confusion, no doubt.

    In his new book The Physics of Life, Adrian Bejan defines life as ‘movement with the freedom to change’. He further notes that movement requires engines which burn fuel. The engines range from mitochondria to internal combustion engines, and burn a variety of fuels. He notes, page vii, that ‘the generated movement destroys its power instantly—it dissipates it in brakes—while penetrating and displacing its ambient, which resists the movement.’ And ‘The phenomenon of life and evolution is how power production and dissipation conspire to facilitate all movement on earth, animate and inanimate, river, wind, animal, human, and machine.’

    On page 56, Bejan discusses savings and debt, which constitute money:
    ‘Money saved is future power and movement saved. When the fuel spent at location A is greater than the movement that could be used with purpose at A, then the surplus movement is transferred to another location B where movement is needed. The record of this physical flow in monetary terms can be described as follows: B deposits at A a note that indicates the movement A could receive from any other producer of movement when A has the need to increase its movement without increasing its consumption of fuel. If we view the transaction in these terms, we can now see the physical effect of the invention of money, and why money and capital accumulation happened naturally. These design changes had the effect of spreading the movement far beyond the spot where the motive power was generated (whether food, work animal or electric power).’

    I agree with Bejan’s characterization of money and debt as the transference of movement (work) from one place to another. I think the characterization could be sharpened by:
    *Making the distinction between currency and energy backed money
    *Tracing the evolution of available energy from the creation of a fuel through the distribution of the fuel and the use of the infrastructure which uses the fuel to do work.
    For example, crude oil can be produced in a desert in Saudi Arabia where it has little value and shipped to London or New York or Houston where it has a lot of value. The crude oil can be refined into products, which can then be distributed to final users over a broad territory. The crude oil in the ground, the crude oil in a tank in Saudi Arabia, the crude oil on a tanker in Houston, the refined products in Houston, and the end user products at the pump could all serve as ‘money’. That is, they have an as yet untapped ability to do work. Once the gasoline is burned in the tank of the automobile ferrying the family on a vacation, it can no longer do work. It has been dissipated, as Bejan describes. If you compare that value chain to the Etp model, you will find a lot of correspondence.

    There is, of course, another subtlety. The purchaser of the end user product may buy diesel which powers an earth moving machine which causes water to behave in ways that are more valuable to humans. Consider the value of a piece of land. The land has the innate ability to harvest solar energy. As Bejan notes, there is an intimate connection between sun and water. In order to make use of the solar energy, water is essential. Without water, there is no photosynthesis. If the diesel fuel can smooth the water availability cycle (through designs we might label as ‘permaculture’), then the piece of land with the water management feature will be more valuable than the land in an unimproved state.

    The long and the short of all this is that ‘increasing debt’ by creating additional currency out of thin air is not the solution to most problems. What we generally need is more money…more ability to do work, with claims on the work freely traded in the marketplace. The only time when currency becomes critical is when there is a failure of the monetary system and there is simply not enough currency to grease the exchanges of work capacity. Many people believe that the depth of the 1930s depression resulted from inadequate supplies of currency, as the central bank pursued a tight money policy. But, at the present time, our problem seems to be that we have declining ability to actually do work in the non-energy producing economy. Printing additional currency is NOT the solution to an energy problem.

    Don Stewart

  20. Apneaman on Wed, 1st Jun 2016 10:57 am 

    End of a story? I doubt it – worldviews/religions die hard, but at the very least validation for all the economic doomers and critics of a bullshit fantasy system. For a minute.

    You’re witnessing the death of neoliberalism – from within

    IMF economists have published a remarkable paper admitting that the ideology was oversold

    “What makes the fund’s intervention so remarkable is not what is being said – but who is saying it and just how bluntly. In the IMF’s flagship publication, three of its top economists have written an essay titled “Neoliberalism: Oversold?”.

    The very headline delivers a jolt. For so long mainstream economists and policymakers have denied the very existence of such a thing as neoliberalism, dismissing it as an insult invented by gap-toothed malcontents who understand neither economics nor capitalism. Now here comes the IMF, describing how a “neoliberal agenda” has spread across the globe in the past 30 years. What they mean is that more and more states have remade their social and political institutions into pale copies of the market. Two British examples, suggests Will Davies – author of the Limits of Neoliberalism – would be the NHS and universities “where classrooms are being transformed into supermarkets”. In this way, the public sector is replaced by private companies, and democracy is supplanted by mere competition.

    The results, the IMF researchers concede, have been terrible. Neoliberalism hasn’t delivered economic growth – it has only made a few people a lot better off. It causes epic crashes that leave behind human wreckage and cost billions to clean up, a finding with which most residents of food bank Britain would agree. And while George Osborne might justify austerity as “fixing the roof while the sun is shining”, the fund team defines it as “curbing the size of the state … another aspect of the neoliberal agenda”. And, they say, its costs “could be large – much larger than the benefit”.

    “Last year the rich countries’ thinktank, the OECD, made a remarkable concession. It acknowledged that the share of UK economic growth enjoyed by workers is now at its lowest since the second world war. Even more remarkably, it said the same or worse applied to workers across the capitalist west.”

    In the final tally, capitalism will have failed more people than all other belief systems combined.

  21. shortonoil on Wed, 1st Jun 2016 12:21 pm 

    There is a saying, “that when one finds that they have dug themselves into a hole, stop digging”. Since Drake spud his first well in 1859 the world (by our calculations) has burned through 1490 Gb of oil. This represented vast, previously unknown riches to be extracted along with the rock oil. So the world took a resource that could have easily lasted 3 or 4 centuries, and burned it up in a century and a half!

    The world’s oil producers discovered 2.8 Gb of the 34 that it extracted in 2015. Our projection that the world’s oil supply will be depleted out by 2030 appears to be holding up fairly well. Because we founded our entire civilization upon oil, when the oil runs out so does the civilization. But there are alternatives; perhaps not as good as the last feeding frenzy powered, but alternatives.

    With 87% of the total reserve that can be removed, already extracted, the world must now deal with how it can extend the life span of the remaining 13%. We can continue to consume it like an alcoholic who has been accidentally locked into a bar over night, or we can Shepard it. We are not of any delusion that petroleum can be replaced at this time, but we can extend its availability for essential applications. Its present 14 year life span might be doubled, or tripled, or more. Every application where oil can be replaced will have to be replaced as soon as possible. It is time to stop digging. Otherwise our modern oil based industrial economy will soon come tumbling down around our heads; and we will have no one to blame but ourselves!

  22. Rodster on Wed, 1st Jun 2016 1:32 pm 

    “With 87% of the total reserve that can be removed, already extracted, the world must now deal with how it can extend the life span of the remaining 13%. We can continue to consume it like an alcoholic who has been accidentally locked into a bar over night, or we can Shepard it.”

    That’s not going to happen with the money system put in place. Everything must continue to grow or it all collapses and turns into Easter Island.

  23. shortonoil on Wed, 1st Jun 2016 1:40 pm 

    “In his new book The Physics of Life, Adrian Bejan defines life as ‘movement with the freedom to change’. He further notes that movement requires engines which burn fuel.”

    Living things that don’t move don’t have brains. Trees don’t have brains, grass doesn’t have a brain; a brain is a calculating device developed to control movement. The Sea Squid is an interesting example; it moves around in its larva stage, and has a small collection of nerves to do it. When it matures it hooks fast to a rock, and never moves again. Since it doesn’t need it anymore it absorbs its brain!

    Humans now have more freedom to change than at anytime in history. We have developed incredible engines to do it. Those engines require a gigantic amount of energy to function; energy that was stored from the remains of vast quantities of life for over half a billion years. We are using that energy by applying our brains. We are applying our brains to effect change over a very few years; a generation, or two at most. We are doing it with mostly no comprehension of the vast spans of time that it took to get us here.

    We now have so much freedom of change because our brains have enabled us to strip mine the planet that supports us. To keep moving we will have to keep using our brains, but the mining will soon be coming to an end. We will then have the choice of absorbing our brains, or finding an alternative to power our engines. There are very few alternatives remaining; if the engines run out of fuel, we can either use our brains, or stop moving.

  24. Apneaman on Wed, 1st Jun 2016 2:34 pm 

    The human brain is a reward seeking organ. Dopamine squirts are the reward. The humans are unable to stop reward seeking because that is their evolutionary programming. The humans are not in control. If they were you would think at least just one civilization would have managed to avoid overshoot – NO. The Sumerians, the first civilization knew they were in the overshoot loop and kept farming even though they knew it was going to destroy the soil – they left their records in cuneiform writing on clay. They did not stop for the same reasons techno industrial civilization will not, cannot stop. Same for all of them. No stopping, no changing, no choice.

  25. Don Stewart on Wed, 1st Jun 2016 3:12 pm 

    By Bejan’s definition, trees move. A tree, for example, is constantly pruning and growing and extending its root system to reach water and nutrients. It also moves carbohydrates into the soil to trade to fungi in return for nutrients. Also the water which moves through the trees to reach the sky is moving. The leaves move in the wind to shed kinetic energy. Everything about the tree is moving. By Bejan’s definition, it is alive.

    By Bejan’s definition, a river delta is alive, because it moves and evolves its shape.

    Bejan does not consider a brain essential to life or movement. In fact, there are single celled critters who engage in quite sophisticated movement.

    Don Stewart

  26. shortonoil on Wed, 1st Jun 2016 4:09 pm 

    “Bejan does not consider a brain essential to life or movement. In fact, there are single celled critters who engage in quite sophisticated movement.
    Don Stewart”

    I’m am just reiterating the position of Evolutionary Psychologists like Toole. Without a centralize net of neural ganglion trees are not considered to have a brain in the strictest definition of the term. That does not mean that they do not think. I have observed growth patterns in trees that indicate very strongly that they do. Trees plan for a future set of events that are not initially present. “I” would call that “thinking”.

    As far as little critters paddling around in a drop of water, I bet that they have some kind of neural path ways directing that paddling. But this is just a curiosity issue for me. It is WAY OUT of my field of study.

    Thanks Don

  27. Don Stewart on Wed, 1st Jun 2016 5:58 pm 

    There is a very good, and concise, book by Dacher Keltner at UC Berkeley called The Power Paradox. If you have time to get out of your field, I recommend it. Keltner is a psychologist who has performed himself a lot of experiments, and who knows a great deal about the experiments performed by others. For example, the brain interacts with our posture. Someone who feels subservient will adopt a certain stance. Contrarily, someone who adopts a ‘power stance’ will begin to feel powerful.

    Someone here talked about humans being in the thrall of dopamine. It turns out that being of service to others triggers dopamine, and leads to a group awarding power to the individual. But many then succumb to the temptations afforded by power, misbehave, and lose power. Then their hormonal rewards and physiological function deteriorate. Those who are able to exercise the power awarded to them and also continue to serve others are the real winners.

    Another good book outside your field is If You’re So Smart, Why Aren’t You Happy? by Raj Raghunathan at the University of Texas. Many parallels to Keltner’s book.

    One of the messages is that a focus on the brain as a standalone system is misplaced. The brain is part of a physiological system which includes all of our body plus our microbiome, and our body has to be considered as part of a social structure.

    Relevant to your project of teapot refineries or others things I don’t know much about, you will find that humans may not be very smart about predicting the future, but they are pretty adaptable to changes.

    Don Stewart
    PS I can’t remember where I read about the remarkable behavior of the single celled critter Stentor in the presence of a pollutant. If I can remember and find the description, I will send it to you.

  28. shortonoil on Wed, 1st Jun 2016 7:44 pm 

    “If You’re So Smart, Why Aren’t You Happy”</i?

    I wonder if that is a linear, or an exponential function. If it is the latter, "I'm happy". If its the first I need a brain transplant with a turnip. Which just goes to show that, if I were a little bit smarter, I'm be miserable. It's a good thing it's a steep curve.

  29. Kenz300 on Thu, 2nd Jun 2016 7:39 am 

    Big Oil Could Have Cut CO2 Emissions In 1970s — But Did Nothing

    New Documents Show Oil Industry Even More Evil Than We Thought

    Climate Change is real….. we will all be impacted by it.

    Oil Giants Spend $115 Million A Year To Oppose Climate Policy

    The Kochs Are Plotting A Multimillion-Dollar Assault On Electric Vehicles

    Inside the Koch Brothers’ Toxic Empire | Rolling Stone

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