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Page added on April 29, 2014
Tech Talk – of oil, water and the age of Stone
There seems to be an assumed correlation between those who have some concerns over the accuracy of the theories of climate change (shall we call them the doubters for today’s discussion) and those who believe that there is a plentiful amount of fossil fuel available that will see us properly provided for well into the future. This is in contrast with those who are actively pushing the agenda associated with remedial matters that might affect the climate, and who also assume that there remains a plentiful sufficiency of fossil fuels, but are anxious for the world to change to alternate sustainable and renewable fuels to reduce our dependency on fuels that generate carbon dioxide.
Discussions of peak oil, the limits to natural gas production, and concerns as to when, this century the currently abundant coal reserves (not to mention the resources beyond them) will run out are dealt with as an increasingly irrelevant topic for discussion. The current adequacy of supplies is assumed as likely to persist, and neither camp is much inclined to argue the issue. Which is unfortunate, since this lack of real interest is taking place at a time when the dominoes are lining up toward a series of cascading falls, when the rather glib commentaries of the past will lie forgotten, and concerns over national fuel resources will be topics for discussion in many more nations around the world than now even talk about it.
One of the most quoted remarks that epitomizes the blindness of many to the coming problems is that of Sheik Yamani “The Stone Age didn’t end for lack of stone, and the oil age will end long before the world runs out of oil.”. Unfortunately for the applicability of this analogy, we have seen, in the past, times where technology disappeared under the assaults of external forces, wiping out civilizations around the world.
I recently mentioned the book “1491” by Charles C. Mann – who covers some of the civilizations that thrived and fell in the Americas before the arrival of Columbus. At some point or other some resource, vital at the time to each civilization proved inadequate. For example the Mayan Civilization collapse has been blamed on a prolonged series of droughts that made the centralized city life impractical. Richardson Gill, for example, in “The Great Maya Droughts: Water, Life and Death” points out how very short a distance a city worker can travel to find food for his family, if he has to go on foot. It is an argument that likely also held true, in its time, in Mesapotamia. Yet, in the short term, there was nothing apparently that the rulers of the time could do to achieve an adequate supply of water. The transient shortages were, however, sufficient to doom those civilizations that suffered (and that includes those along the West Coast of the United States in about the same period). We still have to rely on water, but that doesn’t mean that the times where it fell short were not locally catastrophic and destructive of civilization.
And that is the problem with Sheik Yamani’s analogy between the supply of liquid fuels and the Stone Age. We can look outside and see stone in abundance all around us. Yet we have moved on to rely on other materials. Even in a drought in California, they have a huge amount of water right beside them. It is merely the wrong sort (sea water) and they are only slowly coming to recognize that perhaps they are going to have to bite the bullet of desalination, if the problem is not going to get recursively worse.
There will always be some form of energy available. We have, in large measure, moved away from dung fires for heating and cooking in North America and Europe and it is unlikely we will return to those days. But what is often missed in the assumption that we can switch from one resource to another in times of shortage, is the time that it takes to make the change. That wasn’t too hard to do, if the switch was from gathering dung to gathering wood, but it gets more complicated if the two alternatives are coal and, for the sake of discussion, wind energy.
When coal-fired power stations are closed and demolished they cannot be turned back on if wind energy proves to be an inadequate reserve. Arranging for coal mines that will supply the coal, railways to ship it, and power companies to acquire the permits to build and then burn it takes years. Nuclear power takes even longer, and even running a new pipeline can (in the case of Keystone) drag on for seemingly ever without a decision. The changing picture of energy subsidies for wind and solar are also raising concerns over the reliability of return on investment in those industries. Small, local solar operations (as with the dung fire) can move relatively quickly. Individual houses can be retrofitted within a few months – but for an effort with national impact, the small-scale is likely to be inadequate in overall size to match the power output from major coal-fired stations now on the block.
We are marching to a set of drums that beats out the message that there is no problem, even as the signs of a slowing oil production increase are appearing, and none of the global signals is very reassuring. Those European nations dependent on Russian oil and gas are discovering that, perhaps there really isn’t a practical alternative to that supply, and so speak more quietly about Ukraine and the Baltics. Any tightening of global supplies (a likely event in the next couple of years) will only make that situation worse for those customer nations, and serve to strengthen the national stature of the Russian President.
It is worth remembering that those of us who talk about peak oil are not talking about a resource that will suddenly disappear. No, we are merely projecting that sometime in the near future there will come a time when that year’s overall crude oil production will be a little less than the year before, and similarly in the following years. (Projections for future drilling operations in North America are receiving increasing scrutiny). There will still be a lot of oil around, but as demand exists so the price will start to steadily increase in an continuing rebalancing of price, cost and supply that will increasingly roil the global marketplace. Unfortunately in an increasing number of cases the need for money is an upfront and increasingly expensive one, to pay for the exploration and development, with only some assurance of a payback. And as more money goes into a smaller return in volume, the mandatory prices needed to continue that progression will continue to rise, even as gains diminish.
In the interim the EPA has cut the targeted production of cellulosic-ethanol yet again.
10 Comments on "Tech Talk – of oil, water and the age of Stone"
Davy, Hermann, MO on Wed, 30th Apr 2014 5:34 am
As short points out here most new oil production is in fact uneconomic if we were to consider the real costs without the market distortions. These market distortions through financial repression of the cost of money have allowed an oil subsidy. Financial repression can only last so long because of the market distortions this creates hence the taper. The taper happened because of the diminishing returns of that effort to produce results. As the financial markets rise the effectiveness of new money deteriorates in its effectiveness to move the markets higher. Monetizing debt is nothing more than a wealth transfer policy of market value inflation. This inflation of asset values at the expense of those without assets in the market. We are seeing a further deterioration of discretionary spending from the lower classes. This is another unintended consequences of monetizing debt. We are hollowing out corporation’s earnings from falling sales in the real economy because of increasing unemployment, leverage, and defaults. You have to look to the money like rock says to see that this cannot continue. The markets and the central banks have made big efforts to cover up this trend with statistical distortions and market manipulation. These acts only serve to make the resulting decent that much more ugly, swift, and volatile when the financial decent gathers pace. Of all the problems facing our global system and the global energy efforts the financial system represents the weak link. Confidence and the resulting liquidity are on the knife edge of human psychology. Humans can react overnight in a swift turn of events leading to chaos. If it we were in a healthy financial climate there is the possibility of mitigating the coming vital resource stresses for a few years more. In the current situation the global economies financial tools are a spent force hence all the examples of diminishing returns. Our financial decent is just waiting patiently for the right moment. I feel it is very near.
meld on Wed, 30th Apr 2014 7:38 am
I have a question. If we use economically viable energy to subsidise uneconomical energy, isn’t that worse than just using up what’s left of the economically viable energy.
J-Gav on Wed, 30th Apr 2014 9:38 am
Davy – I get that same uneasy feeling. But I also have to recognize that an all-out, global financial meltdown would be in nobody’s interest so: 1- Knowing that the BRICs and others would like to break free of the present dollar system, do they have the wherewithal and the will to shoulder that responsibility on a global scale? and 2 – Would the Special Drawing Rights issued by the BIS, jointly administered by the IMF be a viable alternative? That would make them issuer, lender of last resort and debt collector, a situation I, for one, would not be too comfortable with.
In any case, I imagine that there are already discussions going on at the highest levels of the international elites on these matters. Who knows they’ll cook up … or will it just blow up?
Makati1 on Wed, 30th Apr 2014 10:10 am
Since the non-western countries are already setting up an alternate to the IMF and the BIS, who knows how it will all shake out. Only certainty is the end of the petrodollar in the near future.
Davy, Hermann, MO on Wed, 30th Apr 2014 1:13 pm
Gav, no other currency has the wherewithal to meet the criteria to replace the dollar. Now that China is descending into its debt spiral it is no longer in contention. All the rest of the brics are a mess financially for various reasons. Russia is entering recession and in a bitter fight with the west. The worst thing any country or group of countries can do now is mess with the status quo that is unless they want something to break loose. Yet, all will suffer if something breaks. There is not enough gold on two planets to replace the dollar. If the global system collapses look to gold to provide some kind of liquidity for trade I imagine. The IMF special drawing rights are not the same animal as what the dollar is providing. The dollar would need to play a part in that too with the size of the US economy being considered. It is conceivable that a group of countries could work towards a new reserve currency. This would need to happen over time and with adjustments to countries that want to be a part of the new currency. It would be much like the Euro was when monetary union happened. The problem currently there is little cooperation or agreements among nations. The system is a mess and getting worse by the month as more debt accumulates and structural dysfunctions multiply. I see the end of the dollar as a reserve currency with the global system contracting significantly. The petro dollar issues is a side issue and nowhere near the importance of the dollar as reserve currency. The bilateral trade deals are just a way around using a reserve currency. They work very well in limited cases but they have no future as a replacement for a reserve currency in global trade. That is my take on the issues.
Northwest Resident on Wed, 30th Apr 2014 1:45 pm
“Who knows (what) they’ll cook up … or will it just blow up?”
My guess and my full-on belief is that it will just blow up.
We are on the downhill slide of peak oil, picking up speed, and only a thick cloud of lies and obfuscations combined with falsified “wonders” of shale oil are fooling the masses into not seeing that devastating reality.
Now is no time to rock the boat and inject unknowns into an already chaotic situation by trying to create a new world currency.
When all the big economies in the world are hanging by their finger tips at the cliff’s edge, clawing desperately to maintain their grip, the last thing anybody wants is to further damage the status quo.
From my point of view, this global economic house of cards is just one puff of wind away from total collapse. Putting a new global currency into circulation would be an ultimately complex task even in the best of times. Maybe post-collapse, during the rebuilding phase, they’ll come up with some kind of world currency. It will be easier to start from scratch than it will be to revamp the current financial system for a new common currency. IMO.
Makati1 on Wed, 30th Apr 2014 8:47 pm
Davy, obviously you have not been keeping up with events outside the Empire. About 40% of world trade is soon to be in currencies other than the USD. The days of the USD as the reserve currency is going to end soon, and fast. If the world holds together until 2020, it will be a done deal. Wait and see.
Your ‘anti-any-place-but-the-US’ bias is misplaced patriotism as I see it. The US is the only country that has gotten away with plundering all the other countries for the last 70 years because it had oil after the war and was able to dictate policy. Now it is the world’s largest debtor nation and cannot even pay it’s bills except by printing counterfeit money by the trillions.
The rest of the world is tired of it and more and more nations are turning to China and Russia for a change. That is making the DC mafia nervous as they too see the writing on the wall and their opportunity to dominate the world is slipping away fast. A realistic look at America shows that they are leading the slippery slide down the slope of contraction into the 3rd world, closely followed by the EU and Japan. But realism is foreign to most sheeple.
Davy, Hermann, MO on Wed, 30th Apr 2014 9:34 pm
Makie, same old song and dance and it is old and stale. Try if you can Makie to reach out for balance so people here will listen to you. You remind me of the news room in Pyongyang. Your rants are always the same with little that is new other than the constant effort to talk ugly about the West and the US. It reminds me of mental illness when one is obsessed.
Makati1 on Thu, 1st May 2014 5:57 am
You get boring also with your concrete mindset Davy. Just because you see the world one way does not mean it is not a different way to someone else. There are 7 billion plus ways the world can be seen through humsan eyes. Certainly yours is only a variation of true reality.
Did something happen in Asia to you or family that you are so anti-East? Or is it just a case of indoctrination by the Ministry of Propaganda? Or do you see them as a threat to your future? They definitely are, but nothing you or I can do to change that. Thank the mafia in DC for your situation.
Sometimes there is no balance, just reality. I’m back in the Police State and it has degraded since my last visit two years ago. Not unexpected.
Davy, Hermann, MO on Thu, 1st May 2014 6:57 am
No anti east here Makie. Just looking for reality. The reality is a mixed bag with Asia just like the US and other large area nations or group of nations. I tend to have balance issues on China and try to stress they are at their foundation a basket case economy with tremendous issues of limits of growth facing them and a population in overshoot to carrying capacity. A Chinese financial system the authorities are attempting to reform but will fail at. These reform will fail because the financial distortions are so deep and pervasive. Unlike you makie I do not look at this as a good thing or something to crow over. You are the type who picks at the bad news to prove your political propagandist ideologue position of a diminished west. China is in no way shape or form going to be the new superpower. They will remain a important world player in a new multipolar global world. We are all in this together at this point and we will all drop together. So the old me against you mentality is dangerous at this point but inevitable and most likely will get worse as the energy and financial decent quickens. Both the west and Asia will be in increasing difficulties socially and environmentally from here on out. So balance and reality says what happens to China will affect the US and vise versa most importantly in the global financial world. The one area the west will be ahead of Asia on is food. Asia is facing serious food stress. China in particular will face increasing food stress and should be very careful about a trade war with the US. A Chinese trade war will naturally hurt the US. I do not see the treasury holding of China as the “dollar killer”. The Chinese can dump treasuries but they will be bought up on the cheap. Much of it can be done by the FED through monitarization. A Chinese move on the dollar and the treasury market is a “fool’s game” with unintended consequences for the global financial system. Now Makie the above is a balanced assessment of what I see going on between the Chinese and Americans. I am humble in my arrogance and realize I may be wrong on some of this but I have stayed balanced. You are a one sided propagandist who has no interest in supporting both sides of a discussion