Like the illusion of Wall Street, with its vast and powerful investment banks, now shuttered, China too is an illusion perpetuated by the Globalists that gave us the 15,000 mile Caesar salad, poisoned cat food and lead based paint on babies' pacifiers. Like the illusion that money would come from thin air to always push housing prices higher, China has spent a generation pursuing its illusion. Pursuing an unattainable dream to be like the West, while 6000 years of its carefully shepherded top soil blows into the sea.
Posted: Tue Sep 07, 2004 1:48 pm Post subject: The Peak Oil Perfect Storm
In the research for a book I just finished, I came across this website. In reviewing the many posts and the different threads of discussion, I see a decline scenario that no one seems to have broached as yet. I will call it the Peak Oil Perfect Storm. While "peak oil" in of itself seems to be a harbinger of disaster, they are many other factors at play that I feel will exacerbate our ability to forestall a hard-landing. Here are some of the things I see:
First: With the lowest interest rates in 40 years, huge deficit spending, and a huge tax cut, we are still having a great difficulty finding economic growth pre-peak. M-3 money supply is at a high only seen after the 1987 crash. June alone had a 20% increase in the trade deficit to 55.8 billion dollars. We may not have any real growth from here on out, regardless of peak oil.
Second: In 2001, a study by then Secretary of the Treasury, Paul O'Neill, projected future "entitlement" expenditures (Social Security, Medicare, Veterans benefits, government retirement, etc) would exceed revenues by $44 trillion dollars. It estimates that closing the gap would require the equivalent of an immediate and permanent 69 percent across-the-board income tax increase, or a 45 percent cut in Social Security and Medicare.
About 82,000 Americans 65 or older filed for bankruptcy in 2001, up 244% from 1991, according to the Consumer Bankruptcy Project, a study done at Harvard. Although there is the perception that many older Americans are affluent, 44% of retirees say Social Security was their primary source of income this year, up from 38% in 2000, according to an annual survey by the Employee Benefit Research Institute. The personal savings rate for Americans has dropped to one of its lowest levels ever--.6 percent. (now .2% Feb 2005)(minus -.2% Nov 2005)
Seventy-seven million baby-boomers are going to start retiring in five years' time. As they do, the number of retirees in America will double. At the same time the workforce supporting them will grow by a mere 15%. Solving this problem will hurt like hell.
Third: At 5.1% (now 6.2% Feb 2005) of U.S. gross domestic product (GDP) and growing, the current account deficit (CAD) is now even bigger than the federal budget deficit. It's also much larger than it was in the mid-1980s, which was the last time the CAD triggered a big financial crisis. This included a 40% decline in the value of the dollar, a huge spike in U.S. bond yields and the 1987 stock market crash. The only thing standing in the way of a repetition of the 1987 fiasco (or worse) is the continued flow of foreign capital into U.S. assets. With the ever increasing value of the European Union's euro to the dollar, more foreign investors are moving toward investing their money there, rather than in dollars. This trend could well denote great economic turmoil in the financial markets.
Fourth: 65% of today's mortgages are progressive rates--not fixed. As interest rates rise, people are going to lose their homes. For many senior citizens, their only major asset is their home. It becomes a de facto pension. That's a problem if they file for bankruptcy. Although pensions are a protected asset, in most states only a small amount of home equity is protected in bankruptcy. So if the value of the equity exceeds the state exemption, then a person who files for Chapter 7 bankruptcy will lose their home. And now with the new bankruptcy laws, many will not be able to file Chapter 7's, only Chapter 13's. In those cases, they still have to pay their debtors.
Fifth: Water shortages. We are experiencing record droughts in many areas, especially the West. I was a National Park Ranger for many years and worked all along the Colorado River. Lake Powell at full pool is 27 million acre feet (MAF) of water. It is now down to a little over 9 million acre feet.
If it drops much more they will not have enough head pressure to generate electricity. Also, by decree of the Colorado River Compact of 1922, they must release 8.5 MAF each year for the states of CA, AZ, NV, and the treaty agreements with Mexico. The entire economy of the West is tied to this water. And to compound matters, the historical flows have never exceeded 7.5 MAF since the pact was signed in 1922. Same holds true for Lake Mead. And Australia is seeing "peak" water right now.
James Howard Kunstler quote:
Quote:
The water situation in Las Vegas is dire. The city has absolutely no capacity left for expansion under any circumstances. What's more, Lake Mead, the impoundment behind Hoover Dam, is down to historically low levels, dropping a foot per week lately, and may soon fall so low that the turbine intakes on Hoover Dam no longer operate, meaning goodbye electric generating capacity. The Colorado River's flow in 2004 was 70 percent below average, and the region was gripped by a years-long drought. Climatologists agree, in fact, that the desert southwest has actually been enjoying two comparatively wet centuries and is now reverting to a drier cycle. Global warming could make it much worse.
Sixth: Major culture shock. We are less than 5% of the world's population and consume 40-50% of all the resources, while being the most overpopulated country in the world in terms of impact on our environment. We took more than our share and set it up as a standard of living. The three first words out of an American baby's mouth are, dada, mama, and more. In my opinion, we are the most unstable country in the world with regard to being prepared to weather a peak oil crisis.
Couple all this together, and I see the formation of the mother of all storms. Individually, any one of these could be a major crisis, but together they leave us with few options. I am impressed with the caliber of people on this site and I hope I can contribute to some meaningful dialogue. Looking forward to your follow up posts!
Monte
Last edited by MonteQuest on Sun Jan 08, 2006 11:26 pm; edited 8 times in total
Joined: Aug 14, 2004 Posts: 2068 Location: San Diego, Ca.
Posted: Tue Sep 07, 2004 2:29 pm Post subject:
Quote:
Couple all this together, and I see the formation of the mother of all storms. Individually, any one of these could be a major crisis, but together they leave us with few options. I am impressed with the caliber of people on this site and I hope I can contribute to some meaningful dialogue. Looking forward to your follow up posts!
You have set the stage, now give us a scenario for the future.
What will be effected first?
When?
What are you doing to prepare? _________________ "Peak oil isn't more than an interesting industry factoid and doesn't have anything to do with the hysterics speculated on ad nauseum around here!" ReserveGrowthRulz
I likewise agree that this is a very plausible scenario. It is precisely why I chose to get a fixed rate interest rate on all of my loans (student loans + mortgage) and why I am socking money away in silver bullion.
You have set the stage, now give us a scenario for the future.
What will be effected first?
When?
What are you doing to prepare?
I think the first thing is the inability to grow the economy. This seems to be the case already. If 1.5 trillion dollars worth of money stimulus, and low interests rates will not ignite the economy, what will? With the savings rate at .6 %, there is no rebound ability. During the Gulf War, the savings rate was around 9 %.
When? If the price of crude doesn't drop below $30 a barrel soon, the airlines will have a big problem. They are the canary in the mineshaft. They cannot be profitable above $30 a barrel. If they pass on the increase to the consumer, the economy will tank. Look what happened after 911 when the airlines didn't fly..or no one would fly. So, the answer is now, especially if the increase in Saudi reserves doesn't show up in September.
Here are my priorities:
1. Get out of debt.
2. Get out of the city. ( I just moved from San Diego)
3. Put your money in precious metals.
4. Sell your house and get someplace smaller and cheaper while you have the equity. Housing prices are going to collapse big time.
5. Upgrade your disaster preparedness kit.
6. Try to find work where you don't need a car to commute.
7. Make capital investments to improve your energy efficiency.
8. Stay away from "leisure activities" jobs. Luxury fuel use vehicles, boats, RV's, although RV's may be the home for a lot of people.
9. Surround yourself with people who you can count on. Not just trust, but who have abilities..MacGyver types.
10. Join peak oil.com
Jato, it all comes down to rate and magnitude. How fast and how big. I am still searching for that answer. Our world has become so complex, it is impossible to predict how the markets will react, much less the people...and the people's reaction is what I fear the most.
Monte
6.
Last edited by MonteQuest on Mon Oct 25, 2004 12:43 am; edited 1 time in total
Joined: May 22, 2004 Posts: 1434 Location: Ottawa, Ontario
Posted: Tue Sep 07, 2004 3:09 pm Post subject:
Good points. There certainly is a case for the United States having economic difficulties. After all they import some 50% more than they export! High oil prices associated with our current lack of excess oil supply is certainly also a factor contributing to the US difficulties. Directly it increases the cost of oil imports and indirectly it increases the requirement for military expenditures.
I don't believe, however, the points you listed will have much of an effect on peak oil itself. The problems you mention can mostly be corrected by a severe recession coupled with some hard policy choices. Yes a recession is a bad thing but on the time scale on which peak oil is occuring (decades) it is just a blip. It might make as large an impression as the 1980s recession did on oil consumption, but then the world economy will eventually recover.
Joined: Aug 14, 2004 Posts: 2068 Location: San Diego, Ca.
Posted: Tue Sep 07, 2004 3:19 pm Post subject:
Quote:
but then the world economy will eventually recover.
Nero,
I am not the sharpest tool in the economic shed. How can an economy recover with a total decline in energy? (Post-Peak) Are you assuming oil & natural gas will be replaced by another energy? Perhaps the world can become more efficient faster than the energy can decline? But wont efficiency may cause more growth and compound the problem? _________________ "Peak oil isn't more than an interesting industry factoid and doesn't have anything to do with the hysterics speculated on ad nauseum around here!" ReserveGrowthRulz
I don't believe, however, the points you listed will have much of an effect on peak oil itself.
Oh, I agree wholeheartily. The point I was trying to make was that our ability to weather the peak oil crisis is very much diminished by these other factors. Without a relatively stable economy, the capital investment required to make a soft landing seems beyond our reach. On April 18, 1977, President Jimmy Carter called for a new energy policy in America, and likened it to "the moral equivalent of war." That ominous warning has slid into obscurity along with 55 mph speed limits, smaller vehicles, conservation, and a move towards renewable energy. Back then, we had a chance to retrofit and prepare, not today.
I am reminded of the story of a South American Indian tribe that devised an ingenious monkey trap. The Indians cut off the small end of a coconut and stuffed it with sweetmeats and rice. They tethered the other end to a stake and placed it in a clearing. Soon, a monkey smelled the treats inside and came to see what it is. It could just barely get its hand into the coconut but, stuffed with booty, it could not pull the hand back out. The Indians easily walked up to the monkey and captured it. Even as the Indians approached, the monkey screamed in horror, not only in fear of its captors, but equally as much, one imagines, in recognition of the tragedy of its own lethal but still unalterable greed. The monkey cannot properly evaluate the relative worth of a handful of food compared to its life. It chooses wrongly, catastrophically so, dooming itself by its own short-term fixation on a relatively paltry pleasure.
America has its own hand in a coconut, one that may doom it just as surely as the monkey. That coconut is its dependence on cheap oil in a world where oil will soon come to an end. The choice we face (whether to let the food go or hold onto it) is whether to wean ourselves off of oil--to quickly evolve a new economy and a new basis for civilization--or to continue to secure stable supplies from the rest of the world by force--because soon, as all of us on this site know--like everything else--demand will exceed supply. We're dealing with a cultural problem--200 years of exponential growth culture. Were we a rational society, a virtue of which we have rarely been accused, we would husband our remaining supplies and institute a program comparable to the Manhattan Project.
To date, we have chosen the second alternative: to secure oil by force which will almost certainly destroy the economy and doom America's short experiment in democracy.
Last edited by MonteQuest on Mon Apr 04, 2005 9:21 pm; edited 5 times in total
You need to look at Strauss and Howe's Fourth Turning. Unless that is what you were looking at in the first place.
They give a good picture of how we allow the elements of such 'perfect storms' to develop. Taken alone, any of the problems you mentioned are surmountable, with the will of the people. Without the will of the people, they just nag along getting worse. And coalesce into a set of problems, usually financial and war-related, the likes of which only the oldest ppl remember.
Joined: May 22, 2004 Posts: 1434 Location: Ottawa, Ontario
Posted: Tue Sep 07, 2004 3:51 pm Post subject:
Quote:
Nero,
I am not the sharpest tool in the economic shed. How can an economy recover with a total decline in energy? (Post-Peak) Are you assuming oil & natural gas will be replaced by another energy? Perhaps the world can become more efficient faster than the energy can decline? But wont efficiency may cause more growth and compound the problem?
Well I would put it this way, just like we have had temporary recessions in the past 60 years while the overall energy supply has increased, when the energy supply is decreasing there will be temporary recoveries when we will be able to temporarily increase energy supply. The previous recession will have undershot the actual available supply.
Joined: Jun 02, 2004 Posts: 1078 Location: Bristol, UK
Posted: Tue Sep 07, 2004 4:14 pm Post subject:
The Perfect Storm is the exact phrase Richard Heinberg uses in his latest book, Powerdown.
His perfect storm is the coming together of resource depletion, continued population growth, declining-per-capita food production, global climate change and other environmental degradation, unsustainable levels of US debt and the potential dollar collapse and last but not least international political instability.
Richard addresses each in turn but in the sprit of copy write you'll need to buy the book to find out what he thinks.
Posted: Tue Sep 07, 2004 4:56 pm Post subject: Population Bomb
clv101 wrote:
The Perfect Storm is the exact phrase Richard Heinberg uses in his latest book, Powerdown.
His perfect storm is the coming together of resource depletion, continued population growth....
I had not really wanted to add this factor to my Perfect Storm, because it is so unpredictable given the decreasing energy supply?but on further consideration, I feel it is highly important.
If we had 145 million people in the United States today, which is the largest number anybody has ever given a semi-sane reason for having alive at one time in the United States, we would be using less than half our petroleum. The world's population is expected to grow from 6.4 billion to 8.9 billion by 2050 if we continue to slow our rate of reproduction. If fertility remains at present levels, the population could reach 12.8 billion by 2050. The highest world population growth rate was 2.04 percent in the late 1960's. This year, it is about 1.31 percent. If fertility remained at current levels, the population would reach the absurd figure of 296 billion in just 150 years. Even if it dropped to 2.5 children per woman and then stopped falling, the population would still reach 28 billion.
World population reached:
1 billion in 1804,
2 billion in 1927 (123 years later)
3 billion in 1960 (33 years)
4 billion in 1974 (13 years)
5 billion in 1987 (12 years)
6 billion in 1999 (12 years)
7 billion in 2013 (14 years - projected)
8 billion in 2028 (15 years - projected)
12.8(high) or 8.9 (low) billion projected for 2050
http://www.population-awareness.net/
Bottom line--the only viable way to prevent the peak oil civilization collapse is to reduce demand, and that will only happen with a reduction in the population starting with the bigger users--us. As the richest 20 percent of humanity consumes 86 percent of all goods and services, while the poorest fifth consumes just 1.3 percent.
Last edited by MonteQuest on Mon Nov 29, 2004 9:23 pm; edited 1 time in total
In reviewing the many posts and the different threads of discussion, I see a decline scenario that no one seems to have broached as yet.
If you look around, you'll find a bunch of us who are particularly interested in how these extra factors relate to peak. While you present this list as synergistic with peak oil, some here (e.g. myself) believe that some of the factors listed are actually causally related to peak oil...
For example, entitlement expenditures. Any time in the past, if you extrapolated the cost of exponentially increasing expenditures out far enough, it looked pretty scary. Not a problem though, because you can pay them if you have enough growth.
It's well known that industrialized countries don't grow like they used to. In my opinion, this is related to diminishing returns to energy extraction. Many people here are aware that peak energy per capita was in the 70's. As I understand it, since then, energy per capita has actually increased in USA, for example, whilst decreasing in poorer parts of the world. Thus, since the 70's, there has been a growing inequality of energy consumption per capita. In my opinion, the increased costs of increasing energy consumption are very much related to the lower levels of growth. And so, a key reason why entitlements are sure to blow out is related to the nearness of peak energy (which will come with oil).
Also, take the interest rate and deficit situation. Rather than be a direct cause of peak oil, these are extreme states of a system designed to grow, but which is being starved of energy. Lots of people here have discussed the relationship between debt and growth. Budget deficits are debt, and low interest rates are the systemic response designed to increase it (debt). Increasing debt is supposed to make the system grow, but it only works when there's enough energy.
Some other things you mention, like baby boomers and water, are of course not causally related to peak, but just damn bad timing. They will contribute in interesting and complex ways. We'll have to wait for the movie to see how it all plays out.
Rather than be a direct cause of peak oil, these are extreme states of a system designed to grow, but which is being starved of energy. Lots of people here have discussed the relationship between debt and growth. Budget deficits are debt, and low interest rates are the systemic response designed to increase it (debt). Increasing debt is supposed to make the system grow, but it only works when there's enough energy.
Thanks for the welcome! Yes, I agree with your points. It is one of the reasons that people have such a hard time grasping peak oil. It is a very complex machine.
And yes, increasing debt is supposed to make the system grow. That was my first point. It doesn't work anymore. I'm not sure it is totally tied to having enough energy. But then again , it may be tied to the oil industry stopping the construction of refineries, merging 7 companies into 4, etc.
The OPEC crisis in the 70's made for a blip on the radar screen, in that we didn't really increase production so much as we became more efficient, buying Japanese cars, insulating our homes, 55 mph speed limits, etc. It took from 1979 to around 1997, I believe before we returned to our consumption at that time. We even see years where production was declining.
The tech stock bubble in the late 90's changed all that. Rampant speculation, buying on margin, decreased savings rate, ballooning deficits, etc. It would seem that the trends of technology had a lot to do with the changes in economies and consumption. That, and with countries like China getting their first cars and refrigerators, overnight we had a competitor, not just for energy but for jobs here at home. Comes back to us having to share the world's resources with the other developing countries.
2. Get out of the city. ( I just moved from San Diego)
Won't that increase your fuel use? I live in a city, and I don't use any gasoline at all. Jobs are scarce in the country, and you might have to drive a while. Shopping may not be so conveniently located. You may have to drive to the city frequently to take care of business, shop, pick somebody up from the airport etc.
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I likewise agree that this is a very plausible scenario. It is precisely why I chose to get a fixed rate interest rate on all of my loans (student loans + mortgage) and why I am socking money away in silver bullion.
How can an economy recover with a total decline in energy? (Post-Peak) Are you assuming oil & natural gas will be replaced by another energy? Perhaps the world can become more efficient faster than the energy can decline? But wont efficiency may cause more growth and compound the problem?
