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Re: Why peak oil doesn't mean a recession

Postby nero » Sun 24 Dec 2006, 02:33:28

$this->bbcode_second_pass_quote('airlinepilot', 'I') am most decidely more pessimistic than you due to the time issue. I think what your saying basically is going to transpire, but there will only be a very short respite for GDP until those mitigating technologies show their true colors. I don't think it will take very long to see that throwing money and technology at the problem is not going to work. It already appears to me that we are pedalling very hard just to stay in one place and unless there is some fairly miraculous breakthrough very soon, the trend shows no sign of abating. It may in fact accelerate. At that point the real fun will begin. That is solely my opinion based on a lot of the already informative threads concerning alternatives on this site.


yes we seem to have a bit of a difference in opinion on how fast things will transpire. I think the absolute peak will occur in about 10 years but that we are already feeling it's effects now and that the peak will unfold slowly over the next 20 years. ie that in 20 years people will still not be sure we have peaked and will still not see peak oil as a crisis.

I would agree with your idea about pedalling faster and faster to stay in one place, ever since I read Tainter I have been noticing exactly that, however I don't limit that to just peak oil and see it as a larger civilizational issue. I do think peak oil is one aspect of it, but due to differences in time scale I see the other converging crises will also be factors. In 20-30 years out I think peak oil will just be one of the factors leading to global insecurity, at which point we'll probably be blaming our economic problems on "the war".
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Re: Why peak oil doesn't mean a recession

Postby Lighthouse » Sun 24 Dec 2006, 02:52:41

$this->bbcode_second_pass_quote('NEOPO', 'a')s to the title - correct as peak oil equals a shrinking economy which is depression not recession....


A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe.

We heading for a recession followed by a depression.
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Re: Why peak oil doesn't mean a recession

Postby wowpleasewakeupalready » Sun 24 Dec 2006, 11:06:06

$this->bbcode_second_pass_quote('nero', '')$this->bbcode_second_pass_quote('airlinepilot', 'I') am most decidely more pessimistic than you due to the time issue. I think what your saying basically is going to transpire, but there will only be a very short respite for GDP until those mitigating technologies show their true colors. I don't think it will take very long to see that throwing money and technology at the problem is not going to work. It already appears to me that we are pedalling very hard just to stay in one place and unless there is some fairly miraculous breakthrough very soon, the trend shows no sign of abating. It may in fact accelerate. At that point the real fun will begin. That is solely my opinion based on a lot of the already informative threads concerning alternatives on this site.


yes we seem to have a bit of a difference in opinion on how fast things will transpire. I think the absolute peak will occur in about 10 years but that we are already feeling it's effects now and that the peak will unfold slowly over the next 20 years. ie that in 20 years people will still not be sure we have peaked and will still not see peak oil as a crisis.

I would agree with your idea about pedalling faster and faster to stay in one place, ever since I read Tainter I have been noticing exactly that, however I don't limit that to just peak oil and see it as a larger civilizational issue. I do think peak oil is one aspect of it, but due to differences in time scale I see the other converging crises will also be factors. In 20-30 years out I think peak oil will just be one of the factors leading to global insecurity, at which point we'll probably be blaming our economic problems on "the war".


Hey nero - nice posts. It looks like you've stepped back and looked at the peak/plateau liquid fuels situation objectively. I agree with a lot of what you said. I don't think any of us really knows what will happen, but obviously it won't be as bad as the doomers believe and it won't be as good as the cornucopians believe.

Are you currently investing in alternative energy? If so, which companies?
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Re: Why peak oil doesn't mean a recession

Postby nero » Sun 24 Dec 2006, 14:38:12

$this->bbcode_second_pass_quote('wowpleasewakeupalready', 'A')re you currently investing in alternative energy? If so, which companies?


Well if you consider oil sands and hydroelectricity projects as "alternative" then yes I am. Most of the alternative energy market is either highly speculative gambles or are highly dependent on the current subsidy regime. But I'm pretty conservative right now cause I think the credit bubble is bursting and that we will have a recession within a year.
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Re: Why peak oil doesn't mean a recession

Postby MrBill » Mon 25 Dec 2006, 04:37:14

$this->bbcode_second_pass_quote('nero', '')$this->bbcode_second_pass_quote('wowpleasewakeupalready', 'A')re you currently investing in alternative energy? If so, which companies?


Well if you consider oil sands and hydroelectricity projects as "alternative" then yes I am. Most of the alternative energy market is either highly speculative gambles or are highly dependent on the current subsidy regime. But I'm pretty conservative right now cause I think the credit bubble is bursting and that we will have a recession within a year.



As the more recent run-up in commodities, energy and base metals as well as the share prices of companies that are engaged in producing them or looking for substitutes there will be both winners and losers from declining resources. The share prices of CNR and CPR certainly have benefited from the objective search for more efficient transport as rail can move a lot of tonnage using less fuel per ton per mile.

So, yes, I agree that 'the search for alternatives' will initially create a lot of economic activity, but whether it is similar to 'the dot con bubble' I am less certain. Certainly, the wall of money that was thrown at new Internet technologies financed a lot of new inventions that are still with us and a few business models that are not.

There is lot's of money to throw at alternatives. Private investors control about $17-20 trillion in investible assets as compared with official central bank reserves, which are about 1/6th that amount. That is not counting assets that could be liquidated and then re-invested into projects with the possibility, but no guarantee, of a higher ROI. And do not confuse ROI with EROEI. They are NOT the same thing.

However, as the economic boom in N. Alberta surrounding the exploitation of the oil sands shows is that large projects with long lead times are not only expensive to finance, but require skilled workers as well.

The general economic decline associated with post peak oil depletion means a lot of jobs connected to the automobile, recreational vehicle and leisure sport industries would more than likely all but disappear. There may be some highly paid jobs looking for more fuel efficient or alternative technologies, but these will not offset all the jobs lost at the local car and RV & boat dealerships. Or the jobs of those that service and repair those vehicles.

Skilled workers, not unskilled workers, will be needed to develop alternatives such as synthetic oil projects for example. Those job skills take years to acquire.

And we are talking about rich world solutions here. Forget about the developing world when you talk about nuclear energy. Not withstanding the shortage of uranium and the problems associated with waste storage and disposal. Countries that lack the skilled labor as well as the political stability to ensure that power grids, railways and other essential infrastructure are not only in place, but are maintained properly are not going to be in a position to build nuclear reactors, supply power to replace liquid fuels, by bio-fuels for example, and keep those nuclear power plants safe from thieves, local warlords or terrorists.

Remember it was the USA that paid to dismantle and dispose of all Russia's nuclear wastes stemming from the dismantling of their nuclear weapons program. Iran does not even currently possess the needed skills and technology to process its own petroleum into refined products and must import 25% of its gasoline for example. Meanwhile, the population at large is uneducated with high levels of unemployed. That Iran dismantled one of the best universities in the Middle East is an irony. To believe they can successfully develop a peaceful nuclear energy program for power is for me laughable at best.

Euric wrote:
$this->bbcode_second_pass_quote('', 'B')io-fuels.

The problem is there isn't enough land to produce crops for both bio-fuels and food. What will have to be done is old inner city neighbourhoods will have to be torn down and high rise apartments built on that land. Enough apartments will have to be built to house the suburbanites as the suburbs will have to be depopulated and the houses torn down and the land reclaimed as farm land.

Some city dwellers will have to be farmers again to tend to the crops.

For electricity more nuclear plants are needed. I believe the Iranians already know that with the end of oil comes the end of fuel to produce electricity and want to have their entire electrical needs come from nuclear sources.


You cannot teardown houses and buildings and return those lots to productive farmlands. Never mind the energy that takes. The soil is gone. In order to build, the topsoil is stripped away, carted off to be sold at a garden centre most likely, and the building is then constructed on the underlying bedrock or stone/gravel foundation. Teardown those houses or apartment buildings and you have the equivalent of a gravel pit. Never mind filling in the holes with ground fill. At best you might cultivate a few backyard gardens where some topsoil still exists.

But the point being that a lot of capital invested to finance specialists looking for alternatives, while skilled laborers and technicians build the necessary infrastructure is not going to replace all the unskilled workers* that lose their jobs if energy production, especially, gasoline and diesel, suddenly or at least rapidly decline.

This economic contraction may look very much like a real recession or depression despites pockets of economic activity surrounding the quest for alternatives.

Or like the 80/20 rule. Eighty percent of the people and traditional industries may be underemployed due to a lack of energy, while the output of twenty percent of the workers and those companies with the necessary expertise will not necessarily make up for that overall drop in economic output.

There will be a misallocation of land, labor, capital and intangible skills in the transition from the economy we have today to what is left of the economy post peak oil depletion.

*unskilled in the sense that they may have skills, but just not the right ones needed in the search for alternatives or to build the new infrastructure.
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Re: Why peak oil doesn't mean a recession

Postby TreebeardsUncle » Mon 25 Dec 2006, 13:47:28

Hi.
Well, natural gas, coal, and nuclear fuels will also be depleted. How well will ethanol and bio-fuel production and distribution function in the absense of a supply of fossil fuels to produce fertilizers, pesticides, to fuel harvesting equipment, and provide distribution networks? Already it appears that ethanol prices in the US at least appear to track gasoline prices and so are unlikely to be any cheaper.

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Re: Why peak oil doesn't mean a recession

Postby nero » Mon 25 Dec 2006, 22:44:16

$this->bbcode_second_pass_quote('MrBill', 'T')he general economic decline associated with post peak oil depletion means a lot of jobs connected to the automobile, recreational vehicle and leisure sport industries would more than likely all but disappear. There may be some highly paid jobs looking for more fuel efficient or alternative technologies, but these will not offset all the jobs lost at the local car and RV & boat dealerships. Or the jobs of those that service and repair those vehicles.


Yes, when there is sudden changes in the economy alot of people don't have the skills to benefit and the skills they do have are often no longer as valuable. It is ever thus, and as far as we expect economic change to accelerate in a peak oil world we should expect more workers to be dislocated. I don't automatically assume however that all newly in demand skills will be what we traditionally consider hi-tech skills. Certainly in Northern Alberta the boom isn't felt so much in engineering as it is in the blue collar jobs of construction and on the drilling rigs (not to say that engineers aren't in demand but they are only a small minority of the newly created jobs.)

One of the growth sectors in a peak oil world will likely be in the military and other forms of security which have traditionally been considered to be blue collar jobs. We'll have those ex-RV sales men humping packs through the deserts of Iraq before you know it.
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Re: Why peak oil doesn't mean a recession

Postby MrBill » Tue 26 Dec 2006, 04:07:26

nero wrote:
$this->bbcode_second_pass_quote('', 'C')ertainly in Northern Alberta the boom isn't felt so much in engineering as it is in the blue collar jobs of construction and on the drilling rigs (not to say that engineers aren't in demand but they are only a small minority of the newly created jobs.)


Sorry, I did not articulate myself very well. What is the equivalent of stuttering when you're typing? ; - )

I meant to use N. Alberta as an example of natural bottlenecks. There is an urgent need to develop synthetic crude as an alternative to traditional oilfields. Some that are in pretty nasty neighborhoods and therefore make them not reliable producers or exporters.

The money is also there. Oil companies are earning record profits at the moment and, in general, most are planning to increase CAPEX. Certainly, their expenditures are higher than when the price was in the $15-30 per barrel range. I think a conservative estimate of capital spending for the Athabasca oilsands is now in the $100 billion range, although for cost reasons some projects have been delayed.

So there is a need and the funding is in place. And as you said, this is benefiting all those workers in such trades as construction, welding, heavy duty mechanics, etc., and even pushing up the wages for unskilled and semi-skilled workers such as roughnecks, truck drivers and manual laborers.

But the general bottleneck is the time it takes to plan the projects and then bring them to fruition. Plus spiralling costs as even unskilled workers demand $30 per hour and a COLA if they have to be flown in and out of Fort McMurray every two weeks. Forget skilled labor. They can name their price. Ditto for experienced oilfield truckers with their own rigs. Plus material costs are soaring while housing becomes not only unaffordable for many, but simply unavailable. If ever you wanted to see supply & demand in action as well as a typical textbook case of a wage & price spiral all you have to do is visit Alberta today.

It is a boom for the workers, but the bane of companies that have to pay the inflated bills. When the price of crude is high then it is bearable. But the taxpayer is also having to fork out for basic infrastructure like schools and roads that temporary construction jobs will not support in the long run. The skilled jobs of running refineries afterwards will bring nice benefits to the Province, but they will not keep everyone employed. Even the unemployed need services.

And due to a lack of infrastructure in place today oil will be sent south of the border for value added refining. That is downstream revenue lost to the workers and taxpayers of Alberta even though the environmental damage and subsequent clean-up costs remain behind. It may look like a great bargain for everyone today, but there are some long-term drawbacks as well.

I do not disagree with your point about post peak oil depletion generating economic activity in other sectors of the economy related to substitutes and the search for alternatives. I just think that the oilsands project in N. Alberta just clearly demonstrate that there may be a mismatch between the skills needed and the skills in excess supply needed for the transition in the fossil fuel dependent economy to a less energy intensive future.

Treebeardsuncle wrote:
$this->bbcode_second_pass_quote('', 'H')i.
Well, natural gas, coal, and nuclear fuels will also be depleted. How well will ethanol and bio-fuel production and distribution function in the absense of a supply of fossil fuels to produce fertilizers, pesticides, to fuel harvesting equipment, and provide distribution networks? Already it appears that ethanol prices in the US at least appear to track gasoline prices and so are unlikely to be any cheaper.


Point taken. Eventually all non-renewable resources such as natural gas, coal and nuclear fuels will be depleted. But the question is the time frame and what alternatives will be developed in the meantime?

I think everyone agrees that petroleum for gasoline and diesel will be the first to go. Maybe between 2030-50 if you trust the EROEI calculations being done in the Depletion Modelling threads on peak oil dot com?

Then natural gas some time after that. And coal after gas. The time horizon may be another 50-100-200 years? As for nuclear we do not know? Theoretically, we do not know how much uranium exists or whether spent nuclear rods can be reused? But nevermind there are a host of other practical problems associated with nuclear energy generation. It depends on many factors. Not a few back of the envelop guesstimates. Clearly by that time the realization will be that we cannot support the existing infrastructure with less and less energy.

The point being is that running out of fossil fuels like gasoline and diesel FIRST will really get people's attention and focus their collective minds.

I personally believe that bio-fuels such as cellulosic ethanol or bio-diesel will have to be grown on marginal land, so that they do not displace existing crop production. And great strides in efficiency will have to be realized from GMO to productivity gains in energy conversion. Simply put the processes we have are not efficient enough. As for the energy needed to produce liquid fuels like cellulosic ethanol and bio-diesel I guess they will come from stationary sources of power used to run the process. Coal to liquids via ethanol and bio-diesel for example.

It may not be as efficient or as convenient as using petroleum, but once the petroleum is gone, or as some say, its EROEI drops below 1:1, then there is no other choice. You HAVE to go with the next best alternative!

I expect nuclear power to eventually replace natural gas as a source of energy and power in the conversion of bitumen to synthetic oil in the Athabasca tarsands. The plans are on the drawing board, but up to now there has been no urgency because natural gas WAS cheap and plentiful. Not that great engineering problems still needed to be solved?

$this->bbcode_second_pass_quote('', '"')We must build the Candu technology at home," Mr. Lunn said. "It's imperative for the Canadian nuclear industry. If we can't compete at home, I would suggest it wouldn't look very good for our technology elsewhere around the world."

He said cost overruns associated with building reactors in Ontario in the 1980s are a thing of the past. AECL has had an "impeccable record" over the past 10 years, delivering six reactors on time and under budget, including three in South Korea and two in China, he said.
Ottawa favours Candu reactors



And I suspect we all agree traditional farming methods, at least those as practiced in the past 50-years, will have to change drastically. Again if you do not have the energy, or in this case the liquid fuels, to run the existing infrastructure, including farm machinery, you are forced to switch to a less energy intensive production.

However, like the 'Scrooge' thread by Pup55, its like solving uncontrolled population growth is a separate, but related, problem to growing food in a post peak oil world with more bodies and less energy. Bad news for many of the world's extra 3-3.5 billion unborn babies.

Power down means fewer not more people. An inconvenient truth.

nero wrote:
$this->bbcode_second_pass_quote('', 'W')e'll have those ex-RV sales men humping packs through the deserts of Iraq before you know it.

Forget fighting foreign wars for depleting oil reserves. Better concentrate on homeland security to keep the hungry masses from landing on your own shores! Not that they will have the energy or means to get there, but illegal immigration will exacerbate the problems associated with post peak oil depletion in the transition period. Or as Jarrod Diamond puts it, 'swamping the remaining life rafts!' Happy holidays! ; - )
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Re: Why peak oil doesn't mean a recession

Postby nero » Tue 26 Dec 2006, 18:26:47

I think we are in agreement,

I originally started this thread in the hopes that with some thoughtful debate I could refine my ideas, but you can't debate when people agree, darn it.

so, Happy Holidays MrBill.
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Re: Why peak oil doesn't mean a recession

Postby AirlinePilot » Wed 27 Dec 2006, 02:12:06

I am in general agreement with you guys except on one point. I cant get over the fact that all of your conjectures, which are well thought out and plausible, are missing the boat with regards to reality. Not meant as an insult at all here. What I am driving at is that there are many unknowns, but I think we can all agree that reality bites. What is going to go down in the real world will not follow anything that looks logical. I think you are both off on the timing by a significant amount. Its due to this issue I see the decline and possible collapse of economies coming much sooner than I think your looking at.

I believe your glossing over the ramifications of significant crude price increases and how they will have dramatic economic consequences at some point very soon. I dont know when that will be, and more importantly what the tipping price will be, but when it happens I think things could fold like a house of cards dramatically and quickly. Not days or weeks but over the course of just a few months, I think things will snowball. There are just too many interconnected industries and companies which if challenged will bring things down at a rapid pace.

There will be a crossover point sometime within the next few years I believe where after that point, its not going to matter what we do. I believe a worldwide depression of fairly unprecedented proportions is likley sometime after 2010-12 due to our inability to address the situation to date. Its really just a guess on my part and I do think it's possible to arrive sooner but not before late 08 or 09.

Real world political, military, and terrorist actions will have a very large effect I think and I see this as an accelerant to the problem. Nothing here is getting better at the moment. I would say it's getting decidedly worse. We may be on the brink of some very big things.

I think you are looking at the problem from a "clean" and almost academic standpoint, and it is most assuredly not that.
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Re: Why peak oil doesn't mean a recession

Postby nero » Wed 27 Dec 2006, 03:07:31

$this->bbcode_second_pass_quote('AirlinePilot', 'I') think you are looking at the problem from a "clean" and almost academic standpoint, and it is most assuredly not that.


I agree that things can change in suprising and disruptive ways and that reality rarely conforms with theory. It is to avoid being suprised by errors in conventional wisdom that you have to take a step back and question your assumptions in an "academic" way. Creating a simplified model may not give accurate results but it often can help elucidate the possible interactions of the significant variables.
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Re: Why peak oil doesn't mean a recession

Postby MrBill » Wed 27 Dec 2006, 04:11:51

$this->bbcode_second_pass_quote('nero', '')$this->bbcode_second_pass_quote('AirlinePilot', 'I') think you are looking at the problem from a "clean" and almost academic standpoint, and it is most assuredly not that.


I agree that things can change in suprising and disruptive ways and that reality rarely conforms with theory. It is to avoid being suprised by errors in conventional wisdom that you have to take a step back and question your assumptions in an "academic" way. Creating a simplified model may not give accurate results but it often can help elucidate the possible interactions of the significant variables.


Well, objective, or sterile analysis has its advantages. Like expecting post peak oil depletion to bite in 2008 or 2010 is simply not realistic either. It is an over-reaction to the long-term problems facing us.

One way of looking at it is to plan for the 'long-emergency' if I can borrow the term from another Chicken Little, Jim Kunstler, but identfiy the red-flags, or tipping points as you mentioned, that could be disruptive.

Some of them off-hand would be a nuclear accident or confrontation; a closing of the Straits of Hormuz; a worldwide pandemic of human to human avian influenza; or a major terrorist attack against Saudi Arabia's oil infractructure and/or another major western city. A sudden dollar crash might also be a major factor. They are certainly all plausible and there is a mathmetical probability of them happening. But we can not estimate it with any precision.

So we are somewhat stuck with planning for a long, drawn-out drop in standards of living with the realization that things might get a lot worse sooner if everyone does not agree to die-off on schedule. But the devil is always in the details.
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Re: Why peak oil doesn't mean a recession

Postby AirlinePilot » Wed 27 Dec 2006, 13:49:34

I know it goes both ways too. On the one hand there are things which can make the problem uglier and quicker while there may also be things which can mitigate the timeline or provide us with an alternative form of energy which could possibly supplant oil.

I would think that If quantam physics can solve the "thoery of everything" soon, than what is to stop us from harnessing the power of gravity?

Im not saying its a solution thats likely, but who on this planet thought we would be traveling every day to work in our own personal vehicles at almost 80 miles an hour 200 years ago?

Just look at the airplane. No one alive during the early part of the last century thought we would be doing with it what we are today.
Food for thought I guess.

What makes me a doomer is the fact that we as a species seem to always choose the viloent course of action. Reminds me of the line from the movie Terminator II when John Connor makes the observation "we're not going to make it are we? Humans I mean" and the Terminator replies "Its in your nature to destroy yourselves" I actually find some truth to that and it worries me.
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Re: Why peak oil doesn't mean a recession

Postby cube » Wed 27 Dec 2006, 15:06:12

$this->bbcode_second_pass_quote('nero', '.')..
This investment boom of course will have a cost, we will have to have higher prices for energy and transportation, higher prices for things that we currently get very cheaply from china, and higher taxes to pay for the increased costs of security.
...
I think the phrase "money sink" would be much more appropriate then "investment".

An investment is suppose to MAKE you money not LOSE it. When a person thinks about investing they think about getting richer not poorer. But you said it yourself Nero, "people will not feel wealthier"......

Lets rephrase this,

"As the EROEI for oil declines it is leading to a massive MONEY SINK in technologies that mitigate the effects of the decline in energy availability."

there that sounds much better :-D
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Re: Why peak oil doesn't mean a recession

Postby AirlinePilot » Wed 27 Dec 2006, 16:59:50

$this->bbcode_second_pass_quote('ElijahJones', 'B')elieve me there are many scenarios in which peak oil is lights out for every society that currently depends on oil. Mad Max is more of a prophecy than entertainment.


I had thought for quite a while that the conditions in Mad Max were just not possible. Now I feel while not neccesarily likely, it decidedly looks like we COULD go there if things don't break our way in some areas.

I actually think it's plausible in our lifetimes, even though I realize that a lot of really bad things would have to happen for us to go there. If you think about those movies carefully they just aren't so far fetched.

I believe that very, very few folks can make that connection right now and once enough can see it, it will be too late. I see this as probably THE NUMBER ONE PROBLEM involving PO and how we as humans handle it.
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Re: Why peak oil doesn't mean a recession

Postby EnergySpin » Wed 27 Dec 2006, 18:54:32

$this->bbcode_second_pass_quote('AirlinePilot', 'R')eminds me of the line from the movie Terminator II when John Connor makes the observation "we're not going to make it are we? Humans I mean" and the Terminator replies "Its in your nature to destroy yourselves" I actually find some truth to that and it worries me.

In spite of that Calis voted for him BIG time 8O
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Re: Why peak oil doesn't mean a recession

Postby AirlinePilot » Thu 28 Dec 2006, 18:25:19

Im a Sci FI nut and as movies go, it was decent sci-fi flick. As great movies go its not that good. That particular exchange in the movie was very powerful and telling though. I also believe its not far off the mark either.

I like Arnold, but I dont think he was that good an actor. A decent action type, and when one needs a big guy to foot the bill it worked. But I wouldnt place him that high on the ability list as far as acting goes. I really did like the Conan pics.
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