Peak Oil is You
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Page added on November 2, 2014
Peak Oil Is Happening
The media is full of peak oil refutations. Unfortunately for the pundits, while they’re heavy on rhetoric they tend to be short on data.
In comparison, way back in 2009, Praveen Ghunta, used the BP Statistical Review of World Energy to make a list of countries past peak oil on his True Cost blog. He updated the data again in 2011.
Taking Ghunta’s work as a base I have followed up with figures from the 2014 BP Statistical Review of World Energy. I have purposefully been much more conservative in in defining what a country past peak actually looks like: I have made the arbitrary decision that any country or region that peaked more than 10 years ago and produced a minimum of 10% less oil in 2013 than in the peak year has officially reached peak oil. That is of course is the point in time when the maximum rate of extraction of oil is reached, after which the rate of production is expected to enter terminal decline. Peak oil is only visible through hindsight and so I have taken a cautious approach to assigning exactly which countries and regions are past peak. Peak oilers have long been far too quick to draw conclusions based on questionable data and so I am trying to avoid this same pitfall.
It is worth noting that terminal decline is not always inevitable as we have have seen from the stunning turn around in the United State’s production figures. How long this will actually last and how applicable the United State’s shale oil technology is to the rest of the world is yet to be seen. Too many factors play into oil production to make any strong predictions for the future.
That being said, Luisa Cipollitti an official for Statoil Venezuela recently commented that half of the world’s 163 biggest oil projects require a $120 price for crude oil. Given the current plummeting oil prices many projects could be delayed or cancelled if those prices stay low. This in turn could hurt global production in the coming years. At the time of writing Brent crude prices were sitting around $85 a barrel.
The truth is that peak oil is happening in a number of countries and regions throughout the world. It’s just happening in a way that many of the doomsday peakers never imagined. John Michael Greer appears to be correct in coining the term “the long descent.” We can expect to see periods of growth truncated by recessions which push greater and greater proportions of society to breaking point. We will also see an increasing number of countries and regions hitting peak oil. Some will decline spectacularly such as Australia, Norway and Yemen. Others will carry on for many years on an undulating plateau. Yet others still will see production gains due to new technology making olds fields viable once more. The only thing for certain is that the future will be messy.
It is worth noting that a number of politically unstable countries such as Iraq and Syria and sanctioned countries such as Iran are more than likely not physically past peak. However their difficult political/conflict situations make external investment untenable for many players. It is unlikely they will stabilise enough for production to increase in the near future and so for all intents and purposes they are past peak. Including these countries and those potentially past peak, 27% the worlds production comes from countries and regions that are past peak oil.
A full 40% of countries and regions appear to to stable and/or growing. Most of these countries are relatively politically stable and so are attractive for investment. However, ongoing trouble in Nigeria has seen a pullout of some major players which has led to a lack of development of new fields and the Republic of Congo has seen a number of major fields pass peak.
The most interesting sub-group is that which I have classed as ‘outliers.’ These countries account for 33% of 2013 production but don’t follow any discernible pattern and so need to be looked at individually.
Angola’s production has been stagnant due to persistent technical problems with some projects. Despite some new fields coming online since 2008 rapid depletions in other fields has led to steep decline rates.
Azerbaijan’s production has suffered from unexpected technical problems at its largest fields. New projects such as the Chirag Oil Project, may boost Azerbaijan’s production. Then again, it might not.
Ecuador rejoined OPEC in 2007 after leaving in 1992 due to OPEC’s high membership fees and refusal to allow Ecuador to raise production. Since then Ecuador has remained relatively unattractive to investment due to socialist government initiatives to retain a higher share of oil profits.
Italy banned offshore drill in 2010 following Deepwater Horizon and is only now beginning to allow some offshore projects. Italy first produced over 100,000 thousand barrels of crude in 1996 and has bounced along roughly 20,000 barrels either side since then.
Kuwait has struggled to boost oil and natural gas production for more than a decade due to project delays and insufficient foreign investment. A shake out of the state owned oil company was made in 2013 in order to try and address these issues.
Oman has technically difficult plays which are expensive to extract. Oman’s fiscal breakeven price for oil in 2013 is $104 per barrel. DME Oman prices ranged between $101.69 and $95.28 per barrel in September 2014.
Most of the smaller Central and South American producers maintain relatively socialist governments with inflexible profit sharing arrangements. These countries therefore struggle to attract overseas investment to develop new wells.
The Russian Federation has a number of new projects in development but these are expected to only offset declining output from large aging fields. New technology is seeing better recovery rates from current fields.
Already mentioned, the United States has seen an unprecedented increase in oil production since 2008 due to a huge increase in exploration and drilling in previously unprofitable shale oil fields. It is highly debatable how long this boom will last. The latest EIA report forecasts a long, slow production decline after 2021 while the Post Carbon Institute put a report out last week predicting a peak before 2020 with production levels just one tenth of what the EIA forecasts by 2040.
36 Comments on "Peak Oil Is Happening"
rockman on Sun, 2nd Nov 2014 9:00 am
Interesting article. Except, of course, for being full of sh*t about US oil production in 2013. Since they appear to like EIA stats we’ll use those: 1970 = 9.637 million bopd and 2013 = 7.462 million bopd. So 2013 US crude oil production has declined 22.6% from its peak. IOW twice what they post and squarely puts the US in their “Potentially Post Peak Oil” category.
And as far as their sloppy wording, ” Peak Oil is Happening”, technically speaking global peak oil began the day the first bbl of crude oil was produced. Granted that’s a rather silly way of describing the Peak Oil Dynamic but they are the ones that are trying to put a start date on PO. An odd view IMHO. PO neither starts nor finishes. It’s simply a date on the calendar. A date itself that’s not very relevant IMHO. What’s very relevant is the POD…and that encompasses much more then the global oil production rate.
JuanP on Sun, 2nd Nov 2014 9:27 am
“Peak Oil Is Happening”
I liked the title. I have used this phrase inside my head constantly for a while now. It defines for me our present circumstances.
shortonoil on Sun, 2nd Nov 2014 9:30 am
This author is certainly correct, we are pasted Peak. But the reason we are pasted Peak is not because of a supply constraint; there still remains an immense amount of liquid hydrocarbons in the earth’s crust. We are past Peak because it is no longer economically feasible to extract those hydrocarbons. The recent downturn in crude prices is not a coincidence; petroleum’s ability to pay for its own extraction is declining. We have reached the point where the energy provided to the general economy has become insufficient to pay for what is used. Over the next five years petroleum prices will decline dramatically. Development will be severally constrained, and many existing sources will be shut-in. We have used most of the high quality resource that was available; what remains is marginal at best. Depletion has not been be put on hold.
http://www.thehillsgroup.org/
bobinget on Sun, 2nd Nov 2014 9:37 am
Rockman as usual, cuts to the ‘chase’.
Some of us math challenged fail to see big errors on a page such as this when it appears to be coming from an authoritative source.
Because crude production, in almost every nation seems inextricably tied to everything besides geology; religion, statehood, domestic and foreign politics, climate, agriculture, finance.. recent hedge fund disasters that endanger future E&P, apart from climate, serious environmental concerns, criminal activity.. Nigeria a prime example, even ebola like plagues that have devastating ST economic effect.
Daily, investors evaluate current state of affairs in oil
exporting nations as well as economic numbers in oil
importing states. It would be way easy if investors
relied entirely on economic or geologic data.
What will be the latest UN Climate Change Report
have on manufacturing, transportation, agriculture, population movements?
http://www.cbc.ca/news/technology/un-climate-change-report-offers-stark-warnings-hope-1.2821093
JuanP on Sun, 2nd Nov 2014 9:44 am
Rock is correct. I will train my mind to think “The POD is here, the POD is here!” from now on. It is more accurate and sounds way cooler, too. It will be my go to mental rebuttal to PO denialist titles from now on. LOL
Nony on Sun, 2nd Nov 2014 10:01 am
Rock, he discusses US in the article text. That it is technically post-peak, but he reclassifies based on recent fast growth. I almost get the impression you are bored with reading peaker articles and are jumping to comment before reading…very understandable! 😉
I wonder how much of the SA, KUW, Russian production is “struggling” or how much this is them not wanting to flood the market. Maybe they were just doing a good job of running a cartel? And then the U.S. disrupted things just recently…not part of the cartel.
bobinget on Sun, 2nd Nov 2014 10:26 am
Respectfully shortonoil,
You state, in effect, the line from “Oklahoma”
“They’ve gone as far as there is to go in Kansas City”
I agree most if not all ‘elephant’ oil fields are in steep decline.
The few new ‘e’ fields are impossible to exploit given CURRENT geopolitical, financial, and climatic conditions.
What strikes me as counter intuitive is the statement:
“over next five five years petroleum prices will decline dramatically”
Today, because certain economies are in transition,
some increasing at exponential rates others in decline,
our crude oil supply is described as either ‘adequate’,
over supply, or my favorite, ‘glut’ (what ever that means?)
Yet, shortonoil states (as I read it) that the more difficult it becomes to extract and deliver the cheaper
products become. Has this the case, long term?
Much to our astonishment, despite near collapse of
world economies in 2008, a baseline of oil production and consumption continued apace. Because demand
slowed dramatically, so did oil prices, production and exploration . Cheaper oil, in particular natural gas
was (and is) a major factor in reviving a plundered economy, up to this point.
The promise of huge windfall profits, remember crude hit $147, brought on major new oil and gas projects that, as shortonoil knows, take many many years to
bring to fruition. I would argue we are now experiencing ‘adequate’ oil/gas supplies because of technology developed in the halcyon $140 era.
Cutting back now because of artificially low oil prices
will in fewer then six years deny ‘adequate’ oil and gas.
Shortonoil is predicting deflation, adult population decline, economic collapse, not just harder and more expensive to mine crude gas and oil.
IMO it will be oil and gas too expensive and rare not too cheap and plentful that’s disastrous.
Plantagenet on Sun, 2nd Nov 2014 10:46 am
Yes the US is post peak, but the USA now has rapidly growing oil production. That is something the peak oil models never predicted. Thanks to frakking, the US is now the largest energy producer in the world, even surpassing KSA and Russia. Where else might frakking start boosting oil production above what peak oil models once predicted?. Mexico? Argentina? Australia? Canada? China? etc.?
Davy on Sun, 2nd Nov 2014 10:46 am
Bob, IMO prices could go either way currently and at different intervals but I feel as short does the longer term trend is likely down because economic activity will likely decrease. The relative price of oil is likely to remain high compared to what people can afford further depressing economic activity. Bob, you really don’t think an economy in the condition the current global economy is in can manage higher oil prices do you?
Diminishing returns to the financial repressing policies currently in place make debt an increasingly less effective economic support tool. Sooner or later business cycles happen. Tragically we are so far into QE policies that there is little time to adjust interest rates to be used as a tool to combat a recession that surely will happen soon. No one is claiming we have transcended the fundamentals of the business cycle whether corn or doom.
We know debt has hit its limits of effectiveness. It may be used again in difficult times but it will never be effective as is was in 09. We have used up the effective tools on economic policy fiscal and monetary. This reality if we can call it that will likely destroy new and expensive oil supplies. One possible alternative is martial law with a command economy subsidizing oil production at the expense of other areas in the economy but that will only last a short time IMHO. You can only cut so much meat from the bone after the fat is gone.
Plantagenet on Sun, 2nd Nov 2014 11:04 am
The current drop in oil prices is just Jevon’s paradox in action. When oil prices zoomed up, countries around the world has to decrease their use of oil. They did this by becoming more efficient. In many cases that meant laying off their less productive workers. The demand for oil drops and the price of oil goes down. But that leads to increased use of oil, which will result in even HIGHER levels of oil consumption and the price will climb back up.
We are living through an economic cycle where Jevon’s paradox is playing out right now.
poaecdotcom on Sun, 2nd Nov 2014 11:43 am
“Over the next five years petroleum prices will decline dramatically.”
I will take that bet.
I understand the supply logic as there is inadequate capital for low EROI oil BUT what about the demand side?
Energy is everything.
There is no ready substitute for oil (liquid, dense, scalable (at least for now).
All other assets will be sold to bid up what is left of the sexiest stuff humans have ever known(high EROI oil – 3 years worth of human labor for about $100) into the stratosphere.
Over the next five years, I bet that oil price will not decline dramatically.
I bet that as the lack of capital affects lack of supply, demand will push prices for the good stuff higher and higher.
Of course, the second reason supporting my position is that all fiat tends to zero. Therefore all assets, priced in fiat, will tend to infinity.
Perk Earl on Sun, 2nd Nov 2014 11:45 am
The idea we are simply in another oil cycle of dropping price due to high supply, and later when oil is in less supply the price will rise to initiate more extraction is missing a fundamental change.
In previous decades when the usual cycle occurred, it didn’t do so needing QE, Zirp and other fiscal policies. Worldwide desperate fiscal efforts are being utilized to counter oil price (that carries over to higher prices in food and other products) to try and maintain growth in the economy.
Japan is on the ropes with a minus 7% GDP number from the latest qtr. reported and now is going back to QE again! The EU is recessionary with very high unemployment and are mulling over what stimulus measures can be exacted. China production has slowed. The US has had high growth in the 2nd qtr. of 4.6% & 3.4% in the 3rd qtr. It remains to be seen how long those growth numbers will continue, as any positive effects of QE decline with the end of that program.
Lower oil price should stimulate more consumption and when supply declines, oil price will go up some, but the tale of the tape will be how much the economy can handle that higher price before reduced demand drops it back down again. We are most likely in a period when oil price never rises high enough or long enough to drive a production increases like it did since 08.
There is no escape from a net energy decline and it will show itself in some manner, and grow worse as time moves forward. Lower oil price while capex rises will show up as reduced future supply and at some juncture we will descend from peak oil.
J-Gav on Sun, 2nd Nov 2014 12:03 pm
Perk – “There is no escape from a net energy decline.” Precisely!
Northwest Resident on Sun, 2nd Nov 2014 12:35 pm
I don’t see how the global or national economies hold together for much longer. I believe that the global debt load is unsustainable, and that they’ve pumped the global economy up as far as it can stretch with debt. It is at the breaking point right now.
Like Perk Earl says, this is not just your typical run of the mill oil price cycle like we’ve seen in the past so many times.
When Alan Greenspan takes the trouble to appear on the pages of the WSJ and announce that the only way to fix the economy is to “bring it down”, I believe he is telegraphing an imminent reality that people would be wise to heed.
shortonoil nails it too — petroleum’s ability to pay for its own extraction is declining. As goes petroleum, so goes the economy. Shale/unconventional has been a loser in America and it would most certainly be a loser anywhere else in the world — unconventional will not save us. Too little, too late, and for far too high a price.
Fixating on price for oil/NG at any given point from here on out avoids the main issue, and that is, we are going down for the count. The oil age is winding down, slowly now or so it seems, but picking up speed. Ensuing panic, war and chaos will render any predictions/assumptions based on current and past realities totally moot.
We are heading into the unknown, like into a black hole where the laws of physics as we understand them no longer apply.
GregT on Sun, 2nd Nov 2014 12:37 pm
I believe what we are witnessing now is ‘the undulating plateau’. We have already seen the effects of too high oil prices on economic activity. The damage has been done. 2015 is ramping up to be a game changer. I expect more austerity.
J-Gav on Sun, 2nd Nov 2014 12:56 pm
I’m afraid you’re right GregT. But 2015 (or 2016) could also be the year people decide they will have no more austerity, simply because they need to eat and drink and have a roof over their heads.
Who knows how that might work out? It is however doubtful that it will be smooth or easy.
eugene on Sun, 2nd Nov 2014 1:26 pm
Years ago, a friend and I discussed the “peak oil” issue and decided it would be a stop/start, jerky phenomenon with all the endless speculation that accompanies such situations. For both of us, the writing was on the wall as we are chasing ever more difficult, expensive to extract oil. He and I have since lost touch but I watch the wild optimism knowing full well there is a creeping fear spreading across the land. As the bullshit gets deeper, the cries will grow louder as the increased costs creep higher into the economic classes. We can change oil definitions, rant about government and spout outlandish reserve quotes but all the while the basic truth is there. Ever more expensive/difficult to extract energy sources just sit there simmering in the debates and in the end unavoidable.
rockman on Sun, 2nd Nov 2014 1:37 pm
“…but he reclassifies based on recent fast growth.” He chose the 2013 time frame…not me. And his analysis is based upon historic production rates and not future projections. For now the US is almost half a century past its PO. The future? We’ll have to look back in a few years to see where we are then.
But, again, the subject of the article is about where countries are CURRENTLY with respect to their oil production. Their decision… not mine.
But once again too much focus on a f*cking date for any country’s PO. The least important metric IMHO. Even with the current lower prices US consumers are spending more then twice what they were before the surge in domestic production. IOW the high prices that brought on increased production have hurt the US economy…not helped it.
That that’s the simple undeniable FACT that cornucopians avoid like Ebola. LOL.
shortonoil on Sun, 2nd Nov 2014 1:40 pm
“I will take that bet.”
“The price of a unit of oil can not exceed the value of the economic activity it can produce for the end consumer”
According to data supplied by the EIA, and the World Bank in 2014 it took 5,869 BTU to produce a 1 $’s worth of goods and services. In 2014 the end user got 12,188 BTU of USABLE energy from a gallon of 37.5 API crude. That is $89.98 per barrel. Next year will be less.
http://www.thehillsgroup.org/
nemteck on Sun, 2nd Nov 2014 1:59 pm
“Over the next five years petroleum prices will decline dramatically.”
No they will not. The whole world economy is built on hydrocarbons, from cars, plastic, to pharma products, and millions of other uses. There is no alternative in sight. It is the value of an end products that influences the price of oil. For some expensive products, say cosmetics, only a “few drops” of oil are needed, and hence, a high oil price is affordable for those companies.
“petroleum’s ability to pay for its own extraction is declining”.
Not if the oil price is high enough (and yet affordable by industry) to warrant expensive production.
We had other forecasts (e.g., shortonoil on Sun, 26th Oct 2014 8:10 am) saying that oil will be $0.00 in the time frame 2030-2035 which is ridiculous since it implies that there is a world without energy and perhaps only one Billion people survive. I find those forecasts not helpful in discussing the serious problems we will experience in not to far future.
Davy on Sun, 2nd Nov 2014 1:59 pm
If you introduce the systematic variable to the forecasted energy gradient for liquid fuels you realize complexity cannot be maintained. Without complexity, energy intensity, and social fabric there is no economy as we know it. How can we talk about high or low oil prices if there is no economy as we know it?
Oil will always have a high relative value like gold but its economic value may or may not be high. It depends on what kind of economy we have. How long will BAU last and then what? We know there is the goldilocks range for oil for BAU currently. My big question is how long can oil dwell outside this range and we still have BAU. My thoughts are only a few years. The goldilocks range keeps compressing like an economic time bomb. It used to appear to be $90 – $110 Brent. Can BAU survive long with oil in the $60-$80 range?
If a major financial contraction occurs I would see $60 as high. If economic activity falls drastically it does not matter how magical oil is if demand is not there. We could see liquid fuels decoupling from the economy and only finding utilization with a narrow segment of the economy. We could see a significant majority no longer in an oil based economy for all practical purposes.
We had copious amounts of oil in the 30’s but little demand. I would say the price will stay relatively high because it is not cheap to produce, refine, transport, and use. Every step of the way requires expensive equipment and expensive end use purposes. The huge question is will BAU hold and if not what comes next?
GregT on Sun, 2nd Nov 2014 2:01 pm
“But 2015 (or 2016) could also be the year people decide they will have no more austerity,………Who knows how that might work out?”
I highly suspect that when that tipping point has been reached, we can expect a breakdown in civil society. Much like what we have seen in many parts of the world already.
poaecdotcom on Sun, 2nd Nov 2014 2:14 pm
“Fixating on price for oil/NG at any given point from here on out avoids the main issue, and that is, we are going down for the count”
Agreed, most of us are on the same page here and arguing over the price in 5 years is small potatoes in comparison to contraction, the result of less NET ENERGY into the system to maintain current complexity.
Well said Davy, I agree with pretty much every word you say there.
JuanP on Sun, 2nd Nov 2014 3:35 pm
Davy “We could see liquid fuels decoupling from the economy and only finding utilization with a narrow segment of the economy. We could see a significant majority no longer in an oil based economy for all practical purposes.”
Yes, definitely. Those scenarios you describe are likely to play out at some point, at least in some places.
jmb on Sun, 2nd Nov 2014 5:11 pm
Short, are you saying that the present dramatic drop in oil and gasoline prices is because oil is failing to deliver enough energy?
MSN Fanboy on Sun, 2nd Nov 2014 5:36 pm
Axiomatic arguements.
LOL: Heres mine.
Chances are we will still be having the same arguement in ten years when nothing happens.
Don’t get me wrong, BAU will be killed by pod, however it will happen slowly, twisting the knife.
Its like hypothermia. The economic system will react to higer prices by reducing blood supply to the extremities (discretionary economy). SLOWLY.
Then, at some point when the core economy is threatned by pod (such as agriculture, financing services, infrastructure wtc…) we will witness a social collapse. The body shuts down and the cells die.
But dont worry about that, we only started the slope in 2008 and through zirp the extremities are dying slowly. We have 20 years left i bet. AT LEAST.
Davy on Sun, 2nd Nov 2014 6:16 pm
JMB, it is not that straight forward. In the short term we have issues with the financial markets with option unwinds and other hedging strategies. We have slowing growth with well supplied markets. These are current events. Yet underlying these issues is a longer term phenomenon of higher cost oil being unaffordable for the growth that is needed for the global economy to be healthy. Oil is losing its economic punch and as its net energy falls it causes systematic drag and turbulence.
Increasingly sectors of the economy cannot afford to operate on expensive oil. In aggregate the entire global system is finding itself struggling to manage with oil that is costing more to produce and at the same time providing less net energy to the entire growth process. This longer term issues is just one of several Peak Oil dynamics issues happening today. So yes in an indirect way the fact that the net energy delivered by oil is falling is hollowing out the health of the economy. This makes the short term issues more pronounced.
We are seeing the overall economic health of the economy suffering making these short term issues magnified. There are many other reasons in play but the underlying trend is depletion and reduction of net energy delivered. This is a natural phenomenon playing out in a steady process that will not end until it cost more to get the oil than the oil will deliver. The economy will be finished long before we get to that point because of the requirements of maintaining complexity and growth will have been breached and the systematic disruption from limits of growth and diminishing returns fatal.
Southern Limits on Sun, 2nd Nov 2014 11:58 pm
In reply to your first post Rockman, I included the US in the outliers group due to it’s unprecedented turn around in production, as already explained. It will more than likely produce the highest amount of oil ever in the next couple of years. Hence why I couldn’t leave in the peaked category in good faith. “U.S. crude production will grow by a million barrels a day this year and next to reach 9.5 million in 2015, the most since 1970, the EIA said in its monthly Short-Term Energy Outlook on Oct. 7.”
Perk Earl on Mon, 3rd Nov 2014 12:05 am
“I don’t see how the global or national economies hold together for much longer.”
NWR, the timing part is what I can’t wrap my mind around as to whether it happens soon like you suggest or who knows when. If Japan at some point implodes in one manner or another, because they seem like the weakest link, does that have a contagion effect or do the other developed countries simply keep going?
Part of me wonders if there will be a sudden collapse or if infrastructure just degrades and the disenfranchised simply fall out of the system with little more than a whimper. They may gather and riot, but people on the ropes often just fall by the wayside. Society as a whole may end up being cruel enough to just keep saying, well we have ours and we’ll just keep going as long its good for us.
meld on Mon, 3rd Nov 2014 2:24 am
We’re definitely on an undulating plateau. Who knows how long it can continue. I do know one thing though the longer the plateau continues the sharper the drop off the edge will be when it comes.
Davy on Mon, 3rd Nov 2014 6:05 am
Southern, the geology may be there to produce that supply you mention but there is no way to forecast if the economy will be there. Will the financial repression hold with debt and low interest rates to support capex driven production we see so important to US production.
Looking out into the big world and we see a generalized recession in the making with possible finance/trade wars that could ravage supply. Will the ME blow up with conflict issues from Iran to ISIS. This is where the majority of supply is. Oil being a global commodity and vital to the global economy any disruption is transparently broadcast into the US economy. Surely a global disruption will affect the US production through economic issues. Witness falling prices now and the potential disruption to US production.
You can rightly say the US has the potential to produce a few million more barrels for a few more years but then what? Geologically it has been shown the US supply is short term by normal giant field standards.
Economically US production is anyone’s guess. Economics cannot be forecast like geology. It is a pseudo-science that has been notoriously inaccurate servicing political and marketing factions. IOW economics is manipulated by who is in control to broadcast a message in today’s corrupted world. The small amount of bean counting is even being corrupted with distorted economic measures and policies. The economy is a big if at best with the geology being nothing to brag about in relation to the supply timeframe and in relation to total global supply.
Davy on Mon, 3rd Nov 2014 6:28 am
Perk, I am with you and Meld how to wrap our heads around this colossal issues. It is colossal because it involves multiple problems some that appear to be predicaments. These problems are understood through hard science but also systematically abstract.
The most difficult to understand is the financial situation. It is a hall of mirrors full of smoke. This is true global with every major power engaged in this smoke and mirror economics. Financial repression is an addiction that has dangerously hit diminishing returns with little results to show for a huge mal-investment. The business cycle is pointing to recession through the fundamentals with few monetary and fiscal tools left in the TPTB’s tool box.
Finance and economics is a pseudo-science dealing with unpredictability and irrational human behavior. We as humans are not completely rational. Our irrational nature comes out in the emotions of lust and greed. We also have to accept the primary driver of finance and its underlying economics of confidence and trust is very fragile. Exchange and distribution of vital global resources that all locals are codependent on is only possible because of the liquidity of confidence and trust.
What happens when panic sets in with a highly integrated, complex, and efficient global economy? I say efficient but dangerously efficient because of just-in-time production of nearly everything with dispersed global distribution. I also need only mention our food supply being globally distributed monocultures as a serious danger. Our complex production systems must have just-in-time global production our food system global distribution.
We are dangerously exposed to a systematic process out of our control. It is a real danger because it appears to be almost a biologically self-organizing organism. We have become global with local needs. Our global system is in danger of breaking down and our locals are dangerously dependent on the global. We are truly at the mercy of nature and chance on this one.
Davy on Mon, 3rd Nov 2014 6:48 am
Perk you being a ZH reader you might enjoy this read that further explains why we find it hard to wrap our heads around these many and varied issues:
http://www.zerohedge.com/news/2014-11-02/zombie-system-how-capitalism-has-gone-rails
Perk Earl on Mon, 3rd Nov 2014 11:07 am
Great article linked, Davy – thanks. This paragraph I thought really sizes up the frailty of the situation:
“Be it in Japan, Europe or the United States, companies are hardly investing in new machinery or factories anymore. Instead, prices are exploding on the global stock, real estate and bond markets, a dangerous boom driven by cheap money, not by sustainable growth. Experts with the Bank for International Settlements have already identified “worrisome signs” of an impending crash in many areas. In addition to creating new risks, the West’s crisis policy is also exacerbating conflicts in the industrialized nations themselves. While workers’ wages are stagnating and traditional savings accounts are yielding almost nothing, the wealthier classes — those that derive most of their income by allowing their money to work for them — are profiting handsomely.”
There probably should be a name for what has taken place since 08, and I think Stoneleigh got it right with ‘Extend & Pretend’. Financially extend the BAU game as long as possible, pretending it will all somehow turn out good. Maybe another term could be, ‘The Undulating Extend & Pretend Plateau’. Whatever disastrous punctuation occurs at it’s conclusion, it certainly is an extremely interesting period in world history.
Northwest Resident on Mon, 3rd Nov 2014 11:27 am
Perk Earl: “Maybe another term could be, ‘The Undulating Extend & Pretend Plateau’.”
I like that. It is a great descriptive phrase. But I think I’ll stick with the basic, tried and true idiomatic expression: “The Calm Before The Storm”.
A quote from that ZH article that Davy linked to:
“‘I always had this impression,” says Mayo, ‘that the head of a bank would be the most ethical person and upstanding citizen possible.'”
We all need a laugh from time to time, I suppose.
Southern Limits on Mon, 3rd Nov 2014 2:01 pm
Davy, totally agree with you there.