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EROI < 1:5 => collaps of modern civilisation!

Discuss research and forecasts regarding hydrocarbon depletion.

Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby Yoshua » Mon 05 Nov 2018, 01:43:31

The global economy is slowing down as we are reaching peak oil since the growth rate in world oil production is falling as the production is plateauing?

At the peak the prospects for further growth is zero. At that point the global debt plus interest can no longer be serviced.

The peak will be a violent event!
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby shortonoil » Fri 09 Nov 2018, 13:23:10

At the peak the prospects for further growth is zero. At that point the global debt plus interest can no longer be serviced.


Here are the graphs that I promised onlooker; about an eon ago.

Image

Both graphs signify $/barrel versus time in years. The "green" graph represents the benefits that a barrel of oil generates in the global economy. The "red" graph represents the cost of that barrel to the society. Historically increased petroleum production has always added to the size of GDP. That will change in mid 2021. At that point the benefit derived from consuming a barrel of oil, and its products will equal the cost of producing it. Beyond that point maximizing GDP will only be possible by reducing petroleum production.

The two curves are calculated as follows:

Benefit = GDP * R/Gb = $/barrel
Cost = Total Production Energy/ The cost of energy (BTU/$) = $/barrel

**R = % of total gross energy supplied by petroleum (eia)

Historically the growth in world GDP has had an almost perfect correlation to petroleum production growth.

Image

Beyond the 2021 point increased petroleum production will result in reducing GDP. The world is entering the era of DE-industrialization. Most modern systems, including monetary/ financial, and production/ distribution will be contracting. The world's over reliance on petroleum has been convenient, but myopic. It was a convenience born of ignoring that petroleum production was necessary as an energy delivery process to the remainder of the economy. It was an oversight that will result in the massive, and staggering destruction of capital that is to follow!

http://www.thehillsgroup.org/
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby onlooker » Fri 09 Nov 2018, 13:53:37

So, those equations are not some esoteric mind boggling formulations. But simple calculations using figures readily available from the official sites. And contracy to what Outcast says, you are not ignoring inflation, given that the graphs represent the comparison at the same exact point in time of costs vis-a- vis benefits. It is not about comparing data from different time periods whereby the rate of inflation could distort the monetary figues. It is about following the progression to observe how the benefits/cost ratio of Oil Production begins to get less favorable over time. Until, D-day arrives ie. the inflection point 2021, when Oil ceases to be a productive net benefit for the Economy and instead becomes a drain. Thank you so much Short. You and the Hills Group are truly shedding light on all this obfuscation, misinformation and ignorance that abounds, relative to the true state and trajectory of the Oil industry and by extension our whole Industrial Economic Civilization.
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby onlooker » Fri 09 Nov 2018, 14:13:51

45719087_10217477906843937_1327742375954481152_n.jpg
45719087_10217477906843937_1327742375954481152_n.jpg (44.37 KiB) Viewed 2043 times
Here is the staggering amount of Debt now needed to propel the GDP. Sorry, you cannot just say Debt has always been around or that it is a good thing to ignite economic growth. Not when so much Lending is needed just to give the impression that everything is okay
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby shortonoil » Fri 09 Nov 2018, 17:32:48

Here is the staggering amount of Debt now needed to propel the GDP.


That is a Debt to GDP Growth ratio of 16.3¢ on the dollar. It is no wonder that the CBs are cutting back on their printing. It isn't doing anything anymore. If they did it would be like printing into a black hole. When capital preservation becomes more important than capital accumulation there is very little use for money, and that is exactly where the world is heading. The New World Order isn't going exactly where its promoters thought it was going to take them. They completely missed the petroleum factor! With no growth in the economy, for now and into the foreseeable future, the debt that they have been acquiring for the last couple of hundred years is going to be selling at fire auction rates. The money lenders will be very high on the "first to go" list.
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby kublikhan » Fri 09 Nov 2018, 17:46:51

shortonoil wrote:It is no wonder that the CBs are cutting back on their printing. It isn't doing anything anymore. If they did it would be like printing into a black hole. When capital preservation becomes more important than capital accumulation there is very little use for money, and that is exactly where the world is heading. The New World Order isn't going exactly where its promoters thought it was going to take them. They completely missed the petroleum factor!
Just last year you were confident that the FED would never reduce it's balance sheet. You got that call wrong too. Just like how your call on oil was wrong.

kublikhan wrote:
shortonoil wrote:Jun 07, 2017 - This one is 1 month old, and the FED has a $4.5 trillion balance sheet. A lot of it is worthless garbage like repurchased Chinese MBS that aren't worth 5¢ on the dollar. The FED is not going to be reducing anything as long as you are are breathing. Come visit our once beautiful planet from time to time. Learn how things work on this side of the stratosphere.
Wanna bet on that?

Reuters: "World refiners are CLOGGED with oil"
The oil barrel is half-full.
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby shortonoil » Fri 09 Nov 2018, 18:15:48

And contracy to what Outcast says, you are not ignoring inflation, given that the graphs represent the comparison at the same exact point in time of costs vis-a- vis benefits.


Even though inflation is completely irrelevant here, he will probably bring it up anyway! When your only tool is a hammer, every problem looks like a nail.

You and the Hills Group are truly shedding light on all this obfuscation, misinformation and ignorance that abounds, relative to the true state and trajectory of the Oil industry and by extension our whole Industrial Economic Civilization.


It takes about zero insight to realize that petroleum is the key stone of our civilization. All the pictures of Robert E. Lee I have seen show him riding by on a horse. But, studying one aspect of a culture as huge as the present one gets easily entangled in irrelevant trivia. A strictly mathematical approach is the only route that can be taken to an objective conclusion. Otherwise, emotion, wishful thinking, and what you think you know, "that you don't" have a tendency to dominate.
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby shortonoil » Fri 09 Nov 2018, 19:56:54

Just last year you were confident that the FED would never reduce it's balance sheet.


The FED has a $4.7 billion balance sheet. It reduced it by about 3%. Considering that it has raised interest rates by 2.25% during that same period its balance sheet just took a big jump through the back door. The FED represents the presences, and behavior of the world's reserve currency, of which it owns a great deal, through Treasury Bonds. If it really reduced its balance sheet, an equal part of the economy would go along with it. To reduce their balance sheet they would have to take money out of circulation. The M2 money supply isn't shrinking, it's growing by leaps and bounds:

https://tradingeconomics.com/united-sta ... -supply-m2

shrink, my ass!
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby shortonoil » Fri 09 Nov 2018, 19:59:26

$4.7 TRILLION
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby kublikhan » Fri 09 Nov 2018, 20:51:24

shortonoil wrote:The FED has a $4.7 billion balance sheet. It reduced it by about 3%. Considering that it has raised interest rates by 2.25% during that same period its balance sheet just took a big jump through the back door. The FED represents the presences, and behavior of the world's reserve currency, of which it owns a great deal, through Treasury Bonds. If it really reduced its balance sheet, an equal part of the economy would go along with it. To reduce their balance sheet they would have to take money out of circulation. The M2 money supply isn't shrinking, it's growing by leaps and bounds:
There are at least 4 things wrong with what you just said:

1. Backpedaling. First your spiel was if QE does not continue forever, the economy will tank. When QE ended and the economy didn't tank you backpedaled to a new tune: if the FED ever reduces it's balance sheet, the economy will tank. Now that the FED is reducing it's balance sheet and the economy is not tanking you backpedaled yet again. Now it's this rate of balance sheet reduction is so slow that it doesn't count. Same old story with you. Make prediction, they fail to come true, backpedal.

2. Claiming raising the interest rate offsets the fed's tightening of lowering the balance sheet. Both of these actions represent tightening by the FED. They do not offset each other, they mutually reinforce each other:

* Raising interests rates and shrinking the balance sheet could work in tandem to tighten monetary policy more than the Fed expects.

In October of this year, the Fed at last began a slow slimming-down of the balance sheet, allowing $10 billion in maturing securities to roll off without reinvesting the proceeds. All else being equal, this represents a tightening of monetary policy, as it tends to push up longer-term (10-year) market interest rates. The Fed's main tool for tightening monetary policy in a recovering economy would, therefore, she explained, be raising short-term market interest rates by paying banks greater interest on reserves (IOR). Since December 2015, the Fed has raised the rate on IOR by 100 basis points (1%), which has pushed up its short-term benchmark rate—the effective federal funds rate—in tandem.
The Fed could be tightening more than it realizes

This week, the Fed raised its benchmark interest rate a quarter point. 10 of the last 13 rate hike cycles ended in recession. "We're now getting deeper into the rate hike cycle, and while we all focus on where the fed funds rate is going to be, behind the scenes the Fed continues to shrink their balance sheet." The Fed built up $4.5 trillion in bonds and other securities during its quantitative easing program which began nearly a decade ago.The dual approach of hiking rates while reducing asset holdings tightens monetary conditions at a faster pace than a change to the fed funds rate alone. Next month, the Fed will increase its reductions to $50 billion a month — five times the pace this time last year. "Next year you start to lose the one-time step-up to earnings from the tax cut and...the monetary tightening begins to pick up steam."
The Fed could be rate hiking the US into a recession

3. You are conflating the federal reserve balance sheet and M2 money supply. These are 2 different things.
DEFINITION of 'Fed Balance Sheet'
The Fed balance sheet is a breakdown of the assets and liabilities held by the Federal Reserve.
Fed Balance Sheet

What is 'M2'
M2 is a calculation of the money supply that includes all elements of M1 as well as "near money." M1 includes cash and checking deposits, while near money refers to savings deposits, money market securities, mutual funds and other time deposits.
M2

4. The size of the federal balance sheet is not $4.7 trillion, it is $4.1 trillion
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby StarvingLion » Fri 09 Nov 2018, 20:58:04

General Electric stock down 6% today. At this pace it will be a penny stock by the end of the year.

One week ago the stock was $13. Today it is $8.58.

Will rockdoc or marmico ever show a stock chart of GE stock year 2000?

Shale "oil" is a scam, people. There is no more new oil to make diesel and aviation fuel in America.

Deindustrialisation means certain death. Thats what GE stock is signaling.

You'll all soon be dead.
2025 is the Year of The Oil Apocalypse when >15% decline rates hit ALL legacy giant old fields. It will be a Steel Bolt to the Head of Humanity.
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby shortonoil » Fri 09 Nov 2018, 21:49:40

To reduce their balance sheet they would have to take money out of circulation. The M2 money supply isn't shrinking, it's growing by leaps and bounds:


To reduce their balance sheet the FED would have to sell some of the $2+ trillion in absolutely worthless toxic trash that it holds (MBS, derivatives, etc). If they sold it, someone would have to buy it. When that someone bought it they would have to pay for it with money.

follow me yet?

When the buyer of the trash paid for it, they did by giving that money to the FED, so when they did, it no longer exists. The money is a liability on the FED's books, when it goes back to the FED, it writes off the liability. The money supply would go down. Your money, and anyone's money is a bookkeeping entry on the liability side of their ledger. A banks books are the opposite of everyone else. A dollar to them is a liability; it is an asset to anyone else holding it.

figured it out yet?

You guys flunked Thermo 101, and Accounting 100. What an accomplishment??
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby kublikhan » Fri 09 Nov 2018, 22:50:41

shortonoil wrote:To reduce their balance sheet the FED would have to sell some of the $2+ trillion in absolutely worthless toxic trash that it holds (MBS, derivatives, etc). If they sold it, someone would have to buy it. When that someone bought it they would have to pay for it with money.

follow me yet?

When the buyer of the trash paid for it, they did by giving that money to the FED, so when they did, it no longer exists. The money is a liability on the FED's books, when it goes back to the FED, it writes off the liability. The money supply would go down. Your money, and anyone's money is a bookkeeping entry on the liability side of their ledger. A banks books are the opposite of everyone else. A dollar to them is a liability; it is an asset to anyone else holding it.

figured it out yet?

You guys flunked Thermo 101, and Accounting 100. What an accomplishment??
Says the guy who doesn't know the difference between oil prices and oil volumes. During the FED's unwinding program the monetary base shrinks, not M2.

There are several standard measures of the money supply, including the monetary base, M1, and M2. The monetary base is defined as the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve). M1 is defined as the sum of currency held by the public and transaction deposits at depository institutions (which are financial institutions that obtain their funds mainly through deposits from the public, such as commercial banks, savings and loan associations, savings banks, and credit unions). M2 is defined as M1 plus savings deposits, small-denomination time deposits (those issued in amounts of less than $100,000), and retail money market mutual fund shares.
What is the money supply?

The monetary base is shrinking. It's been shrinking all year: St. Louis Adjusted Monetary Base
M2 on the other hand includes much more than just the monetary base. M2 can, and is, growing even if the monetary base and the FED's balance sheet shrinks.
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby kublikhan » Fri 09 Nov 2018, 23:15:42

The unwinding of the balance sheet comes from the process of selling bonds to primary dealers (banks) and debiting the reserves of that bank held at the Federal Reserve. This action decreases the 'monetary base'. The monetary base is comprised of currency in circulation and the excess reserves of banks held at the Federal Reserve.

Since we have a fractional reserve banking system, banks loan out a multiple of their reserves. The ratio of M2 money supply (broad money supply) divided by the monetary base equals the money multipler. In a fractional reserve system, the money multipler is always greater than 1.

The money multipler indicates many things. If the money multipler is high that means that banks are creating a lot of money and have a high willingness to lend or consumers have a high willingness to borrow. A low money multipler indicates that banks have a low willingness to lend or consumers have a low willingness to borrow.

Prior to 2009, the money multipler was around 8.1. This is the long-term historical average. A money multipler of 8 means that monetary policy was also very effective because for every 1 dollar change in the monetary base from the Federal Reserve changed the money supply by 8 dollars.

After 2009, the money multipler crashed to 3.55. I believe this was due to the Federal Reserve expanding the monetary base and providing the banks with excess reserves that consumers had no willingness to borrow. This concept is called 'pushing on a string'. The Federal Reserve can always tighten monetary policy but it can only expand monetary policy so much. It does not work in both directions.

The reason for this is due to the process in which money is created. Money moves from the Federal Reserve to Commercial banks to the general public (borrowers). Money does not move from the Federal Reserve to the public.

The Federal Reserve can limit the expansion of credit by tightening monetary policy but it cannot force a creation of credit, only encourage it by lowering the hurdle rate. This means monetary policy can pull or tighten but not necessarily push or expand.
The Math Behind Quantitative Tightening
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby Cog » Sat 10 Nov 2018, 05:47:06

GE's problems have zero to do with the overall strength of the economy. They took on a lot of debt to expand into what turned into unprofitable ventures. Then they doubled down in trying to keep those ventures afloat. Bad management will wreck a company even when the economy is doing well.
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby Yoshua » Sat 10 Nov 2018, 08:36:03

The dollar is the world reserve currency. The Fed has raised the funds rate and reduced its balance sheet.

The result: the EM crisis, the global markets are in a bear market and Europe is slowing down.

But fair enough...only America counts: treasury yields are rising, the NYSE is down YTD, housing is down...but sure "It's the best economy ever".

The Fed has only managed to raise the funds rate to 2.25 percent and reduce the balance sheet by 300 billion. We are very close to the edge.
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby shortonoil » Sat 10 Nov 2018, 10:02:02

The result: the EM crisis, the global markets are in a bear market and Europe is slowing down.


Image

One can only wonder if this is not what is producing the social unrest that is taking place across the world. A French minister is talking about a revolution taking place there. Everyone, and their pet gerbil is talking about a civil war in the US as its debt grows to the stratosphere. Everyone is concerned about a few hundred million pouring out of Latin America into the US as their economies collapse. China appears to be walking on egg shells as its real estate markets fold, bankruptcies sweep the country, and its foreign reserves fall. The end of the oil age is showing up on ledger sheets, in FX markets, and with deteriorating world wide social cohesion. The developed economies are cannibalizing the less developed to continue their excursion into debt suicide. Declining economies are pulling everything, and everyone apart, and we are just at the beginning of this count down.
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby onlooker » Sat 10 Nov 2018, 10:15:32

Yep, they're is no where to go. It really is now pick your poison time. Continue raising the funds rate or prime rate, slow the rapid devaluation of currencies and the balloning of the stock market assets bubble and let Deflation and Recession set in.

Or do not continue raising the rate, allow the Lending/Debt bonaza to continue, let the Market continue its irrational exuberance. Then at some point when investors sense the jig is up, the bulls will run for the exist and it will all explode and collapse similar to 2008 only much worse.

Of course, one must ask why would this situation have been alllowed to continue, fester and deteriorate? Because the graphs Short is displaying are accurate. The cost to benefit ratio of Oil production and its effect on the Economy is at dangerous levels now. And that circumstance can only be hidden or delayed somewhat. It has no solution. It is the Great Predicament and Unfolding Collapse of modern economies we are witnessing.
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby ralfy » Sat 10 Nov 2018, 11:13:41

The myth of the money multiplier with the Triffin dilemma meets diminishing returns meets species die-offs. But no worries, we can always increase debt!
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Re: EROI < 1:5 => collaps of modern civilisation!

Unread postby Yoshua » Sat 10 Nov 2018, 14:43:20

S&P 500 vs. Treasury Yields

https://mobile.twitter.com/NorthmanTrad ... 62/photo/1

The Fed can't really continue to raise the rate and push up the treasury yield without taking down the stock market.

The Fed will just have to continue to inflate the bubble until it pops.

The global economy needs more and more energy to stay alive, so we might as well just feed it with everything we got.

I don't think there's a way to turn back or slow down.
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