Monday, April 1, 2013

Peak Oil: All Going to Plan

Something wicked this way comes? Lightning strikes Cyprus.

Perhaps it’s the unseasonable chill that has settled over Britain and shows no sign of abating but there’s a decidedly gloomy feeling in the air. Something doesn’t feel quite right; indeed it’s all gone a bit Twilight Zone of late.

I’d hazard a guess that the eerie feeling is the initial and ongoing onset of cognitive dissonance that is growing in the damp basement of the nation’s consciousness. It’s that uneasy feeling that all is not well and that all is not going to be well, despite how many times the politicians and techno optimists tell us everything is on track.

And that’s just the small minority of people who take a passing interest in current affairs. The majority, whose days are filled with TV entertainment shows, sports and other diversions, must really be wondering what the hell is happening and why they are suddenly finding their options for living a normal life constrained ever more with every passing month. It must be the government’s fault.

But this is what peak oil looks like. It’s what peak oilers have been saying it would look like for years if not decades. In fact, we are following the script to a tee, which makes it all the scarier because we know what is coming next. We can tick off the following as ‘happened already’:

  • Global liquids (excluding ethanol etc.) plateauing and supply remaining constrained despite growing demand
  • Which in turn led to a huge hike in oil prices that has stayed with us
  • Thus causing a permanent state of close to zero growth or shrinkage in the major industrialised nations
  • And a shortage of food in much of the Middle East, leading to riots and revolutions
  • Followed by a desperate scramble for unconventional fossil fuels, such as shale gas, tight oil and deep sea oil

Furthermore, we were told to expect politicians to do anything to restore the expected growth paradigm, and that all of their efforts would be in vain because of their collective failure to recognise energy inputs as a limiting factor for economic success. We can certainly tick that one off the list as well.

So what’s next in the peak oil recipe book of How to Make a Global Disaster of Epic Proportions? Well, almost certainly we can expect to see the wheels come off the global financial system. The 2008 ‘credit crunch’ was just the first distant rumbling noise of an approaching storm, and what happened in Cyprus last week was the first violent flash of lightning as that storm makes landfall. Depositors now face losing 60% of their bank deposits in what looks like a smash and grab by the troika of the IMF, the EU and the ECB. I’d be surprised if many of them saw anything at all of their deposits back. Europe is so phenomenally broke that to ‘fix’ the debt would require some several hundred trillion dollars. Reality check: the entire world economy is only about 70 trillion dollars measured in annual GDP.

Those on the inside know the scale of the problem and we are now seeing the first part of the great deleveraging. For the past hundred years or so we have seen a giant credit bubble grow – the biggest credit bubble in the history of the world. There is now something like 99 units of phantom ‘money’ for every unit of value. Those in the know are quietly getting rid of their soon-to-be-worthless paper wealth and using it to buy up tangible wealth in the form of solid productive enterprises, land, minerals and gold. Empires in waiting are quietly disposing of their US debt and buying up precious metals, and the average man in the street thinks the fact that the US stock market is rising means that everything is doing fine (just don’t look at the trading volumes, which tell another story).

Why is finance important? Because, as Nicole Foss tirelessly points out at The Automatic Earth, finance is the operating system of the global economy. If it crashes, then nothing but a complete system reboot will restore the economy. Indeed, when it does crash we will see economies freeze up, like has happened in Cyprus. Forget a 1 or 2 percent drop in GDP, we’re looking at anything up to 50% wiped off the value of the economy in short order.

The history of humankind is a history of snatching. First it was just basic land snatching from one another. Slavery was a form of snatching other people’s energy and using it to get useful products and money from the land we had snatched. Then we discovered oil, giving us the chance to snatch energy that had taken millions of years to form. This in turn allowed the creation of the biggest credit bubble in history, which is a form of inter-temporal snatching i.e. appropriating wealth in the form of debt from our descendants. Now that the inter-temporal wealth bubble is collapsing in on itself the clever snatchers who know that the game is up are busy appropriating productive assets with the idea of leaving the rest of us out in the cold to freeze.

We didn’t mind the snatchers as long as the game was on the up. We were quite happy to buy shares and over-priced property and take out private pensions. But now that the game has been thrown into reverse we are losing our trust in the institutions that rely on trust to function. Banks, corporations, regional and national governments. And as the trust erodes (prior to an all-out stampede when a critical mass of people catch on) these centres of power will do whatever it takes to maintain the concentrated core at the expense of the periphery.  Once that happens panic will set in as people suddenly realise that they are actually on the periphery, and an unholy scramble for ‘safety’ starts- although by then it will be too late.

In the meantime we are fed an illusory series of bubbles, which rise into the air before our eyes, shimmering beautifully. A bubble in this sense is an apparition of wealth that convinces us of its value. It rises up, expanding as it does so, getting bigger and bigger as people inflate it with their wealth. It’s a law of physics that an expanding bubble will always burst and a law of human nature that some people will always insist that this isn’t true. That’s what our economies are doing these days. In the absence of creating real value they are instead merely blowing bubbles for reasons of political expediency and the enrichment of financiers extracting wealth from the suckers among us. 

Bubbles might be ephemeral, but when they burst they create real damage in the real world. Industries crash, people lose everything, political careers are cut short and everyone says ‘never again’. We’ll likely witness the bursting of the shale gas bubble pretty soon which, among other things, will spark off an energy panic and case stage two (or perhaps it will be three) of the financial crash.

So contagion is likely to be the order of the day. Europe will contaminate the US (despite an initial flight to the illusory safety of the US dollar), China will struggle to service its infrastructure under the deadweight of its reckless expansion, and everywhere else in the world will bear the brunt of the ensuing chaos. A vast deflationary period will ensue, probably for a century but maybe longer, until economies can reestablish themselves at a lower level of energy throughput and with a lot fewer mouths to support because several billion of us rely on business as usual to ensure adequate food for our survival. 

And that’s just the financial problems, which in the long run are actually the least of our worries. Following financial collapse and the inevitable wars that will ensue (Europe is laying down the groundwork for one right now) we’ll be hit with the kind of power shortages that nobody in the 21st century really likes to contemplate. There may well be plenty of oil left but that doesn’t mean you or I will benefit from it. What’s really important is traded oil. Once a country, say Saudi Arabia or Venezuela, falls below a certain threshold of oil production needed to keep the local population happy, the idea of selling it abroad becomes deeply politically unpopular. The only way to then get at that country’s oil is to fabricate a casus belli and invade it. It’ll be a pity that the major economies will likely be too broke to finance such resource wars.

Telescope events again and even the great energy crunch of the next few decades will pale in significance to the great damage we are doing to the environmental commons, with topsoil, the oceans and the climate all being left in a state far less capable of supporting life than they are even now. That is the great gift we will leave our children and their children and so on.

It doesn’t give me any joy to contemplate this, or to say that these predictions are coming true. Indeed, it’s hard enough being a Cassandra when people don’t want to listen. Try telling any of the above to the cornucopian techno optimists and they’ll tell you to perk up a bit and put your faith in the scientists or policy makers or economists. Soon it will all be flying cars and trips to Mars. Indeed, there’s been plenty written in the last couple of weeks on the peak oilosphere about the modern religion of progress, and some of us would do well to acknowledge that we’re probably also trapped by it to some extent. The realization of the trap is perhaps even harder to bear than when one considers our current predicament in any depth.

And that’s another techno trap of our age – the assumption that the universe operates along linear lines. That’s why we put hope in economists who regard monetary and fiscal policy as scientific instruments. Just tweak this knob and this will happen. Pull that lever and that will happen. But that’s not how the real world operates – economies are human constructs and as such they are vulnerable to the vagaries of human irrationality and emotional drivers. Fear and greed are two words conspicuously absent from economics textbooks. 

And it’s the same with science. Most people these days erroneously equate science with technology. Thus scientists in labs create the latest iPhones and cures for diabetes. Give them enough time (and money) and they will cure cancer and perfect cold fusion. Just don’t hold your breath while you are waiting.

So what hope is there? Well, it’s not my intention to dish out hopium. For what it’s worth I’ve spent the last week researching shale gas and coal for an article. I had a long phone conversation with Carl Shoupe in Kentucky, who used to be an Appalachian coal miner and now fights big coal in a town where everyone is a) working for the coal industry and b) is being shafted by the same. He says that even in this community some people are starting to twig that blowing up mountains and bulldozing the rubble into valleys wasn’t such a bright idea after all. There’s a bit of hope for you.

And what else? I’ve been out meeting local food producers, including organic farmers, fishermen and various artisanal producers. It’s heartening to see such a thriving network of local foodies, even if it is against a backdrop of continued supermarket expansion and a general lowering of food quality. I have been a bit surprised by the lack of organic food in the shops in the UK – there seems to be far less than when I lived here last in 2000. People, on the whole, seem to be going for the cheapest, junkiest food and the situation seems to be getting worse all the time (the only ‘job creators’ in the news seem to be the big fast food chains and the discount food stores – all of whom are doing very well. Yet another facet of peak oil.) So from now on I’ll be getting my organic foodstuffs delivered in a box once a week from a local farm. It costs more than the local Tesco, but at least it won’t poison me and my family and it’ll provide a bit of extra income for a local farmer.

But even so, if the supermarket trucks stopped rolling tomorrow, how much food would the regional food network where I live be able to supply? 10%? 15%? Who knows. Hopefully it was pay to get to know the people growing the food I eat.

In the meantime I’ve been concentrating of getting some resilience built into my own life. A few fruit and nut trees have gone in at Fox Wood – the start of a forest garden. I’m stocking up on tools and various pieces of equipment while I can. I might even get that poly tunnel set up this year instead of next – there’s no point hanging around. I know it’s not much, but it’s a start, and you’ve gotta start somewhere.


  1. You are doing good work and this is one of your better essays.

    I'm not very hopeful myself, but I suspect that there will be a point when things will deteriorate enough that things will get easier. For example, most people will find growing their own food difficult, even if they have the land, because local regulations prevent it and there are not enough independent growers to build a relationship with one and bypass the supermarket chains. But if it gets to the point where the regulations are not being enforced, or even ordinary people can pay small amounts of cash to the officials so they can go away, eg deteriorates, then you will see more garden farming, and more networks will develop as the chains close up their shops or become so unreliable that no one bothers.

    Right now everyone is trying to work within a dying system, so the system keeps dying and there is no way to get away from that. It has to deteriorate further for most people to be able to cut loose from it. I think alot of the collapse thinking around peak oil has been wishful thinking, but there was a grain of truth that once a system starts to die, it really has to die before things can even start to improve, and the wishful part was that the process would hurry up and resolve itself in our lifetimes.

    1. Thanks - I was aware that I'd been writing a load of gibberish of late. Put it down to burn-out caused by my move.

      I'm with you on the dying supermarket paradigm. I tend to agree that we have to go all the way to the bottom before things start to improve again. Even if that means everyone shopping at bargain basement big boxes, eating chemically-laced dog-food like slime from tins and being fiercely loyal about the whole thing.

      Another thing that I have noticed is that the food quality has gone down, but the price has gone up. Way up. I actually sent off for that poly tunnel today - I'm thinking it will pay for itself in a year or two at this rate.

  2. Here in India PM Singh has been having to promise continued economic growth in the face of the global downturn. He also had to give a long speech about why he was increasing the cost of natural gas cylinders (it is rationed too).

    Political stability here depends on energy in a way that the west will come to see sooner or later. In much of the country it is a matter of life and death. Inflation is increasing making food costly while wages don't really increase (especially for working class people who make between US$2~5/day).

    There is a common mindset that the country emerged from the Dark Ages and cannot under any circumstances return. Most of the middle class seems to believe in a bright destiny where India regains its past former glory. I believe they'd be willing to fight for that dream.

    If economic growth starts dipping too low, then people will revolt. The same actually applies to China as well. All over Asia politicians are promising prosperity.

    Incidentally, this might prompt Asian powers like India to ignore the US and NATO, and just buy their oil as much as they please from Iran. They're still buying some oil from Iran.

    Watching peak oil play out on this side of the world is interesting.

    On the bright side, a country like India uses a fraction of the energy per capita as westerners do, so there isn't really a transition towards a low-energy lifestyle for most people.

    1. Jeffrey - I've always been fascinated by India, yet I know that it can be a truly violent and dark place as well. I once got caught up in a riot in Agra and it was quite terrifying.

      You're right of course. When the promise of a better life fails to materialise for the masses, and the extravagant lifestyles of the upper classes are so obviously on display, I wouldn't want to be caught up in the middle of it all.

      I have had quite a few dealings with the 'new Indians' these last few years, flogging them holidays in Africa. They want the whole 'Imperial Raj' fantasy, complete with servants, cocktails and all the rest of it. Seems like they regard it as their rightful destiny.

      I read somewhere the other day that Egyptian farmers, who rely heavily on petrol generators to irrigate their arid land, have no money for fuel this year. It doesn't take a genius to figure out what happens next in such a volatile place.

  3. Twilight Zone indeed. I feel it to. Great piece!

  4. This is a powerful essay, Jason. I've been feeling somewhat complacent over the past few months. I chalk it up to the cold winter that doesn't seem to want to end. My plans are to be as active as possible in the local garden co-op and learn, learn, learn.

    I see what's happening in Cyprus, and most likely what will soon be the rest of Europe, and I can't help but feel a sense of resignation. I'm not nearly clever or skilled enough to navigate the minefield of the crumbling financial world whilst keeping my meager wealth intact. That's why I focus on developing my skills with an eye towards accepting that I'm not going to be materially rich by any means in the future. I'm ok with this as long as I can get those skills in place.

    It's a strange place to be, as I'm sure you know, to live in a world dictated by the worship of progress and see it for the metastasizing cancer that it really is.

    1. I think the term 'genteel poverty' is about as aspirational as I can get. There's a lot to be said for having the financial security to know that you'll be able to make it through the lean times, having some tradeable skills to earn a bit of money, and having a network of friends and acquaintances whom you can call on when things get tough.

      From experience, I know I don't have sharp elbows when a lot of people all want the same thing at the same time. My strategy is to avoid having to have them. My finances are also somewhat precarious - I could do with a good couple of years without any bank runs before I'll likely feel 'okay'. Not sure if we will be granted such.

  5. Wow, great essay. This is one of those "bad feeling in the pit of my stomach" reads. You've done that to me before...but I've become complacent, I think, in recent months. Winter time, I guess. Here in Boston it is definitely pea-planting time.

    1. We can all feel complacent at times. My aim, which I don't always live up to, is to do one thing every day that will make my situation more resilient. It could be anything, from buying a book on ancient Chinese organic gardening, to planting some seeds. It all adds up.

      I planted some peas last week, so we're clearly on the same wavelength!

  6. Some extracts from The Revolt of the Masses, Ortega y Gasset, I'll put them in their order in the book, though they don't necessarily flow into each other:

    "[The masses] are only concerned with their own well-being, and at the same time they remain alien to the cause of that well-being. As they do not see, beyond the benefits of civilization, marvels of invention and construction which can only be maintained by great effort and foresight, they imagine that their role is limited to demanding these benefits peremptorily, as if they were natural rights. In the disturbances caused by scarcity of food, the mob goes in search of bread, and the means it employs is generally to wreck the bakeries. This may serve as a symbol of the attitude adopted, on a greater and more complicated scale, by the masses of to-day towards the civilization by which they are supported.(p45)

    "[T]here is no culture where there are no standards to which our fellow-men can have recourse. There is no culture where there are no principles of legality to which to appeal. There is no culture where there is no acceptance of certain final intellectual positions to which a dispute may be referred. There is no culture where eocnomic relations are not subject to a regulating principle to protect interests involved. There is no culture where aesthetic controversy does not recognize the necessity of justifying the work of art.
    When all these things are lacking there is no culture; there is in the strictest sense of the word, barbarism.(p54-55)

    "The civilization of the nineteenth century is, then, of such a character that it allows the average man to take his place in a world of superabundance, of which he perceives only the lavishness of the means at his disposal, nothing of the pains involved. He finds himself surrounded by marvellous instruments, healing medicines, watchful governments, comfortable privileges. On the other hand, he is ignorant how difficult it is to invent those medicines and those instruments and to assure their production in the future."(p77)

    Ortega y Gasset wrote this in 1930. How much more dumbed-down hubristic, and vicious are we now? I've been literally a lifetime acquiring textiles knowledge and skills, for the product of which I'm offered packs of cigarettes by mass-persons -- who know I don't smoke -- and who are malicious and bullying when I won't sell to them at any price. Despite my rigour and discipline in the craft, when oil-based technology fails, how will I colour my threads? Vegetable dyes? Barely possible. I'll be starting a dye garden this summer. Mordants? Those are the things that come in plastic bottles from specialty mail-order sources. What's alum? Where is it sourced, how is it extracted, how is it processed for use as a mordant? I don't know. I have a friend who's a theoretical and analytical chemist. He doesn't know either. Most people would consider this a trivial example. Multiply it by an exponential order for all the other oil-based technologies: the underpinning knowledge is gone. I'll be planting fibre-flax this summer. My heart is weeping.

    1. Yes, I've seen people offer craftspeople cigarettes - it must be very insulting - a bit like throwing peanuts at monkeys.

      I make soap and, like you, wonder what on earth I would use to make it if and when various ingredients become unavailable. It's not a thing most people want to contemplate.

  7. Hi Jason,

    Greetings to you and your family in Cornwall! I hope everyone is well and that you will find the future you envisioned for yourself and your family.

    Speaking of Cassandra, I listened to an interview on the American NPR (National Public Radio) today, with a man called David Stockman, former Budget Director under Ronald Reagan, before he quit that club.
    If you want to listen to it, I have to warn you in advance that Diane Rehm has had an illness that provoked a speech disorder, so she sounds funny to the naive ear. But her shows are very well made, and she had an interesting guest today.
    I have to admit that I am not very knowledgeable on economics, so a number of the statements David Stockman makes, fall on barren grounds. Yet there was enough left to replay it tonight on the computer, so my husband could also hear it.
    And sometimes I think I am more knowledgeable on economics than most nowadays, because I have always honoured my father's slogan: you can only spend the money that is in your pocket. Throughout the years, that slogan has saved me and my family from a lot of troubles.
    Like you did when you sold your house in Spain, we will also quit the mortgage system very soon.
    I guess a lot of us are making preparations in the face of the future to come, each in our own way, and our own pace. I find that a soothing idea, and am grateful for the internet that provides me with the knowledge I need to make those preparations.

    1. Hi Jeannette - I have a simple theory regarding abstract disciplines like economics: things can always be boiled down into simple and understandable thought mouthfuls.

      Modern economics relies on people not understanding it - otherwise it would be transparently clear that wahat was happening is not in their best interest!

      Thanks for the links.

  8. Here's a last passage that your site choked on, too many words altogether to digest in one binge; just to be complete:

    "A world superabundant in possibilities automatically produces deformities, vicious types of human life, which may be brought under the general class, the 'heir-man', of which the 'aristocrat' is only one particular case, the spoiled child another, and the mass-man of our time, more fully, more radically, a third. (It would, moreover, be possible to make more detailed use of this last allusion to the 'aristocrat', by showing how many of his characteristic traits, in all times and among all peoples, germinate in the mass-man. For example: his propensity to make out of games and sports the central occupation of his life; the cult of the body -- hygienic regime and attention to dress; lack of romance in his dealings with woman; his amusing himself with the 'intellectual', while at bottom despising him and at times ordering his flunkeys or his bravoes to chastise him; his preference for living under an absolute authority rather than under a regime of free-discussion, etc.) [To which OyG notes:] [T]he security seemingly offered by progress (i.e. the ever-growing increase of vital advantages) demoralized the average man, inspiring him with a confidence which is false, vicious, and atrophying."(p76)

    And since I have room for more words now, here also is the thesis of Ortega y Gasset's essay:

    "***The characteristic of the hour is that the commonplace mind, knowing itself to be commonplace, has the assurance to proclaim the rights of the commonplace and to impose them wherever it will.***(italics) The mass crushes beneath it everything that is different, everything that is excellent, individual, qualified and select. Anybody who is not like everybody, who does not think like everybody, runs the risk of being eliminated. And it is clear, of course, that this 'everybody' is not 'everybody'. 'Everybody' was normally the complex unity of the mass and the divergent, specialized minorities. Nowadays, 'everybody' is the mass alone. Here we have the formidable fact of our times, described without any concealment of the brutality of its features."(p14)

    How likely is it that we -- the Cassandras -- will be the first targets, for our prescience....?

  9. Here in the east of england food production is likely to be way down this year. Because of last years wet summer over 20% of arable land was not ploughed and planted last autumn. The late spring will have a general negative effect on crop growth. The cereal crops that were not planted in the autumn will not catch up and many crops are late going in this spring because of the coldest March in 50 years. Food production will be well down and prices will go up.

    I'm experimenting on my allotment this year growing Maris Wigeon, an organic bread making wheat. It went in last October and is looking good so far. I'm looking forward to harvesting it and threshing it by hand. I've been hand milling wheat to make wholemeal bread and man is it hard work. Makes you realise how much human time and effort will be needed when fossil fuel agriculture comes to an end. My first grandchild will be born in the next 6 weeks and my main aim is to ensure that he / she is brought up knowing how to grow food as I'm certain that in the next 40 years access to food and water will be the key issues on our planet.

    Like you Jason and other commenters I cannot see how our government can fail to address this obvious weakness for the UK. Luckily we have France on our doorstep which will be a crucial food source for us over the coming decades, as long as climate change does not mess up their agriculture, which I'm afraid it probably will.

    1. Very timely, Phil:

      I once tried to grow enough wheat to make a loaf of bread on some land in Spain. It started off well, but ended in disaster. It was something of a lesson. Maris Wigeon sounds like a good idea!

  10. Hi Jason,

    Thanks for continuing to write, despite your move. I'm sure you have a lot on your plate. Have been enjoying the photos on your other site as well.

    It's a long process, this unraveling. Very unpredictable, aside from the general trajectory. Overall it does seems to be playing out according to the long descent/catabolic collapse playbook, but at the level of an individual's life it's much less easy to anticipate how it will all play out. So we prepare as best we can, but resign ourselves to being flexible and accepting of what comes along with some amount of cheerfulness and stoicism I think.

    You probably have to be of a sensitive, intuitive nature to notice it, or to pay attention to it. And people that notice it do tend to think quite a lot about it. But thinking about it too much will do your head in. So, prepare today, be flexible, do what you can, and don't sweat the details too much. Thanks for sharing your own journey.

    1. I think you are right, Mark. Once you have learned about peak oil etc. it's very hard to un-know it. If you have put in all the hours of observation, reading and thinking - but then choose not to do anything about it - then something has clearly gone wrong.

      But, yes, none of know how it will pan out at the individual level. The best bet: grow a garden and keep smiling.


I'll try to reply to comments as time permits.