Gail Tverberg

Aug 13, 2013

Inflation, deflation or discontinuity?

After a while, a period of stagflation is reached. Population catches up to the new resource, and job opportunities for young people become less plentiful. Wage disparity grows, with wages of the common worker lagging behind. The cost of government rises. Because of the low wages of workers, it becomes increasingly difficult to collect enough taxes from workers to pay for rising government costs. To work around these problems, use of debt grows. Needless to say, this scenario tends to end very badly.
~ Gail Tverberg from, Inflation, Deflation, or Discontinuity? | Our Finite World

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Sep 3, 2013

Our energy predicament in charts

There is considerable evidence that we are already reaching the situation where governments are encountering financial distress of the type shown in Figure 18. With wages being depressing in recent years (Figure 16), it is difficult to collect as much taxes as required. At the same time, expenses are elevated to handle the many issues that arise (such as payments to the unemployed, subsidies for alternative energy, and the higher costs of road repairs due to higher asphalt costs). The big gap between revenue and expense makes it hard to fix our current financial predicament, and increases the likelihood of political problems.
~ Gail Tverberg from, Our Energy Predicament in Charts

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Jan 2, 2014

Stumbling Blocks

The story of oil limits is one that crosses many disciplines. It is not an easy one to understand. Most of those who are writing about peak oil come from hard sciences such as geology, chemistry, and engineering. The following are several stumbling blocks to figuring out the full story that I have encountered. Needless to say, not all of those writing about peak oil have been tripped up by these issues, but it makes it difficult to understand the “real” story.
~ Gail Tverberg from, Stumbling Blocks to Figuring Out the Real Oil Limits Story

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Apr 3, 2014

Energy and economic models

We live in an economic world. Economic models that were developed years ago were created based on observations of how the economy seemed to work at the time. As time goes on, it is becoming clear that early economists missed important connections. The most important of these is the role of energy and its connection to the economy. It takes energy to make anything, from a piece of steel to a loaf of bread. It takes energy to transport anything. Humans need energy in the form of food to continue to live. Clearly, energy should have a place in economic models.
~ Gail Tverberg from, Energy and the Economy

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I find this stuff fascinating; It’s this giant, emergent phenomenon. Billions of individual people going about their daily lives create such a whirl of activity and action. But the ultimate result is what… an “economy”? A path to “enlightenment” for humankind? Meaningless in total, but meaningful at the individual’s level of experience? Perhaps it’s simply [on the whole] incomprehensible. If you study a little chaos theory, you learn: The butterfly’s beating wings have ZERO affect on the weather. Instead, the fully understood system, (“stochastic”) is truly unpredictable.

May 15, 2014

Oil limits

This model “works” fairly well, as long as the economy is growing fast enough–population continues to grow and resource extraction continues to grow as planned. In a finite world, we know that this model cannot work forever. At some point, we can expect to start reaching limits.
What do these limits look like? I would argue that in the case of resource extraction, these limits look like increasingly high cost of extraction.
~ Gail Tverberg from, Oil Limits Reduce GDP Growth; Unwinding QE a Problem

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You should also read “Quantitative Easing (QE)” (the first three, short paragraphs on WikiPedia summarize it neatly.)

My opinion: We need to start seriously talking about a STEADY STATE ECONOMY. What would that look like? How would it work? How do we get to that? Seriously. We simply CANNOT have a growing and expanding economy forever on a finite planet with finite room and finite resources. What part of “finite” don’t you understand?

Dec 26, 2014

Energy return on energy invested

Eventually, the civilization hit a period of stagflation, typically lasting 50 or 60 years, as the population hit the carrying capacity of the land, and as additional workers did not add proportionately more output. When this happened, the wages of common workers tended to stagnate or decrease, resulting in increased wage disparity. The price of food tended to spike. To counter these problems, the amount of government services rose, as did the amount of debt.
~ Gail Tverberg from, Diminishing Returns, Energy Return on Energy Invested, and Collapse

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Jan 4, 2015

Oil limits and the economy

While the press treats these issues as separate stories, they are in fact very closely connected, related to the fact that we are reaching limits in many different directions simultaneously. The economy is the coordinating system that ties together all available resources, as well as the users of these resources. It does this almost magically, by figuring out what prices are needed to keep the system in balance—how much materials of which types are needed, given what consumers can afford to pay.
~ Gail Tverberg, from Oil Limits and the Economy: One Story, Not Two

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Jan 16, 2015

Debt: This time is different

Many seem to believe that if we worked our way out of debt problems in the past, we can do the same thing again. The same assets may have new owners, but everything will work together in the long run. Businesses will continue operating, and people will continue to have jobs. We may have to adjust monetary policy, or perhaps regulation of financial institutions, but that is about all.
I think this is where the story goes wrong. The situation we have now is very different, and far worse, than what happened in the past.
~ Gail Tverberg, from Debt

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Mar 21, 2015

Low oil prices

I would argue that falling commodity prices are bad news. It likely means that the debt bubble which has been holding up the world economy for a very long time–since World War II, at least–is failing to expand sufficiently. If the debt bubble collapses, we will be in huge difficulty.
~ Gail Tverberg from, Low Oil Prices

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Apr 13, 2015

Why peak oil predictions haven’t come true

It seems to me, though, that a third outcome is not only possible, but is what is actually happening.
3. Diminishing returns from oil limits are already beginning to hit, but the impacts and the expected shape of the down slope are quite different from those forecast by most Peak Oilers.
~ Gail Tverberg from, WSJ Gets it Wrong on “Why Peak Oil Predictions Haven’t Come True”

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May 11, 2015

Our oil predicament

A person might think that oil prices would be fairly stable. Prices would set themselves at a level that would be high enough for the majority of producers, so that in total producers would provide enough–but not too much–oil for the world economy. The prices would be fairly affordable for consumers. And economies around the world would grow robustly with these oil supplies, plus other energy supplies. Unfortunately, it doesn’t seem to work that way recently. Let me explain at least a few of the issues involved.
~ Gail Tverberg from, Eight Pieces of Our Oil Price Predicament

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May 23, 2015

Oil price slide

… demand doesn’t pick up quickly as prices drop. We are dealing with a world that has a huge amount of debt. China in particular has been on a debt binge that cannot continue at the same pace. A reduction in China’s debt, or even slower growth in its debt, reduces growth in the demand for oil, and thus its price. The same situation holds for other countries that are now saturated with debt, and trying to come closer to balancing their budgets.
~ Gail Tverberg from, Oil Price Slide – No Good Way Out

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I have now discussed this a few times, and a common objection raised is that she is over-complicating a simple case of supply-and-demand. To which I say: What part of our enormous, intertwined, legacy, critical to everything from food to medicine to transportation to energy production, global dependency on petroleum is simple?

Jun 10, 2015

Today, the situation is different

There has been much written about past debt bubbles and collapses. The situation we are facing today is different. In the past, the world economy was growing, even if a particular area was reaching limits, such as too much population relative to agricultural land. Even if a local area collapsed, the rest of the world could go on without them. Now, the world economy is much more networked, so a collapse in one area affects other areas as well. There is much more danger of a widespread collapse.
~ Gail Tverberg from, The Problem of Debt as We Reach Oil Limits | Our Finite World

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Aug 22, 2016

Overly simple energy-economy models give misleading answers

It is not intuitive, but complexity-related issues create a situation in which economies need to grow, or they will collapse. See my post, The Physics of Energy and the Economy. The popular idea that we extract 50% of a resource before peak, and 50% after peak will be found not to be true–much of the second 50% will stay in the ground.
~ Gail Tverberg from, Overly Simple Energy-Economy Models Give Misleading Answers | Our Finite World

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Sep 13, 2016

An updated version of the “peak oil” story

Instead of the scenario envisioned by Peak Oilers, I think that it is likely that we will in the very near future hit a limit similar to the collapse scenarios that many early civilizations encountered when they hit resource limits. We don’t think about our situation as being similar to early economies, but we too are reaching a situation of decreasing resources per capita (especially energy resources). The resource we are most concerned about is oil, but there are other resources in short supply, including fresh water and some minerals.
~ Gail Tverberg from, An Updated Version of the “Peak Oil” Story | Our Finite World

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Presented without comment.

Oct 4, 2016

Intermittent renewables can’t favorably transform grid electricity

Few people have stopped to realize that intermittent electricity isn’t worth very much. It may even have negative value, when the cost of all of the adjustments needed to make it useful are considered.
Energy products are very different in “quality.” Intermittent electricity is of exceptionally low quality. The costs that intermittent electricity impose on the system need to be paid by someone else. This is a huge problem, especially as penetration levels start exceeding the 10% to 15% level that can be handled by operating reserves, and much more costly adjustments must be made to accommodate this energy. Even if wind turbines and solar panels could be produced for $0, it seems likely that the costs of working around the problems caused by intermittent electricity would be greater than the compensation that can be obtained to fix those problems.
~ Gail Tverberg from, Intermittent Renewables Can’t Favorably Transform Grid Electricity | Our Finite World

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I’m not saying “abandon all renewable energy sources.” I am saying, “you should go read this article… and everything else on that web site.”

Oct 27, 2016

What really causes falling productivity growth

The general trend in falling productivity growth does not seem to be particularly recent. OECD data shows a long-term pattern of slowing productivity growth, dating back to the 1970s for many developed economies.
~ Gail Tverberg from, What really causes falling productivity growth — an energy-based explanation | Our Finite World

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Presented without comment.

May 5, 2017

The “wind and solar will save us” delusion

There has been a misunderstanding regarding the nature of our energy problem. Many people believe that we will “run out” of fossil fuels, or that the price of oil and other fuels will rise very high. In fact, our problem seems to be one of affordability: energy prices don’t rise high enough to cover the rising cost of producing electricity and other energy products. Adding wind and solar tends to make the problem of low commodity prices worse.
~ Gail Tverberg from, The “Wind and Solar Will Save Us” Delusion

Elsewhere, this is 4uoute2. — slipbox

Presented without comment.

Jan 10, 2018

The Great Depression was an energy crisis

When I put together a chart of per capita energy consumption since 1820 for a post back in 2012, there was a strange “flat spot” in the period between 1920 and 1940. When we look at the underlying data, we see that coal production was starting to decline in some of the major coal producing parts of the world at that time. From the point of view of people living at the time, the situation might have looked very much like peak energy consumption, at least on a per capita basis.
~ Gail Tverberg from, The Depression of the 1930s Was an Energy Crisis

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One of my rules-of-thumb is to thoroughly read everything written my Gail Tverberg.

Years ago, I found a web site called The Oil Drum which was a collecton of superlative thinkers all writing about things related to petroleum. Actually, it still IS a superlative collection, because they’ve left it up as-is to be an archive.

Mar 15, 2018

Chain reaction

The catch is that we are too close to the “edge” to be testing an increase in interest rates. Economies, below a certain “stall speed,” cannot repay debt with interest, and cannot hope to provide entrepreneurs with an adequate return on investment. Our low rate of growth is already close to this stall speed.
~ Gail Tverberg from, Raising Interest Rates Is Like Starting a Fission Chain Reaction

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There’s a graph early on in this article that is, frankly, alarming.

May 26, 2018

Supply-and-demand is a model

The reason for the strange behavior of energy prices near limits is because the system is very interconnected. It is a self-organized system that gradually changes over time. New customers are added over time. These customers are often also wage-earners. They decide what to buy based on their own wages, and based on other considerations, such as the prices of competing products and whether inexpensive financing is available.
~ Gail Tverberg from, How the Economy Works as It Reaches Energy Limits — An Introduction for Actuaries and Others

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Supply-and-demand is a model. There’s nothing wrong with the model. Does the model still fit reality as we approach the limits of how much energy our economy can consume? (tl;dr: it does not.)

Aug 30, 2018

A global, self-organizing what now?

Today’s indications seem to suggest that an even more major recession than the Great Recession may strike in the not too distant future. Why should this be the case? Am I imagining problems where none exist? The next ten sections provide an introduction to how the world’s self-organizing economy seems to operate.
~ Gail Tverberg from, The world’s weird self-organizing economy | Our Finite World

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“Ten sections.” “Introduction.” Some thinking and integration of ideas will be required.

Jan 12, 2019

Low oil prices are a problem too

In recent years, we have heard a great deal about the possibility of Peak Oil, including high oil prices. If the issue we are facing is really prices that are too low for producers, then there seems to be the possibility of a different limits issue, called Collapse. Many early economies seem to have collapsed as they reached resource limits. Collapse seems to be characterized by growing wealth disparity, inadequate wages for non-elite workers, failing governments, debt defaults, resource wars, and epidemics. Eventually, population associated with collapsed economies may fall very low or completely disappear. As Collapse approaches, commodity prices seem to be low, rather than high.
~ Gail Tverberg, from Low Oil Prices

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The idea that there may no price where a buyer and seller can agree is patently obvious, right?

Suppose you can only afford to spend $1 on some thing you absolutely need, but I need $100 to cover the cost of producing the thing. No amount of haggling over price will solve this problem. The solution is to add some debt; you borrow some money and buy the thing at some price we can agree on.

What happens if you cannot take on more debt? You need the thing, you cannot afford the price, and you cannot leverage future payment (aka, debt) to purchase the thing…

What happens as more of the world can no longer afford to purchase oil at the price needed by the oil producers?

What happens as more of the world runs out of debt?

…and if you think running out of debt is not possible, please go read more of Gail’s writing.

Nov 4, 2019

Understanding renewable energy

The reasons why the Green New Deal won’t really work are fairly subtle. A person really has to look into the details to see what goes wrong. In this post, I try to explain at least a few of the issues involved.
~ Gail Tverberg from, Understanding Why the Green New Deal Won’t Really Work | Our Finite World

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You should read everything Tverberg has ever written about energy. I’ve been following her for about 15 years or so, and she is a font of careful, reasonable discussion.

Nov 19, 2020

Epidemiology and economics

It is increasingly clear that neither of these assumptions is correct. Despite the claims of epidemiologists, our best efforts have never been able to reduce the number of newly reported COVID-19 cases for the world as a whole for any significant period of time. In fact, the latest week seems to be the highest week so far.
~ Gail Tverberg from, Reaching the End of Early Stimulus – What’s Ahead?

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It’s not meant as a doom-and-gloom quote. The article goes on to talk about how our economies really work and what’s really going on.

I’ve a tag for Tverberg for a reason. You should read everything she’s ever written—which would be hard because you’d have to also wade through the amazing, museum-piece that is The Oil Drum. I use that site as a litmus test for anyone who ever mentions “energy”—”Have you heard of The Oil Drum site?” If they have, then I’m really listening.

May 17, 2021

It’s all about energy

The economy runs on energy, far more than it operates on growing debt. Our energy problems don’t appear to be fixable in the near term, such as six months or a year. Instead, the economy seems to be headed for a collapse of its debt bubble. Eventually, we may see a reset of the world financial system leading to fewer interchangeable currencies, far less international trade and falling production of goods and services. Some governments may collapse.
~ Gail Tverberg from, Headed for a Collapsing Debt Bubble

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I’ve been reading, and tagging here on my blog, Tverberg’s commentary for years. I don’t link to these things because I fancy myself Chicken Little. Rather, I link because she has really interesting and insightful things to say about energy.

Apr 22, 2022

Brittle and prone to failure

Together, these approaches comprise “complexity.” They tend to make the economic system less resilient. At least temporarily, they pass fewer of the higher costs of energy products through to current citizens. As a result, the economy can temporarily withstand a higher price of energy. But the system tends to become brittle and prone to failure.
~ Gail Tverberg from, Spike in energy prices suggests that sharp changes are ahead

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I don’t know whether to say you’ll be better, or worse, off—but I absolutely recommend reading everything Tverberg has ever written. I’ve a number, (nowhere near all of her stuff however,) of things quoted here on the blog; All those posts are tagged Gail Tverberg. History shows many examples, over thousands of years of recorded history, where economies, (empires, civilizations, and the people,) grew slowly and ended precipitously. There’s yet to be an example of a gradual decline. The open question is for how much longer—possibly very very much longer—can humanity continue to incline? (And to be clear, I don’t have an educated opinion about that question.)

Jun 11, 2022

People make the difference

The world economy doesn’t behave the way most people would expect. Standard modeling approaches miss the point that economies require adequate supplies of energy products of the right kinds, provided at the right times of day and year, if they are to keep from collapsing.
~ Gail Tverberg from, Is it possible that the world is approaching end times? | Our Finite World

Elsewhere, this is 4uouii1. — slipbox

Since we finished remodeling our home, this is the time of year when I pay a local company to dump two cords of split firewood in my lawn, (a pile about the size of a small car.) On my patio this morning, as the sun climbs above the old, worn-down mountain behind our neighborhood, the world smells like fresh, black coffee and green firewood.

I remain very optimistic about our world, and our economy—local, national and global. Because: People. Heating primarily with wood only works well for us for a few reasons: The housing density is low enough that multiple wood stoves is sane in a neighborhood. But the housing density is also just high enough that the stores are very close by. These trees grew relatively close, were sawn and split by a local company, and traveled not too far to get to my yard. Troy—the firewood guy—and I will both work very hard though, in the entire process of my heating with wood. Meanwhile, street gas (which isn’t even available on my block), propane (which I use to cook with), and electricity (which is my secondary heat source via heat pump and baseboards) are rising steeply in price.

Lumber prices are also crazy-high. (What was once a $2 2×4 is now nearly $10.) And Troy has resumed sawing lumber, something his father used to do with their equipment decades ago. And he’s taken on another person part-time. Yes, he asked me for more money to cover the fuel-cost of delivery, but the firewood is still less than the other fuel (gas, electric) options available to me for next heating season. My point here is that if everyone keeps making manageable decisions sooner rather than later, things will work out. The difficulty that I see for most people is being honest about what things they have to eliminate, in order to be able to keep their personal universes going.