[shortonoil]

Hi BahamasEd:

I never could get my head around that the model said low prices would be what ended the oil age. But here we are, with all energy prices too low to spur new production because the end user can't pay a higher price at the margin.

Being a statement of the 2'nd Law, the Etp Model is a non linear energy function. Economics, on the other hand, is a linear estimation of a non linear process. Straight lines can go on forever, curves in the real world sometimes circle back to their zero bound where they started. Following a straight line can take you nowhere. The real world went the other direction! Economic models never told us how much oil could actually be extracted. They were a straight line to nowhere; which is exactly where we are now.

Oil powers an economy that creates goods and services which are represented by an abstraction called money. Creating an abstraction does not translate into goods and services. That only works in Fairy Tales. Money can never have more value than the actual amount of goods and services that exists. No matter how much is created only the amount of it that is being used determines prices. Only then does the Supply/Demand rule hold. Money sitting in a FED reserve account is not being used. We can see that in the velocity of money. The FED has been pumping money into the system for a decade, and yet there is no inflation? Most of what they create never enters the goods and services circulation system. That is determined by the strength of the economy, and the strength of the economy can be measured by the amount of energy that enters, and exits it. The Etp Model does that for petroleum; which is a reasonable proxy for the entire energy system.

Depletion is like a rotting 2X4 in the back yard. There becomes less and less of a 2X4 as time passes. Declining energy availability resulting from depletion translates into deflation. Petroleum is saying that availability is going down, and so is the price. That includes the price of petroleum. To keep the petroleum industry operating, which is essential, would require a huge decline in energy availability used from other sources, and a huge input into petroleum. To do that would require shutting down a large sector of the world's economy. Something like what is taking place right now.

The Theory is that we will have to kill the economy to save it; color me doubtful . According to the Model that will require an 18% decline in GDP and oil production to accomplish. GDP $69 trillion, oil - 82 mb/d. 27.2 quad BTU/ yr. With OPEC in disarray, and Putin seeing a golden opportunity to kick is primary source of aggravation, the US, right in the Butt, some of them are going to have to go broke; permanently.

It is time to replace oil before the Bubonic Plague really arrives. The first thing that we have to do is de-globalize. Flying lettuce in from South Africa is a waste of good energy that could be used to produce oil.

[onlooker]

Awesome post Short. Damned if we do, damned if we don't.

[Yoshua]

The charts are pointing to a 20% - 30% decline in value of the euro against the dollar, and so are other currencies.

So a global decline in GDP in dollar terms seems to be coming.

In the U.S the banks will take over the shale oil industry.

https://mobile.reuters.com/article/amp/ ... ssion=true

[sparky]

.
From Shortonoil

" Money can never have more value than the actual amount of goods and services that exists. No matter how much is created only the amount of it that is being used determines prices. Only then does the Supply/Demand rule hold. Money sitting in a FED reserve account is not being used. We can see that in the velocity of money. The FED has been pumping money into the system for a decade, and yet there is no inflation? Most of what they create never enters the goods and services circulation system. That is determined by the strength of the economy"

Totally correct .....money is a force not a quantity

so many trillions and no inflation !!!!
this is like flogging a dying horse to get it to trot and drag the economic cart forward
the amount of flogging is irrelevant , the effect of flogging is what matter

[REAL Green]

Inflation has been with asset prices but also in some areas like food. Before the virus if you have ever eaten out was it not painful? Deflation is more with declining activity in certain areas plus the condition of many imports coming in cheap. Combine these and you get stagflation where money is worth less with less activity although certain products were cheap. Before the virus there was still enough growth to balance the forces of decline. Currently, the equation is different because of the economic effects of the virus plus the effects are global. There is central bank liquidity pumping and the buying of distressed debt. They say this will normalize but I doubt it. It will be just another door opened that shuts tight. This is now a central bank managed world in all regions. This will surely result in more distortion distortions because of the excessive liquidity combine with economic activity drop.

A key will be how the economy reboots. If there is a depression then this might be a long one. We could just be in a hard recession that may do some good by clearing out bad debt and zombie companies. We really don’t know what is coming so this is a big danger now. Policies are being implemented with uncertain outcomes. Ideally, as a global world this time is an opportunity to do some creative degrowth and reduce those unsustainable industries, sectors, and lifestyles. This time is a golden opportunity to focus on emission reduction. It is an opportune time to shorten value chains for more local resilience. It might be a good time to sweep up debt that will never pay. There are many house cleaning activities that could be done or we could just add more clutter.

The virus will not have killed that many people so 80MIL more people will need to be fed. Unfortunately the global economic system is forecast to be supplying an aggregate of 20%-30% less activity and things at least in the beginning of a post virus recovery. That can’t end well. Food shortages are surely ahead because things are not getting grown and processed. This is a fantastic time of possibility and danger economically and systematically.

[shortonoil]

Awesome post Short. Damned if we do, damned if we don't.

Yea, the can we have been kicking hit the proverbial brick wall. I really have to hand it to someone out there; using the Virus to Trick 7.4 billion people into taking an extended vacation when most of them are still counting: 1,2,3,many was a stroke of absolute genius. Getting the majority of world leaders to cooperate is almost impossible to believe. But they did! What did they say to them?: something like, "we either slow this buggy down, or it's over the cliff, and the bottom of that cliff is somewhere in the Stone Age". Someone out there needs to be nominated as the Sales Person of the Millennium!

Trick Two will be getting this show running again at a lower sustainable level. That will be easier said than done. Trick Three will be replacing oil, and we only have a decade remaining to do it. There is an awful lot of Tricks to get through before the Treat arrives.

I have been studying this situation for almost two decades. Theoretically, replacing oil is possible, but theory is one thing, and practicable application is another? The engineer in me tells me that even the best theory doesn't necessarily work at the nuts and bolts level. One thing that is for sure; "Normal" is now something that was. Get used to it, or join the Dodo Birds.

If you are walking up and down Broad Street, beware of rapidly descending bankers!

[asg70]

This time is a golden opportunity to focus on emission reduction.

Not gonna happen under Donald "Bring back coal!" Trump.

[REAL Green]

This time is a golden opportunity to focus on emission reduction.

Not gonna happen under Donald "Bring back coal!" Trump.

The forces of change are bigger than Trump. With a possible depression ahead what kind of survival situation will air travel and autos be in? Could it be these industries are heading for a meaningful decline without a policy directive? If the money is not there they will shrink. Bailouts this time around may achieve little but buy a small amount of time. I don't see a rebound like 08 this time mainly becuase the 08 rebound was already running its course into a decline. The past year has shown this. Growth was only being generated with great costs with more debt that was suffering diminishing returns. This time a degrowth level will likely be drop down to with or without a policy so emissions reduction should be in the cards. The only time reductions have been meaningful in the past has been declining economic activity. That is what appears to be ahead. Renewables have not reduced emission they just slowed them. Activity decline yields real reductions.

[shortonoil]

So a global decline in GDP in dollar terms seems to be coming.

At $22 a barrel it won't be long before the dollar does not even exist. The world's entire debt based monetary system is now imploding. Autos aren't being built, planes aren't flying, ships aren't sailing. This whole show is blinking out, one process after the other. Pretty soon we will be back to 1889, and no one will be sending text messages from the saddle of their mule.

It is all going down a thousand times faster than it went up, and there is nothing that the PTB, central banks, disingenuous media, or clueless, self serving politicians can do to stop it.

[asg70]

I don't see a rebound like 08

Doomers didn't see a rebound in 08 either. You might want to think twice before you make such predictions.

Activity decline yields real reductions.

7+ billion people do not voluntarily decline their activities. You'd be surprised how GDP has a way of rebounding no matter what the starting point of the economy is.

[REAL Green]

I don't see a rebound like 08

Doomers didn't see a rebound in 08 either. You might want to think twice before you make such predictions.

Activity decline yields real reductions.

7+ billion people do not voluntarily decline their activities. You'd be surprised how GDP has a way of rebounding no matter what the starting point of the economy is.

Yeap, I got 08 right on the crisis and failed miserably with the rebound. Yet, I learned a lot about being moderate and realistic in the process. In this regards I feel that process changed my life serendipitously. It could have gone wrong too but for me I got lucky and got out of the rat race into a simpler life. I am not really making a prediction on a rebound I am only stating if a rebound comes it might be much less or none at all because the best tools have already been employed to fix economic dislocations over the last decade. These tools are less effective as time goes on as debt distortions damage the economic base. The possibility of a big drop to another economic activity level is very possible if the wrong policy is followed or war occurs. Personally, I think if we embrace needed change at this point in a massive crisis it might be beneficial for a more sustainable way of life. I say that relatively speaking since modern life is so far from what is resilient and sustainable in my opinion. I disagree on the 7BIL and their ability to reboot GDP. I think without a functioning globalism at the level it peaked at in the last decade we in effect capped GDP and population. Too many growth variables like oil, food, and global value chains have been damaged. I think it is a good thing if we hit a ceiling with population and GDP. We should be optimistic although much pain is ahead for all and particularly bad for some.

[asg70]

I appreciate the fact there are still idealists out there who are evangelizing for proactive lifestyle change but I don't think there's much hope of the masses coming along. If they're ever living a close-to-the-earth subsistence lifestyle they'll be doing it out of necessity, not out of concern for the environment.

BTW, here's some unfortunate math. Last time I was in the grocery store I picked up a big bag of rice for around three dollars. Bulk raw staples like this are still dirt cheap. There's really no way to compete with the value proposition of big-ag. Permaculture sounds good on principle and I'm all for it but it's extremely slow to get going and even in an ideal world is not going to work well in a small-scale, at least small-scale temperate climate situation. This is complicated by the uncertainties of climate change, global weirding, and invasive species. That's assume you even have access to land. The poor typically don't.

Point being that the average pragmatic individual out there is going to just keep leaning on the system in which labor is exchanged for money and money is exchanged for food (or even more importantly, rent/mortgage+property-tax, healthcare, and utilities) via the existing paradigm. This is why permaculture tends to be a hobby for yuppies and trustifarians. In other words, it's a luxury.

Therefore the only real preps the average person can do are no different now vs. back in the great depression. Get out of debt, be frugal, etc.. No solar, micro-hydro, or BEVs. Not particularly glamorous or innovative I'm afraid.

So when people talk about preps, they're really just describing what they can do based on their own situation. You can't really propose something as if it's one size fits all.

[REAL Green]

Great points asg70:
“I appreciate the fact there are still idealists out there who are evangelizing for proactive lifestyle change but I don't think there's much hope of the masses coming along. If they're ever living a close-to-the-earth subsistence lifestyle they'll be doing it out of necessity, not out of concern for the environment.”

Who is the idealist? There is nothing idealist by living local and close to nature. Idealism is living in techno optimism in my opinion.

“BTW, here's some unfortunate math. Last time I was in the grocery store I picked up a big bag of rice for around three dollars. Bulk raw staples like this are still dirt cheap. There's really no way to compete with the value proposition of big-ag.”

My REAL Green low carbon living says nothing about being economic. It is not economic in the sense of competing with Walmart. It is not meant to be. It is mean to alter behavior away from being dependent on and dumbed down on the easy life modern ways have forced on people. Low carbon is a tough way of life with low value high volume needed to make it work. It is cheaper for me to plug into the grid for power and heat than use my wood boiler and solar pannels in regards to investment and labor. Food is cheaper at Walmart than my herd, garden, orchard, and grapes. Yet, if the grid goes down or prices go way up I have a hedge. If I was all plugged in to the grid and Walmart then what when a pandemic comes…Oops..that is what we are in now.

“Permaculture sounds good on principle and I'm all for it but it's extremely slow to get going and even in an ideal world is not going to work well in a small-scale, at least small-scale temperate climate situation. This is complicated by the uncertainties of climate change, global weirding, and invasive species. That's assume you even have access to land. The poor typically don't.”

Actually, and sadly it only works for a few and even those it works for it is a tough going. My permaculture grazing operation covers its cost but does not pay my labor and even if it did not much for my labor. It takes industrial power to make supercharge my labor. I could increase my stocking rates 5 times and maybe make some money but then I will have destroyed the green side of my permaculture effort. So, it come to tradeoffs. My point of view is get greener if you can but if you can’t then try to reduce the damage you do.

“Point being that the average pragmatic individual out there is going to just keep leaning on the system in which labor is exchanged for money and money is exchanged for food (or even more importantly, rent/mortgage+property-tax, healthcare, and utilities) via the existing paradigm. This is why permaculture tends to be a hobby for yuppies and trustifarians. In other words, it's a luxury.”

No doubt, until it ends and contrary to many techno optimist this massive orgy of human activity can end. There is nothing in science that says it must keep going. It is just this false human belief that it will keep on going. I lean on the system but I also use the system to leave it. I have invested in a way of life that attempts to be greener and more self sufficient at the same time I try to maintain my status quo connections. My family is not into green like I am except my wife is greener but not a nut about it like I am. Even my prep efforts are only partially embraced. This pandemic has changed their options somewhat because they are glad to know I have a doomstead for them to go to. I have all the basics of prep covered to support 8 people for a year. I also have the seeds planted to carry on into a world of low carbon if it came to that. This does not mean I might be overrun and killed in a mad max world. This just means I have some assets in place to maybe carry on if luck shines upon me.

“Therefore the only real preps the average person can do are no different now vs. back in the great depression. Get out of debt, be frugal, etc.. No solar, micro-hydro, or BEVs. Not particularly glamorous or innovative I'm afraid. So when people talk about preps, they're really just describing what they can do based on their own situation. You can't really propose something as if it's one size fits all.”

I am not sure if debt matters because there may be a debt jubilee of sorts coming. If too many people go insolvent there will be no way to foreclose because there will be no way to value the foreclosed assets. Yet, you make a good point. Getting out of debt in effect means saving and being frugal means living within a manageable scale. This generally means downsizing and being wise about every dollar. I think this is exactly what modern life needs so I believe those who are not destroyed by the coming recession or depression may find this crisis a learning experience.

[asg70]

Who is the idealist? There is nothing idealist by living local and close to nature. Idealism is living in techno optimism in my opinion.

That depends on what your ideals are. One person's ideal is another person's dystopia.

If I was all plugged in to the grid and Walmart then what when a pandemic comes…Oops..that is what we are in now.

Well, the grid's still up. I don't begrudge your preps but I think you're jumping the gun if you think this particular situation is going to spiral out of control into Mad Max and The Road.

[REAL Green]

Who is the idealist? There is nothing idealist by living local and close to nature. Idealism is living in techno optimism in my opinion.

That depends on what your ideals are. One person's ideal is another person's dystopia.

If I was all plugged in to the grid and Walmart then what when a pandemic comes…Oops..that is what we are in now.

Well, the grid's still up. I don't begrudge your preps but I think you're jumping the gun if you think this particular situation is going to spiral out of control into Mad Max and The Road.

Well, "depends" is one of those easy words for moderns to fudge things but I agree it is in the eye of the beholder. Yet, techno optimism is a whole lot more idelaistic than subsistence farming the way humans have done for a thousand years.

I don't think the situation will spiral out of control unless maybe China and the US go to war in the current shocked situation then yes we are all screwed. I do think some places will be mad max in a year or two "IF" food goes into shortage. Some places just have no reason to be except cheap abundant energy knocking on to cheap food trasported to their local grocery store. This includes cheap and abundant water sources. Lots can go wrong in many different places but overall I see a system that will likely hold....I hope!!

[Baduila]

Here you see the oil production before the crash, combined with the oil price. Which date has Peak Oil ?

The explanation is here:
https://limitstogrowth.de/wp-content/up ... _EN_09.pdf

[asg70]

ASPO...DE? I thought ASPO was kaput? I guess what's left of that religion is in Germany and they're ETP nuts.

[shortonoil]

Here you see the oil production before the crash, combined with the oil price. Which date has Peak Oil ?

We maybe have a few months before the gas pumps go permanently dry. At $18 none of the industry will survive for long. When producers can no longer keep their wells pressurized, what little remains will be lost forever in the formations. It's a little late to be talking about Peak Oil.