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Why energy prices are ultimately headed lower; what the IMF missed

Why energy prices are ultimately headed lower; what the IMF missed thumbnail

We have been hearing a great deal about IMF concerns recently, after the release of its October 2016 World Economic Outlook and its Annual Meeting October 7-9. The concerns mentioned include the following:

  • Too much growth in debt, with China particularly mentioned as a problem
  • World economic growth seems to have slowed on a long-term basis
  • Central bank intervention required to produce artificially low interest rates, to produce even this low growth
  • Global international trade is no longer growing rapidly
  • Economic stagnation could lead to protectionist calls

These issues are very much related to issues that I have been writing about:

  • It takes energy to make goods and services.
  • It takes an increasing amount of energy consumption to create a growing amount of goods and services–in other words, growing GDP.
  • This energy must be inexpensive, if it is to operate in the historical way: the economy produces good productivity growth; this productivity growth translates to wage growth; and debt levels can stay within reasonable bounds as growth occurs.
  • We can’t keep producing cheap energy because what “runs out” is cheap-to-extract energy. We extract this cheap-to-extract energy first, forcing us to move on to expensive-to-extract energy.
  • Eventually, we run into the problem of energy prices falling below the cost of production because of affordability issues. The wages of non-elite workers don’t keep up with the rising cost of extraction.
  • Governments can try to cover up the problem with more debt at ever-lower interest rates, but eventually this doesn’t work either.
  • Instead of producing higher commodity prices, the system tends to produce asset bubbles.
  • Eventually, the system must collapse due to growing inefficiencies of the system. The result is likely to look much like a “Minsky Moment,” with a collapse in asset prices.
  • The collapse in assets prices will lead to debt defaults, bank failures, and a lack of new loans. With fewer new loans, there will be a further decrease in demand. As a result, energy and other commodity prices can be expected to fall to new lows.

Let me explain a few of these issues.

The Need For Energy to Operate the Economy

On a worldwide basis, it takes energy to make the economy grow. This is evident, regardless of what time period we look at.

Figure 1. World GDP in 2010$ compared (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014).

Figure 1. World GDP in 2010$ compared (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014).

Figure 2. Three year average growth rate in world energy consumption and in GDP. World energy consumption based on BP Review of World Energy, 2015 data; real GDP from USDA in 2010$.

Figure 2. Three year average growth rate in world energy consumption and in GDP. World energy consumption based on BP Review of World Energy, 2015 data; real GDP from USDA in 2010$.

Figure 3. World GDP growth compared to world energy consumption growth for selected time periods since 1820. World real GDP trends for 1975 to present are based on USDA real GDP data in 2010$ for 1975 and subsequent. (Estimated by author for 2015.) GDP estimates for prior to 1975 are based on Maddison project updates as of 2013. Growth in the use of energy products is based on a combination of data from Appendix A data from Vaclav Smil's Energy Transitions: History, Requirements and Prospects together with BP Statistical Review of World Energy 2015 for 1965 and subsequent.

Figure 3. World GDP growth compared to world energy consumption growth for selected time periods since 1820. World real GDP trends for 1975 to present are based on USDA real GDP data in 2010$ for 1975 and subsequent. (Estimated by author for 2015.) GDP estimates for prior to 1975 are based on Maddison project updates as of 2013. Growth in the use of energy products is based on a combination of data from Appendix A, data from Vaclav Smil’s Energy Transitions: History, Requirements and Prospects, together with BP Statistical Review of World Energy 2015 for 1965 and subsequent.

There is a small gain, over and above that added by energy growth. This gain reflects the impact of efficiency gains and technology changes. Generally, this additional gain is less than 1% per year.

In recent years, a large share of the world’s manufacturing has been moved to developing countries. This shift gives the illusion that the developed countries can get along with less energy to produce their GDP. This is not really the case. The developed countries find themselves with a need for a large amount of imported goods. Their heavily services-oriented economies tend to grow slowly. This is because, with little energy use, it is difficult for these economies to make productivity gains. I have written about this issue in What really causes falling productivity growth — an energy-based explanation.

Figure 4. Total amount of energy used by Commercial and Industrial Sector (excluding transportation) based on EIA Energy Consumption by Sector, divided by Bureau of Labor Statistics Total Non-Farm Employees by Year.

Figure 4. Total amount of energy used by Commercial and Industrial Sector (excluding transportation) based on EIA Energy Consumption by Sector, divided by Bureau of Labor Statistics Total Non-Farm Employees by Year.

We Run Out of Cheap-to-Extract Energy Products 

The amount of a given energy product (whether oil, coal, natural gas, or uranium) depends to a significant extent on the price available. The wide base on the triangle in Figure 5 indicates that if the price is high enough, we can extract a very large amount of any given energy resource. For example, if oil is $300 per barrel, we can extract the huge amounts of oil that would seem to make it possible for the economy to grow for the next 25 years.

Figure 5. We extract the easiest to extract energy first.

Figure 5. We extract the easiest to extract energy first.

In fact, the IEA has even made projections assuming $300 per barrel oil.

Figure 6. IEA Figure 1.4 from its World Energy Outlook 2015, showing how much oil can be produced at various price levels.

Figure 6. IEA Figure 1.4 from its World Energy Outlook 2015, showing how much oil can be produced at various price levels.

The reason why there is a problem if oil prices rise to very high levels is because wages don’t rise at the same time.

Figure 7. Reason why wages don't grow.

Figure 7. Reason why wages don’t grow.

This situation of lower and lower efficiency at extracting energy, as described above, is sometimes referred to as diminishing returns.

We can look at the problem from the point of view of the worker. He must make choices regarding which things to cut back on if energy prices rise, but his wages don’t rise. The result tends to be recession.

Figure 8. A worker must make choices, if prices of goods made using energy products rise, but his wages don't.

Figure 8. A worker must make choices, if prices of goods made using energy products rise, but his wages don’t. These choices lead to recession.

Figure 9. Examples of discretionary goods include vacations using airline travel, new homes, and new cars.

Figure 9. Examples of discretionary goods include vacations using airline travel, new homes, and new cars. Other examples might include restaurant meals and charitable contributions.

Central Banks Can Fix the Problem Temporarily

If wages are too low to buy “big-ticket” items, lower interest rates and more debt can “sort of” solve the problem. The combination makes expensive goods more affordable on a monthly payment basis.

Figure 10. Comparison of world oil supply and price, as changes are made to interest rates using QE and other changes.

Figure 10. Comparison of world oil supply and price, as changes are made to interest rates using QE and other changes.

Quantitative Easing (QE) allows interest rates to be very much lower than normal. The United States first started using QE in 2008 when commodity prices dropped very low. The combination of the US’s use of QE, and significantly greater borrowing by China to stimulate its economy, helped bring Brent oil prices back over $120 per barrel by 2011 (Figure 10).

Figure 10 shows that, over time, QE has become less and less able to hold up oil prices. The price suddenly started to fall in 2014 when the US discontinued its QE program and China cut back on its growth in debt. Oil is priced in US dollars; the US dollar rose relative to other currencies when the US eliminated its QE program, making oil relatively more expensive for these countries. As a result, citizens of these countries were forced to cut back on discretionary purchases. This is what led to falling commodity prices of many kinds (not just oil) in mid-2014.

Since 2014, other countries besides the US have maintained their QE programs. In fact, Japan and the EU have expanded their programs. Even with very low interest rates, commodity prices remain far too low for most commodity producers to be profitable. This situation could lead to catastrophe because metals, agriculture, and energy are all essential to the economy.

Figure 11. IMF Commodity Price Indices, from September Commodity Market Monthly.

Figure 11. IMF Commodity Price Indices, from September Commodity Market Monthly.

Throughout the ages, there has been a problem with diminishing returns in producing food and other energy products. The standard workaround seems to be greater “complexity.” When complexity is used, specialization and more concentrations of energy are used to try to work around problems. For example, one solution is to make more tools and other capital goods that can be used to leverage the labor of workers. Another approach is to use larger companies with more hierarchical organizations to bring together more resources. For example, if the problem is inadequate food production, perhaps an organized group can build a dam, so that irrigation can be used to produce a greater amount of food on the same quantity of arable land. A third approach is more specialized training for some of the workers.

An unfortunate impact of greater complexity is an increasingly hierarchical society. While some workers benefit, a large number of non-elite workers accrue little benefit. Instead, lagging wages increasingly make the new, better products mode possible by a complex economy less affordable.

What Goes Wrong?

There are several things that go wrong:

1. Non-elite workers find it increasingly difficult to buy the output of the economy. Their wages lag behind as more of the wages go to the workers with more advanced training and management responsibility. Because there are so many of these non-elite workers, their “demand” is needed if the prices of commodities are to stay high enough to ensure greater production of these commodities. With only low pay, non-elite workers find it difficult to afford houses, cars, and vacations. All of these use commodities, both when capital goods such as houses, cars, and airplanes are made, and later when these capital goods are operated. Low interest rates may not help these non-elite workers very much, because they lack money for down payments. Without as much demand, prices for commodities tend to fall.

2. Central banks lower interest rates, but not much of the benefit of these lower interest rates actually gets back to the buying power of non-elite workers. Instead, low interest rates tend to lead to higher prices of assets, such as land, existing houses, and shares of stock in companies. Unfortunately, these higher prices of assets do nothing for commodity prices. In order to raise demand for commodities, the buying power of non-elite workers needs to rise, so that they can buy the expensive goods that are no longer affordable.

3. The rate of return on investments tends to fall too low, because diminishing returns lead to ever more energy use (including human labor use) to produce energy products. Since capital goods are made and operated using energy products, the cost of their creation and operation is also raised. Each unit of debt required to finance new capital goods and new energy extraction tends to get lower returns over time. This results in the economy becoming increasingly less efficient, and productivity growth tending to fall.

4. Debt levels tend to rise for multiple reasons. One reason debt levels rise relates to diminishing returns with respect to energy extraction. What is needed when it comes to producing the kind of changes that underlie economic growth (for example, extraction of ores, heating of ores, and transportation of finished products to their destinations) is a particular quantity of energy, as measured in some unit of energy, such as British Thermal Units. If the cost of energy extraction is now five times as high as it was fifteen years ago, the quantity of debt needed to extract that energy may need to be five times as high. If the development process takes 10 years instead of 5, that may further increase the amount of debt required.

It is not only energy products that are affected by the need for a greater amount of debt. Products made using energy products, such as cars and homes, tend to become more expensive as well. If the prices of these products rise, more debt is needed to buy them, as well.

5. Another reason debt levels tend to rise relates to falling interest rates, and the impact that these lower interest rates have on asset prices. With lower interest rates, the purchase of existing buildings becomes more affordable, as does the purchase of shares of stock, so prices tend to rise. Customers buy these items, in the hope that capital gains will give them greater returns than the measly returns available from fixed income investments, and likewise, from new investment in new “productive” assets such as oil wells and factories. Most of this asset-based debt is not productive debt; it is simply obtained in the hope of obtaining capital gains on existing assets as a result of ever-lower interest rates.

6. Relativities among currencies become more important. If the US dollar rises, either because the United States is charging higher interest rates, or because it is not using QE while other countries are, then goods become relatively more expensive outside the US. In this situation, investment tends to fall in countries with perceived lower future prospects–in other words, in countries outside of the US. It becomes harder to keep debt levels up, and thus the buying power of the world economy. Downward pressure on the price of commodities becomes greater because of the loss of debt-fueled buying power.

7. Growth in energy supplies can be expected to slow and eventually begin to shrink, as low energy prices lead to lower new investments. Needless to say, these lower energy supplies adversely impact GDP growth, because of the connection between energy consumption and GDP growth. The countries likely to be affected first by low oil prices are oil exporters such as Venezuela and Nigeria. Many people will not make this connection, because they consider only the apparently beneficial impact of low fuel prices for oil importing countries.

Essentially, the problem being encountered is a physics problem. The economy is a dissipative structure. As it grows, it needs an increasing amount of energy to operate. If the energy is not available, it becomes increasingly subject to collapse. See my post, The Physics of Energy and the Economy.

At some point, we can expect to reach a Minsky Moment. Such a moment involves a major drop in asset prices. We have already reached the corresponding drop in commodity prices that comes with diminishing returns, because fewer non-elite workers are able to buy goods made with commodities, and because of the higher US dollar.

Figure 12. Stylized Minisky Cycle from Wikipedia.

Figure 12. Stylized Minsky Cycle from Wikipedia.

We are waiting now for asset prices to fall to a level corresponding to what these assets can really produce. When this happens, the big drop in commodity prices will transfer back to the corresponding asset prices. For example, the price of land used to extract oil and gas should at some point drop to reflect the lower prices available for these commodities in the marketplace. The price of agricultural land should drop to reflect the lower prices of commodities that can be grown on them, such as wheat, cattle, and hogs. The price of land used to extract metals should drop to reflect the low value of metals. This drop in asset prices doesn’t happen immediately, because everyone assumes that prices are going to bounce back up, and that the system will perform as it always has.

When prices of commodity-related assets drop to a level that reflects their true economic value, we can expect a huge number of debt defaults. This, of course, happens because these assets have been used as the basis for a large amount of debt. It will be difficult to save the financial system, because there will be huge defaults both on bank loans and on outstanding bonds. Banks, insurance companies, and pension plans will all be affected.

Can the Price of Oil Rise above $50 per Barrel?

I am doubtful that the price of oil can rise very high, for very long. Our oil price problem is part of a much larger problem–a slowing economy with low prices for a large number of commodities, including oil. The price of oil can perhaps briefly rise as high as $75 per barrel, but such a high price cannot hold for very long. Rising oil prices tend to lead to recession for oil importing countries, and recessions tend to bring commodity prices back down. The world clearly could not support a price of $100 per barrel before the crash in prices in mid-2014. Once we understand the reason for our low-price problem–diminishing returns and the economy’s tie to the use of energy–it is clear that there is no way out of the problem over the longer term.

In the not-too-distant future, our low commodity price problem is likely to become a low asset price problem. Once this happens, we will have a huge debt default problem. It will also become harder to obtain new loans, because defaults on existing loans will have an adverse impact on the ability of banks to make new loans. Interest rates required by bond markets are likely to spike as well.

The lack of new loans will tend to depress demand further, because without new loans it is difficult to buy high-priced goods such as cars, homes, and factories. As a result, in the long run, we can expect lower commodity prices, not higher commodity prices. Oil prices may ultimately fall below $20 per barrel.

our finite world



32 Comments on "Why energy prices are ultimately headed lower; what the IMF missed"

  1. TrumpHillarySuck on Tue, 11th Oct 2016 7:20 pm 

    She is such an amateur writer. She is just putting words together.

    Last paragraph she says
    The lack of new loans will tend to depress demand further, because without new loans it is difficult to buy high-priced goods such as cars, homes, and factories.

    She seems to imply that if we had more loans or if the government were to give money to people everything will become rosy again.

    No mention of oil depletion. No mention that oil productions ( all types of oils includes) peaked in 2015.

  2. makati1 on Tue, 11th Oct 2016 8:13 pm 

    THS, She has nothing new to write about and make a paycheck. Got to feel sorry (NOT), for all those like her whose lifestyle and livelihood depends on a growing economy. (Economists, psychologists, financial advisors, real estate agents, boutique retail salespersons, travel agents, bureaucrats, etc.) All history soon.

  3. bahamased on Tue, 11th Oct 2016 8:31 pm 

    You both are wrong, she hates and does not understand the ETP model but as I have read her last few posts they have explained the ETP model better then shortonoil.

    Or I should say that they are both trying to explain the same process from a different angle.

  4. makati1 on Tue, 11th Oct 2016 8:40 pm 

    Really baha? You are missing her point. More debt is the ONLY way to keep BAU going and debt has hit the wall at the end of the can kicking road. Yes, bankruptcies will happen, but they will just continue to happen until the economy hits a new level somewhere near that of the 3rd world.

    Did I miss her mention and discussion of the contraction of employment opportunities and income? Who gives a damn about the price of oil if you are trying find food and shelter? THOSE will soon be the main objectives of Americans and much of the Western world. Wait and see. Another article full of economist bullshit.

  5. penury on Tue, 11th Oct 2016 8:42 pm 

    My reading of what she is saying is: most consumers in the U.S. have reached the upper limits of the credit available to them. With the millenials, student debt has them trapped so that mortgages are a distant dream, marriage is being delayed and retail stores are losing sales. Unless and until excess debt is paid down the econo0my is not able to grow. Also a lot of people, corporations and levels of government cannot afford to pay the interest on their current debt further limiting additional borrowing. In a debt based economy the lack of ability to borrow spells the doom of the economy. This is the major reason why certain economists (PK) are advocating further QE to be distributed directly to the people.

  6. Davy on Tue, 11th Oct 2016 9:23 pm 

    Economic deflation, resource depletion, physical decay, dysfunctional systems, irrational policy and destabilized culture. These things affect demand and demand effects supply. When an economic momentum is negative and this momentum has a long enough duration destructive change begins to appear. The above issues are subtle and dispersed. They have been building now for a decade. How long does a Ponzi last? They usually last until they don’t. Unfortunately we also have abrupt climate change and a degrading ecosystem. Civilization is cracking with corruption, moral hazard, and wealth transfer. If you were to dream this stuff up you would have a hard time beating this story. We are in the vicinity of an end game. What is amazing is how obscure this end game is. Do we have 10 years or 10 months? Either time frame could fit. I research this daily and find surreal the best word for it. Normal is so soothing that it is hard to see how precarious modern life really is. What is happening is multidimensional so any effort to define this process is going to be lacking.

  7. GregT on Tue, 11th Oct 2016 10:54 pm 

    “This is the major reason why certain economists (PK) are advocating further QE to be distributed directly to the people.”

    Sounds like certain eCONomists’ bags of chicken entrails, have just about completely dried out.

  8. Anonymous on Wed, 12th Oct 2016 12:42 am 

    So, if the IMF ‘believes’ debt is a ‘problem’ in China, then what is the 19 trillion in amerikan debt? Not a big deal, no problem?

  9. GregT on Wed, 12th Oct 2016 1:06 am 

    IMF:

    Purpose-

    Promote international monetary cooperation, facilitate international trade, foster sustainable economic growth, make resources available to members experiencing balance of payments difficulties.

    Headquarters-

    Washington, D.C., United States

    For the more intellectually challenged, sustainable economic growth is an oxymoron.

  10. GregT on Wed, 12th Oct 2016 1:13 am 

    And just when you thought things couldn’t possibly get any more ridiculous:

    IMF: The world’s financial leaders renewed their pledge to use all policy levers, individually and collectively, to fight subdued growth and make globalization work for all.

    These people are on some seriously good crack.

    http://www.imf.org/external/index.htm

  11. makati1 on Wed, 12th Oct 2016 1:22 am 

    GregT, you have to look at their leader, The white haired old lady from France. Her mouth has spouted so much bullshit these last few years, that being in the DC barnyard is the perfect place for her to wallow with the other pigs we loosely call out government.

  12. GregT on Wed, 12th Oct 2016 1:30 am 

    Reminds me of an Upton Sinclair quote makati:

    It is difficult to get a man (or a post menopausal woman) to understand something when his salary depends upon his not understanding it. (brackets mine)

    And another one, very fitting given the circumstances:

    Fascism is capitalism plus murder.

  13. Cloggie on Wed, 12th Oct 2016 3:55 am 

    Fascism is capitalism plus murder.

    The Italian fascist state (1922-1943) killed ca. 10 people internally throughout its entire existence. That’s half of what Texas executes on average in a single year:

    http://www.csmonitor.com/USA/2011/0916/Death-penalty-s-top-5-Which-US-states-have-the-most-executions/Texas

    Even the encyclopedia of the NWO, Wikipedia has to admit:

    https://en.wikipedia.org/wiki/Fascism

    Since the end of World War II in 1945, few parties have openly described themselves as fascist, and the term is instead now usually used pejoratively by political opponents…

    Fascism was an explicit defense mechanism against communism, the greatest humanitarian disaster in human history (and as such an ideal ally for the US sanhedrin to destroy Europe). Communism had conquered Russia between 1917-1922 and threatened to spread all over Europe. Fascism and National Socialism were defense mechanisms against murderous communism.

    Here scenes from the 1992 Russian made “The Czekist”:

    https://www.youtube.com/watch?v=pRfY8CwjXvY

    The standard way to execute millions of Russians who opposed communism: execution in the back of the skull. And these were the allies of the Americans. You are proud of that? But the Spielberg’s of this world, who lord over the Americans, have zero inclination to make films about what was essentially their system, only about the fake hollowcause. In rightwing-Europe between 1933-1945 nothing like that happened what happened in Soviet-Russia and potentially will happen in North-America, if Europe fails to intervene and Gulags will emerge on US soil, run by BLM thugs and neo-bolshevik ghung and apneaman types.

    – Fascism didn’t persecute Jews.
    – Fascism didn’t have concentration camps other than in Libya to put in Arabs-with-an-attitude, who didn’t fancy too much of becoming a European colony (like the rest of Africa was colonized by Britain and France).

    But North-Americans have to picture their conquered European opponents in the worst possible light to cover up their own crimes, which were far, far worse.

    https://en.wikipedia.org/wiki/German_Village_(Dugway_proving_ground)
    The Americans built a village in the US to optimize the number of civilians killed in barbarous bombing campaigns in Germany, where hundreds of thousands were burned alive, because they resisted becoming incorporated in the US & Soviet empires resp (700k is a low end Anglo estimate). Europeans never did that. Soviet and America soldiers engaged in mass rape, Europeans never did that.

    The brave Canadian author James Bacque documented what the Anglos did to the Germans after their horny effort to add western Europe to their US empire succeeded (Russia and China are next.lol):

    https://www.amazon.com/Other-Losses-Investigation-Prisoners-Americans/dp/0889226652/ref=sr_1_1

    More than a million where starved to death on purpose.

    The Soviets were the worst
    The Anglos were the second worst
    The Italian Fascists were merely operetta worriers

    Know your history.

    If Clinton wins, the Anglos are now going to be send into a war with Russia and as a consequence with China as well. The Soros types are going to throw the Americans against the Chinese Wall like a sack of potatoes. That’s what you get if you don’t defend yourself against opponents who want you dead. Russia + China, an opponent 100 times as strong as North-Vietnam. How did that end again?

    Karma is a bitch.

  14. Cloggie on Wed, 12th Oct 2016 5:26 am 

    Sorry for off-topic, but this DIY Tesla Powerwall for $300 4.4 kwh storage is too good to let it pass:

    https://www.youtube.com/watch?v=Bk50IuWXg-c

    (he mixes up kw and kwh a lot)

    Ebay has comparable 5.3 kwh modules on offer for $1400,-

    http://www.ebay.com/itm/Tesla-Model-S-battery-module-24V-250Ah-5-3kWh-444-Panasonic-18650-3400mAh-/182305224728?hash=item2a723cf818:g:C14AAOSwLF1X9qmA&vxp=mtr

    That’s all a family needs for 24/24 coverage (in the summer)

  15. Davy on Wed, 12th Oct 2016 7:05 am 

    Thanks Clog, that is an interesting read.

  16. Cloud9 on Wed, 12th Oct 2016 7:49 am 

    If you want to be independent take these five steps.

    1. Set aside three months of food and water.
    2. Buy a fire arm and learn to use it with the understanding that you must never surrender it.
    3. Set aside some cash and other forms of portable wealth.
    4. Realize that you are not alone; you are in fact part of a swarm that numbers in the millions.
    5. Remain quiet and peaceful, but when they come for you, kill the first man through the door. Resolve to do this and the tyrant is finished before he can even begin.

  17. rockman on Wed, 12th Oct 2016 9:18 am 

    “I am doubtful that the price of oil can rise very high, for very long.” A reasonable expectation since that’s been the dynamic since Col. Drake drilled that first well. What’s telling is the writer appears clueless to the fact that current oil prices are still a good bit higher then the average prices during the low end of the cost cycles. IOW we have LOWER oil prices today…not LOW oil prices.

  18. Robert Spoley on Wed, 12th Oct 2016 10:32 am 

    All societies and cultures throughout history and locations have installed governments of every stripe and shape for the simple reason that they provide some kind of organizational expertise. This allows an efficient way of decreasing the effects of some ongoing or impending problem/crisis. All this with the inherent belief that the citizens will surrender some certain amounts of freedom that lessen the problem but with the belief that once the problem is alleviated, these freedoms will be returned to the citizens. All governments are reluctant to do this. Once any government obtains some kind of power it ceases to be a benign symbiont with the citizen host and becomes PARASITIC. As time goes on and various problems arise, the parasitic government expands and becomes aggressive and finally predatory. The organizers of the American Constitution seemed to know this and severely limited the powers of the federal government. This limitation has been severely eroded. At this point in time in any society throughout history, the citizen host throws out/off the aggressive predatory parasitic government and installs a new government the way it was supposed to be in the first place. Venezuela is going through this process now with Turkey in the wings. The U.S. of A is in the beginning stages of the same process. The government has permeated every aspect of life in this country. HRC defends the parasite and Trump the host. In my opinion, both are poor leaders of their respective supporting bodies. The price of energy and the volume of borrowing in this country are un sustainable at their current levels. Both will be adjusted to sustainable levels by market forces that cannot be controlled by either party for anything but very short time periods. Supply and demand are the final arbitrators of the economies of any society. Recognition of these facts and adherence to their processes will lead to reasonable long term prosperity for the greater part of any society. Failure to recognize these things and live by them will result in the societies downfall. Like the old add, “You can pay me now or you can pay me later” with all that implies.

  19. Ghung on Wed, 12th Oct 2016 10:58 am 

    Robert said; ” The price of energy and the volume of borrowing in this country are un sustainable at their current levels….

    “You can pay me now or you can pay me later” with all that implies.”

    Of course, the looming problem is that all of the costs of energy use in this country (and most of the world) are not accounted for in real time. Environmental costs are, and will be, huge, and we refuse to include that in our current payment scheme.

    That’s the Achilles heel of “supply and demand”. It has no foresight what-so-ever. There are plenty of examples throughout history and in Nature.

    Then there’s the issue of creeping depletion, which only becomes self-evident after the fact of depletion when the supply/demand paradigm isn’t somehow tempered with temperance. We’re at the point where we need to seriously rethink the whole supply/demand thingy. Demand destruction due to lack of supply won’t be pretty; not at all. Our choices have become too limited relative to our needs.

  20. dave thompson on Wed, 12th Oct 2016 11:31 am 

    Buying a used Tesla battery, or any used rechargeable battery would be a waste of money.

  21. GregT on Wed, 12th Oct 2016 12:08 pm 

    “That’s all a family needs for 24/24 coverage (in the summer)”

    That would be misleading cloggie. Batteries store electricity, they don’t generate it, and the vast majority of human beings on this planet rely on the grid to generate their electricity for them.

  22. Cloggie on Wed, 12th Oct 2016 12:39 pm 

    That would be misleading cloggie. Batteries store electricity, they don’t generate it, and the vast majority of human beings on this planet rely on the grid to generate their electricity for them.

    As a physics engineer and somebody who worked for years in the (academic) renewable energy sector, I am obviously aware that batteries are for storage and that for instance solar panels are needed to feed them.

    Like everybody else on this energy forum.

  23. Apneaman on Wed, 12th Oct 2016 1:15 pm 

    “As a physics engineer and somebody who worked for years in the (academic) renewable energy sector…”

    Bahahahahahahahahhahahwaaahahahahahwaaahahahahwaaahahahwaaahahahahahahawaawaawaahahahahahahahahahas!!!!!!!!!!!!!!!!!!!!!

    Walter Mitty rides again.

  24. shortonoil on Wed, 12th Oct 2016 4:58 pm 

    “You both are wrong, she hates and does not understand the ETP model but as I have read her last few posts they have explained the ETP model better then shortonoil. “

    Because she does not understand it, she sometimes makes rather egregious errors. It does seem like a lot of what we post here, and other places ends up being the bases of her articles. That is one reason why we are rather selective as to what we post. It is not because we are annoyed about being copied without accreditation (that is almost comical) it is because some of the subjects that we deal with, if miss represented, would be likely to do more harm than good.

    It is unfortunate that we must employ self censorship, but the freedom of the internet comes with a price. A constant stream of “we are all going to die tomorrow” is just not generally constructive. We are happy to leave that to Hollywood, and Gail. We will continue to work on developing the best understanding of the present situation as possible, and try to develop alternatives that might mitigate its impact. It is first necessary to understand a problem before it can be addressed.

    Progress sometimes seems glacially slow, but it is advancing. What we are hoping for is an avalanche.

    http://www.thehillsgroup.org/

  25. Davy on Wed, 12th Oct 2016 5:23 pm 

    “A constant stream of “we are all going to die tomorrow” is just not generally constructive.” As opposed to a constant stream of “no worries”? Which is less “not generally constructive”?

  26. ghung on Wed, 12th Oct 2016 5:46 pm 

    …. as opposed to somewhere between the two.

  27. Apneaman on Wed, 12th Oct 2016 6:10 pm 

    Davy, folks are going to listen to and believe their tribal (emotion) mouthpieces regardless of consequences. Even deadly consequences. Apparently listening to Matt Drudge, Rush Limbaugh and the rest of the well paid fossil fuel funded conservatard shouting brigade is proving to be “not generally constructive” especially if one considers not drowning to be generally constructive.

    Hurricane Matthew: Matt Drudge Faces Backlash On Twitter Following Government Conspiracy Comments

    http://www.ibtimes.com/hurricane-matthew-matt-drudge-faces-backlash-twitter-following-government-conspiracy-2427979

    North Carolina’s record floods: “You have got to see it to believe all the devastation that has occurred.”

    http://www.vox.com/energy-and-environment/2016/10/11/13243296/north-carolina-floods-hurricane-matthew

    Remember deniers, when it’s your kids or spouse who is the next face down floater that it’s all a hoax right? Keep clinging to your tribe – it’s a sinking stone.

    Survival of the most adaptable or at least survive longer. Probably too late overall, but not too late to take precautions to protect one’s family from being next in line. Each to his own I guess.

  28. makati1 on Wed, 12th Oct 2016 6:30 pm 

    “Be Prepared” means you recognize the danger, reason out what you can do about it and then act. Any Boy Scout knows that. Sadly, some here do not.

  29. shortonoil on Wed, 12th Oct 2016 8:24 pm 

    “As opposed to a constant stream of “no worries”? Which is less “not generally constructive”?

    That was “don’t worry, be happy”. That was a stupid song 30 years ago; it still is!

  30. Cloggie on Wed, 12th Oct 2016 10:19 pm 

    And again has jailbird Friday ruined the readability of this thread with his juvenile 1:15 pm post without spaces.

    IQ80 Monkeys never learn.

  31. Apneaman on Wed, 12th Oct 2016 11:04 pm 

    Whatever you say there professor tall tales.

    Clogged has a PhD in life story fabrication.

    Bull shit 101 is back in session.

  32. Davy on Thu, 13th Oct 2016 6:52 am 

    I know we are joking around with this “worry” or “don’t worry” be “happy” or “scared shitless” and we are serious about it. The “It” is revelations of the truth. How much can society and individuals handle? How much can we ourselves handle? When I say the truth I refer to being near or nearer to the truth. We can never know the truth. This truth is collapse and a process of collapse.

    Since the soothing normal allows us to easily fall back into our surreal status quo this becomes a balancing act. We balance by having one foot in the door of a collapse reality and one in the status quo. The foot in the door of collapse is for our sanity. Many of us who embrace the possible of collapse do this because we are realist and honest. Many have gone through some stage in life where we went through the Kuble-Ross stages of grief. We know the validity and power of acceptance. The other foot is in the door of the status quo. Here we interact with a general public many of whom are oblivious to collapse or the process. There are other who suffer the insanity of it. There are plenty of crazy new agers and bible thumpers we are compared to and who we must deal with. We live and work in the status quo to survive. I use the status quo to leave the status quo. It takes money to build a doomstead. Our relationships are mostly the status quo. How many people can you relate to daily living collapse? I have a lonely handful except for my friends on the internet.

    How much can society handle? My feeling is not a lot but still more than what is currently occurring. The reason there must be a reality disconnect at some level with society is the disruption that may prevent adaptation to collapse. This becomes a judgment call though. It might work better to let society fall apart quickly. This is kind of like setting a bone in the field. At least with a broken bone, one yank is better than a slow pull. We have so little studies to tell us if a fast or slow collapse is better? Do we allow the forces of doom build for a worse die off or get on with it and what may be a less terrible process? There is no escaping this reality it will be terrible and likely horrific. We have the issue of how much the individuals should be revealed with the secrets of collapse. Kids need lower doses then adults. Sometimes I feel we are a secret society carrying around a scroll with the meaning of life. There is also the case where this is all a fantasy in my head and no collapse is on the horizon just normal life. Am I living a strange psychological drama in my head with others who I consider fruit cakes but really I am the fruit cake? To that I say LOL, maybe but I doubt it.

    This is a profoundly human challenge of truth and consequences. If you embrace the idea of collapse then you are compelled to prepare or to not. The not can be procrastination which is bargaining. You can also suffer cognitive dissonance of knowing you should do something but choosing not to. You go ahead and live your status quo life but anxiously knowing it is not sound. Finally there are the cavaliers who like the fool tarot walk into the storm with energy and an open heart of a child but who risk being quickly cut down by the destructive forces of change.

    I don’t have all the answers to this existential dilemma of our surreal predicament but I have good questions. The answers require a community in any case. This process is just another psychological drama of an animal with a large brain. We are capable of imagining our death and that can be very dangerous and debilitating. I am here every day because I need one foot in the door. I have come to the level of acceptance of the consequences or maybe it is insanity. I go forth in life living with those in denial and comfortable oblivion. I try to help those who express need in dealing with the various issues of collapse. I try indirectly to influence status quo conversations about current affairs with the collapse side of the argument. I do not come out and say collapse but I hint at the issue.

    I am living true to my heart. I realize I could be wrong and hope I am wrong in regards to the horrific. Increasingly I am seeing so much evidence I am right. I just do not have all the details. This is another reason I am here on the net talking about collapse daily. The details are vital but also fascinating. If you are like me this is a life passion. You live collapse in what you do and think. It takes extra mental energy so other status quo activities must be discarded. It also takes extra mental energy to live in and out of the status quo at the same time. I am not a sports fan. My hobby is collapse and my interests are collapse. I am a priest of doom and prep. That might sound goofy and maybe it is but goofy is the world we live in so goofy is how you need to live in relation to the insane of the status quo.

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