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Over the past half a decade I’ve made a number of detailed predictions about collapse: how it is likely to unfold, what its various manifestations are likely to be, and how it will affect various groups and categories of people. But I have remained purposefully vague about the timing of collapse and its various stages, being careful to always append “give or take half a decade” to my dire prognostications. I wasn’t withholding information or being coy; I really had no way of calculating when collapse will happen—until five days ago, when, out of the blue, I received the following email from Ugo Bardi:
You may be interested in this post of mine.
Starting from this post, I’m trying to draw a parallel between the collapse of the Soviet Union and the impending collapse of Italy. There are, as always, similarities and differences. In particular, the Soviet Union collapsed almost immediately after that oil production flattened out and started declining. On the contrary, the Italian government survives despite a loss of 36% in oil consumption.
My impression is that it is all related to different taxation methods. I understand that the Soviet tax system was based mainly on commodity taxes and on taxes on production. When production stalled, people had nothing to buy and the government had nothing to tax because most people owned nothing and had little or no savings in banks. So, the government had no choice but to fold over and disappear.
Instead, the Italian system is based largely on income tax and property tax. The government is losing revenues on commodity taxes (e.g. on gasoline) but it can compensate with property taxes. Italians, on the average, are “rich,” in the sense that they have savings in banks and most of them own their homes. So, the government can tax their properties and their savings. As long as Italians still have something taxable, then the government will survive. It will disappear only when it has managed to strip citizens completely of everything they have.
Do you agree with this interpretation? (BTW, Italy as a state may be even more culturally diverse than the old Soviet Union was.)
Very interesting article. Yes, the entire southern tier of the EU is in some early stage of collapse, but so far it hadn’t occurred to me to draw parallels between it and USSR. Now that you mention it, the parallel is obvious: it is financial collapse triggered by something having to do with oil, but with polarities reversed, and delayed by a period of wealth destruction.
In the case of USSR, taxation wasn’t really a source of government revenue. The national economy was based on government ownership of everything, central planning and budgets, and a system of assigning ministerial contracts to enterprises owned by the ministries. The external economy was a matter of exporting hydrocarbons in exchange for foreign currency, which was used to buy grain—mostly feed grain for cattle, without which the population would become protein-deprived and malnourished. Over the so-called “stagnation” period of the 1980s the Soviet economy became hollowed out because of several trends. Too much spending on defense was one of them. Another was that investment in capital goods (machinery, plant and equipment) reached the point of diminishing returns, which is very difficult to characterize but not so difficult to observe. Lastly, Solzhenitsyn and the dissident movement had done irreparable damage to Soviet prestige, destroying morale. The coup de grace, when it came, consisted of two pieces. One was the inability to expand oil production given the state of Soviet oil extraction technology of the era. The other was the fall in oil prices, down to $10/bbl at one point, because North Sea and Alaska both went on stream, and the Saudis pumped as much oil as they could based on a tacit agreement with the US to depress oil prices and thus crush the Soviets. In this they largely succeeded. The USSR became heavily indebted to the West, and, at the very end, needed Western credit to keep the lights on in the Kremlin. One of the final scenes featured Gorbachev on the phone with [West Germany’s Chancellor] Helmut Kohl asking him to ask the Americans to release some funds.
Now, I can see parallels to this in what is happening now in the US and in the EU, but with all the polarities reversed: here oil flows in and money flows out, and the coup de grace [will be] high oil prices rather than low. Instead of failures of central planning, which failed to allocate production effectively, we have failures of the globalized market, where production is effectively globalized but consumption is ineffectively localized among the wealthy and the formerly wealthy, and has to be fueled by credit. Instead of diminishing returns from deployment of capital goods, we have diminishing returns from deployment of capital itself, where a unit of new debt now produces much less than a unit of economic growth. The damage to reputation and morale is mostly on the US side of the Atlantic, where in place of Solzhenitsyn and the dissident movement we have Abu Ghraib [scandal], [Wikileaks’ Julian] Assange and [Edward] Snowden. With the EU, most of the damage has to do with [the] experience of economic disparities between the rich core and the increasingly impoverished periphery, and the recent move in Ukraine to walk away from the EU, and the ensuing Western-financed mayhem in Kiev, show that the bloom is off the EU rose as well. The runaway military spending is likewise mostly a US issue, although epic failures in Afghanistan, Libya and Syria, in which the EU is complicit, are likely to have some effect as well.Comparing USSR to Italy is difficult because of the disparity of scale: 1/5 of the planet’s dry surface versus a smallish peninsula; an economy that slowly decayed in isolation versus an integral part of the EU; a country where the choice is between burning hydrocarbons or dying of exposure versus one where the choice is between riding a scooter or taking the bus; a country with a ravaged agricultural sector unable to grow enough protein calories versus a nation of foodies where corner groceries make worthy subjects for oil paintings. But I think that when it comes to the actual collapse, when it finally comes, there will still be identifiable similarities. Financial collapse always comes first: all sorts of financial arrangements unravel as the center becomes unable to float the periphery, and in response the periphery starts to withhold economic cooperation. The result is a breakdown in supply chains, shutdown of production, and, shortly thereafter, shutdown of commerce. In the case of the USSR, this unfolded in 1989-91 as the various republics and regions refused to cooperate with Moscow. I suspect that this will also happen in the EU, at some point. But I think that you are exactly right that whereas the average Soviet citizen could not be fleeced, Italy, and much of the EU, still have plenty of fat sheep that the government can shear to keep things running. Thus we are looking at a few more years of steady decline before the lights start going out. This, then, is the key distinction: the USSR collapsed promptly because it was already skin and bones, whereas the US and the EU still have plenty of subcutaneous fat to burn through. But they are, in fact, burning through it. And so, the conclusion is, collapse will come, but here it will take a little longer.-Dmitry
I agree with you, of course. It makes perfect sense to me and it is the main point I was making: the Soviet government couldn’t tax Soviet citizens too much because they owned very little.…The Italian government instead has some luck in the sense that Italians have some savings and most of them own their homes. So, the government is progressively strangling their citizens to squeeze out of them all that they have—while they still have something.
The last round of tax increases in Italy is targeting homes and it is really, really hurting, especially the poor. You can be poor here, and still own a house that you inherited from your parents. Now the government asks you to pay as if that house were revenue! That is truly evil. People who don’t have the money to pay this property tax can only indebt themselves with banks (or worse). Eventually, they’ll have to sell their homes or give them to the bank (or to the Mafia)—the result is disaster for everybody, including for the banks, and even the government. But the whole thing has a perverse logic. It has the advantage that it generates some immediate cash which is badly needed, then the hell with the future.
The [next] phase will be to target bank accounts. Then, when there will be nothing left, the government will decamp and say bye to everybody. Hell, what a planet I landed in…..
All the best,
Last week the U.S. Senate’s Energy Committee held the first hearing in decades on the question of whether exporting US crude oil, prohibited by law since the 1970s, should be allowed again. Attendees heard proponents say that allowing crude exports would hold prices down with opponents claiming the opposite case.
To be clear, these would not be net crude oil exports. Of the 19+ million barrels a day that we consume at present, we import roughly 7.5 million barrels of crude per day and export roughly 2.5 million b/day of petroleum products (diesel and propane, for example). And even the US EIA admits we’ll be importing millions of barrels of crude oil for decades, in fact indefinitely.
So this is really an intramural fight: US oil producers want to be able to export while refiners and most users want to keep the crude at home. As Senator Ron Wyden, Chairman of the Energy Committee, said in his remarks, don’t expect this argument to be resolved quickly.
Here’s a related thought experiment. It involves the UK crude oil situation between 1980 and today, shown in Figure 1 below. After joining the exclusive club of Top 20 world oil producers in 1978, two years later the UK’s oil producers joined the ranks of oil exporters. Over the next 25 years they exported roughly ¼ of their total oil production, earning around $20+ per barrel most of those years. But after production peaked in 1999, within six years the UK was back to importing oil, at an average price approaching $100 a barrel. Imports have grown back to ½ million b/d, which is 1/3 of total consumption.
My question to the Brits: if you could turn the clock back, would you allow all your oil to be produced at the maximum possible rate, earning the amount of export dollars you did, if it meant that within a generation you would be back to being an oil importer paying roughly five times as much per barrel? In other words, how did the buy-high sell-low plan work for you? And were those exports in your best long-term national interests? Didn’t think so…
There are almost as many differences as there are parallels between the UK and US circumstances. But they share a bottom-line question: is it in the USA’s best long-term national interests to produce unconventional shale oil sufficiently fast that we end up exporting some of it overseas? Didn’t think so…
Fig. 1: The UK exported oil for 25 years from 1980 through 2005, shown above as the amount produced above the consumption line. Exports peaked at 1.2 million barrels a day in 1999, the same year that production peaked at 2.93 million b/d. imported roughly a half-million b/d in Data is from BP (2013).
Steve Andrews is a former energy consultant and a contributing editor for Peak Oil Review.
Jean Laherrere uses Hubbert linearization to estimate Bakken shale oil peak in 2014 | Peak Oil News and Message Boards
In his latest research on shale oil French oil geologist Jean Laherrere from ASPO France
The most populous U.S. state received 709,014 barrels of crude from Canada by rail in December, a 4.9 percent increase from November and up from zero a year ago, data posted on the state Energy Commission’s website show. Canada made up 67 percent of the state’s total oil-by-rail receipts. North Dakota, where fields in the Bakken formation are producing a record volume of crude, shrank to a 5.9 percent share.
U.S. West Coast refiners from Valero Energy Corp. (VLO) to Tesoro Corp. (TSO), lacking pipeline access to the glut of shale oil in the middle of the country, have been turning to rail to counter declining supplies in California and Alaska. California brought in a record 2.83 million barrels of oil by rail in the fourth quarter from all sources, almost double the amount from the three months prior, the state said.
“We’re seeing a lot of Canadian crude-by-rail loading facilities coming online, so it’s no surprise it’s beginning to show up in California,” David Hackett, president of energy consulting firm Stillwater Associates in Irvine, California, said by telephone. “Refinery configuration in California is oriented toward heavy or medium, sour crude, and the Canadian barrels, which are heavy and somewhat sour, are a better fit than the light Bakken barrels.”
Alaska North Slope crude, which made up 12 percent of California’s oil slate in 2012, has traded an average $27.73 a barrel above Western Canadian Select, a heavy sour blend, over the past month, data compiled by Bloomberg show. Bakken oil has traded $16.09 a barrel above Western Canadian.
“The discounts have been pretty big, an indication of how constrained the pipelines are up in Canada,” Gordon Schremp, a fuels analyst at the state Energy Commission, said by telephone fromSacramento. “I’m not surprised to see more Canadian come in. Wait until some of these rail projects get built here. The economics will be even better than what we’re seeing today.”
Oil-by-rail receipts from Wyoming totaled 221,793 barrels in December, making up the second-largest share of the state’s volume at 21 percent. North Dakota sent 62,325 barrels and New Mexico 12,927.
Alaskan oil output has declined every year since 2002 as the yield from existing wells shrinks. Alaska North Slope crude production averaged 567,600 barrels a day in December, down from 582,150 a year earlier, data posted on the Alaska Department of Revenue’s website today showed.
To contact the editor responsible for this story: Dan Stets at email@example.com
From the report website:
The inaugural work of the Commission on Energy and Geopolitics, “Oil Security 2025: U.S. National Security Policy in an Era of Domestic Oil Abundance,” explores the potential for U.S. oil production to impact American foreign policy and national security in the coming decade and presents a series of recommendations designed to safeguard and advance U.S. interests.
Link to full report (PDF) Released January 15, 2014
Click on the headline (link) for the full text.
US still vulnerable to oil shocks, say generals
Ed Crooks, Financial Times
The US remains vulnerable to oil price shocks caused by disruptions in the Middle East and other producing regions in spite of the North American shale boom, a commission of former generals and senior officials has warned.
(15 January 2014)
How the oil boom could change U.S. foreign policy
Brad Blumer, WonkBlog, Washington post
The United States is suddenly awash in crude oil. From 2008 to 2013, domestic oil production rose by 2.5 million barrels per day — the biggest five-year increase in the country’s history. Last year, U.S. produced more oil than it imported for the first time since 1995.
So what does that mean for the rest of the world? Or for U.S. foreign policy? Well, for starters, it probably doesn’t mean that Americans can now safely ignore the Middle East. The U.S. economy is still heavily reliant on oil, and prices are still largely swayed by what goes on in the global markets. Disruptions in places like Saudi Arabia, Iran or Iraq still have a big impact. That’s one conclusion of a major new report by a commission of former generals and senior officials, backed by Securing America’s Energy Future (SAFE).
“The oil boom has sparked a lot of loose talk about how we can now ignore what goes on in the Middle East,” said Adm. Dennis Blair, a former director of National Intelligence who led the commission, in an interview Tuesday. “But that’s just not true.”
Blair pointed out that the oil boom has already had some impact on U.S. foreign policy. For example, increased North American oil production likely allowed the United States and Europe to impose stricter sanctions on Iran without worrying as much about resulting price spikes. There are also early, tentative signs that China could become more cooperative on Middle East issues now that the fast-growing nation has displaced the United States as the biggest oil importer from the region.
But what’s arguably more telling is how much hasn’t changed. Even with the boom, the United States is still quite vulnerable to oil shocks…
(16 January 2014)
Report: Energy boom won’t end US ties to global oil politics
Jennifer A. Dlouhy, Fuelfix
National security leaders are warning that, even as ever more crude flows from American fields, the U.S. still will be tethered to the global politics of oil and involved in unstable regions that supply it.
In a report issued Wednesday, a group of former military brass, presidential advisers, ambassadors and politicians insist that it’s an illusion that surging U.S. oil production could unshackle the nation’s foreign policy decisions from concerns about safeguarding worldwide crude supplies.
“This is an antidote to those who just glibly say more oil production means we’re free of foreign entanglements,” said Adm. Dennis Blair, the former director of national intelligence, and co-chairman of the Commission on Energy and Geopolitics that produced the 108-page analysis.
“We Americans like to think we can produce our way and work our way out of something,” Blair said in an interview with FuelFix. “Unfortunately, the fact that we are now drilling as much oil as we are is not going to, in and of itself, keep America out of the vulnerable situation and the series of entanglements in places around the world that we have been in the past.”…
(15 January 2014)
The EIA has finally published its International Energy Statistics. The last one had July data. This one is has two months updates, August and September. All the data I publish comes is Crude+Condensate from January 2000 through September 2013.
Again, all data is C+C in thousand barrels per day with the last data point September 2013.
As you can see from the chart World C+C production has leveled out in the last year and one half. September 2013 is slightly lower than February 2012.
There were a couple of major revisions in the July data. Canada was revised down by 269 kb/d while Non-OPEC was revised down by 228 kb/d. There were other small revisions upward. OPEC C+C had no revisions so that left World C+C for July revised down by 228 kb/d.
Both the USA and Canada are on a real tear, owing of course to Light Tight Oil and the Oil Sands. Their combined production is up about 1.9 mb/d since in one year, since last September.
But they are the only ones on a tear. Almost everyone else is flat to down with a few small producers up slightly.
World less USA and Canada is actually below where it was in June 2004 and is swiftly approaching the bottom it hit after the crash of 2008. The peak was in January 11 and they are down 2.65 mb/d since that point.
Actually only Light Tight Oil is keeping the world from declaring peak.
World less USA is down over 1.5 mb/d since the peak of January 2011.
Non-OPEC is up on the strength of the USA and Canada.
However the EIA has OPEC C+C down considerably.
Charts of all Non-OPEC producers are now up on the Non-OPEC Chartspage.
Also a new page has been added, World Crude Oil Production by Geographical Area
An oil leak at the site of the Hibernia offshore platform on the Grand Banks off the coast of Newfoundland has resulted in a significant downturn in oil production.
Workers reported a small leak on Dec. 18. Hibernia management company officials said it happened in a valve that is part of the rig’s offloading system. Only 10 litres of crude oil spilled at the time, and no oil sheens were spotted on the water at that time.
However, on Dec. 27, oil was discovered in the ocean once again, and a further investigation revealed the valve was leaking. The small sheen was rapidly dispersed by heavy seas, and by Jan. 3, it was no longer visible.
As a result of what was observed, Hibernia has shut down the transfer of oil to tankers, and the company says it has “significantly” cut back oil production.
Crews have been arranged to fix the leaking valve as soon as the weather permits.
Why is a finite world a problem? I can think of many answers:
1. A finite world is a problem because we and all of the other creatures living in this world share the same piece of “real estate.” If humans use increasingly more resources, other species necessarily use less. Even “renewable” resources are shared with other species. If humans use more, other species must use less. Solar panels covering the desert floor interfere with normal wildlife; the use of plants for biofuels means less area is available for planting food and for vegetation preferred by desirable insects, such as bees.
2. A finite world is governed by cycles. We like to project in straight lines or as constant percentage increases, but the real world doesn’t follow such patterns. Each day has 24 hours. Water moves in waves. Humans are born, mature, and die. A resource is extracted from an area, and the area suddenly becomes much poorer once the income from those exports is removed. Once a country becomes poorer, fighting is likely to break out. A recent example of this is Egypt’s loss of oil exports, about the time of the Arab Spring uprisings in 2011 (Figure 1). The fighting has not yet stopped.
Figure 1. Egypt’s oil production and consumption, based on BP’s 2013 Statistical Review of World Energy data.
The interconnectedness of resources with the way economies work, and the problems that occur when those resources are not present, make the future much less predictable than most models would suggest.
3. A finite world means that we eventually run short of easy-to-extract resources of many types, including fossil fuels, uranium, and metals. This doesn’t mean that we will “run out” of these resources. Instead, it means that the extraction process will become more expensive for these fuels and metals, unless technology somehow acts to hold costs down. If extraction costs rise, anything made using these fuels and metals becomes more expensive, assuming businesses selling these products are able to recover their costs. (If they don’t, they go out of business, quickly!) Figure 2 shows that a recent turning point toward higher costs came in 2002, for both energy products and base metals.
Figure 2. World Bank Energy (oil, natural gas, and coal) and Base Metals price indices, using 2005 US dollars, indexed to 2010 = 100. Base metals exclude iron. Data source: World Bank.
4. A finite world means that globalization will prove to be a major problem, because it added proportionately far more humans to world demand than it added undeveloped resources to world supply. China was added to the World Trade Organization in December 2001. Its use of fuels of all types skyrocketed quickly soon afterward (Figure 3, below). As noted in Item 3 above, the turning point for prices of fuels and metals was in 2002. In my view, this was not a coincidence–it was connected with rising demand from China, as well as the fact that we had extracted a considerable share of the cheap to extract fuels earlier.
Figure 3. Energy consumption by source for China based on BP 2013 Statistical Review of World Energy.
5. In a finite world, wages don’t rise as much as fuel and metal extraction costs rise, because the extra extraction costs add no real benefit to society–they simply remove resources that could have been put to work elsewhere in the economy. We are, in effect, becoming less and less efficient at producing energy products and metals. This happens because we are producing fuels that are located in harder to reach places and that have more pollutants mixed in. Metal ores have similar problems–they are deeper and of lower concentration. All of the extra human effort and extra resource expenditure does not produce more end product. Instead, we are left with less human effort and less resources to invest in the rest of the economy. As a result, total production of goods and services for the economy tends to stagnate.
In such an economy, workers find that their inflation-adjusted wages tend to lag. (This happens because the total economy produces less, so each worker’s share of what is produced is less.) Companies producing energy and metal products are also likely to find it harder to make a profit, because with lagging wages, consumers cannot afford to buy very much product at the higher prices. In fact, there is likely to be the danger of an abrupt drop in production, because prices remain too low to justify the high cost of additional investment.
6. When workers can afford less and less (see Item 5 above), we end up with multiple problems:
a. If workers can afford less, they cut back in discretionary spending. This tends to slow or eventually stop economic growth. Lack of economic growth eventually affects stock market prices, since stock prices assume that sale of their products will continue to grow indefinitely.
b. If workers can afford less, one item that is increasingly out of reach is a more expensive home. As result, housing prices tend to stagnate or fall with stagnating wages and rising fuel and metals prices. The government can somewhat fix the problem through low interest rates and more commercial sales–that is why the problem is mostly gone now.
c. If workers find their wages lagging, and some are laid off, they increasingly fall back on government services. This leaves governments with a need to pay out more in benefits, without being able to collect sufficient taxes. Thus, governments ultimately end up with financial problems, if extraction costs for fuels and metals rise faster than can be offset by innovation, as they have been since 2002.
7. A finite world means that the need for debt keeps increasing, at the same time the ability to repay debt starts to fall. Workers find that goods, such as cars, are increasingly out of their ability to pay for them, because car prices are affected by the rising cost of metals and fuels. As a result, debt levels need to rise to buy these cars. Governments find that they need more debt to pay for all of the services promised to increasingly impoverished workers. Even energy companies find a need for more debt. For example, according to today’s Wall Street Journal,
Last year, 80 big energy companies in North America spent a combined $50.6 billion more than they brought in from their operations, according to data from S&P Capital IQ. That deficit was twice as high as in 2011, and four times as high as in 2010.
At the same time that the need for debt is increasing, the ability to pay it back is falling. Discretionary income of workers is lagging, because of today’s high prices of fuels and metals. Governments find it difficult to raise taxes. Fuel and metal companies find it hard to raise prices enough to finance operations out of cash flow. Ultimately, (which may not be too in the future) this situation has to come to an unhappy end.
Figure 4. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.
Governments can cover up this problem for a while, with super low interest rates. But if interest rates ever rise again, the increase in interest rates is likely to lead to huge debt defaults, and major financial failures internationally. This happens because higher interest rates lead to a need for higher taxes, and because higher interest rates mean purchases such as homes, cars, and new factories become less affordable. Rising interest rates also mean that the selling price of existing bonds falls, potentially creating financial problems for banks and insurance companies.
8. The fact that the world is finite means that economic growth will need to slow and eventually stop. We are already seeing slower economic growth in the parts of the world that have seen a drop in oil consumption (European Union, the United States, and Japan), even as the rest of the world has seen rising oil consumption.
Figure 5. Oil consumption based on BP’s 2013 Statistical Review of World Energy.
Countries that have had particularly steep drops in oil consumption, such as Greece (Figure 6 below), have had particularly steep drops in their economic growth, while countries with rapid increases in oil and other energy consumption, such as China shown in Figure 2 above, have shown rapid economic growth.
Figure 6. Oil consumption of Greece, Based on EIA data.
The reason why we are already reaching difficulties with oil consumption is because for oil, we are reaching limits of a finite world. We have already pulled out most of the easy to extract oil, and what is left is more expensive and slow to extract. World oil production is not rising very fast in total, and the price needs to be high to cover the high cost of extraction. Someone has to be left out. The countries that use a large proportion of oil in their energy mix (like Greece, with its tourist trade) find that the products they produce are too expensive in a world marketplace. Countries that use mostly coal (which is cheaper), such as China, have a huge cost advantage in a cost-competitive world.
9. The fact that the world is finite has been omitted from virtually every model predicting the future. This means that economic models are virtually all wrong. The models generally predict that economic growth will continue indefinitely, but this is not really possible in a finite world. The models don’t even consider the fact that economic growth will scale back in mature economies.
Even climate change models include far too much future fossil fuel use, in both their standard runs and in their “peak oil” scenarios. This is convenient for regulators. Oil limits are scary because they indicate a possible near-term problem. If a climate change model indicates a need to cut back on future fossil fuel use, these models give the regulator a more distant problem to talk about instead.
10. Even the most basic economic relationships tend to be mis-estimated in a finite world. It is common for economists to look at relationships that worked in the past, and assume that similar relationships will work now. For example, researchers like to look at how much debt an economy can afford relative to GDP, or how much debt a business can afford. The problem is that the amount of debt an economy or a business can afford shrinks dramatically, as the economic growth rates shrinks, unless the interest rate is extremely low.
As another example, economists believe that higher prices will lead to substitutes or a reduction in demand. Unfortunately, they have never stopped to consider that the reduction in demand for an energy product might have a serious adverse impact on the economy–for example, it could mean many fewer jobs are available. Fewer jobs mean less demand (or affordability), but is that what is really desired?
Economists also seem to believe that prices for oil products will keep rising, until they eventually reach the price level of substitutes. If people are poorer, this is not necessarily the case, as discussed above.
11. Besides energy products and metals, there are many other limits that are a problem in a finite world. There is already an inadequate supply of fresh water in many parts of the world. This problem can be solved with desalination, but doing so is expensive and takes resources away from other uses.
Arable land in a finite world is subject to limits. Soil is subject to erosion and degrades in quality if it is mistreated. Food is dependent on oil, water, arable land, and soil quality, so it quickly reaches limits if any of these inputs are disturbed. Pollinating insects, such as bees, are also important.
Probably the biggest problem in a finite world is the problem of too high population. Before fossil fuel use was added, the world could feed only 1 billion people. It is not clear that even that many could be fed today, without fossil fuels. The world’s population now exceeds 7 billion.
Where We Are Now in a Finite World
At this point, the problem of hitting limits in a finite world has morphed into primarily a financial problem. Governments are particularly affected. They find that they need to borrow increasing amounts of money to provide promised services to their citizens. Debt is a huge problem, both for governments and for individual citizens. Interest rates need to stay very low, in order for the current system to “stick together.”
Governments are either unaware of the true nature of their problems, or are doing everything they can to hide the true situation from their constituents. Governments rely on economists for advice on what to do next. Economists’ models do a very poor job of representing today’s world, so they provide little useful guidance.
The primary way of dealing with limits seems to be “solutions” dictated by concern over climate change. These solutions are of questionable benefit when it comes to the real limits of a finite world, but they do make it look like politicians are doing something useful. They also provide a continuing revenue stream to academic institutions and “green” businesses.
The public has been placated by all kinds of misleading stories about how oil from shale will be the solution. Quantitative Easing (used by governments to lower interest rates) has temporarily allowed stock markets to soar, and allowed interest rates to stay quite low. So superficially, everything looks great. The question is how long all of this will last. Will interest rates rise, and undo the happy situation? Or will a different financial problem (for example, a debt problem in Europe or Japan) bring the house of cards down? Or will the ultimate problem be a decline in oil supply, perhaps caused by oil and gas companies reaching debt limits?
2014 will be an interesting year. Let’s all keep our fingers crossed as to how things will work out. It is surreal how close we can be to limits, without major media catching on to what the problem really is.