LOW oil prices are a problem too

https://ourfiniteworld.com/2018/11/28/low-oil-prices-an-indication-of-major-problems-ahead/

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

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.

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A global, self-organizing what now?

https://ourfiniteworld.com/2018/07/11/the-worlds-weird-self-organizing-economy/

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

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

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Supply-and-demand is a model

https://ourfiniteworld.com/2018/05/11/how-the-economy-works-as-it-reaches-energy-limits-an-introduction-for-actuaries-and-others/

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

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.)

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Chain reaction

https://ourfiniteworld.com/2018/02/21/raising-interest-rates-is-like-starting-a-fission-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

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

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The Great Depression was an energy crisis

https://ourfiniteworld.com/2017/12/19/the-depression-of-the-1930s-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

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.

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The “Wind and Solar Will Save Us” Delusion

ourfiniteworld.com/2017/01/30/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

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Intermittent Renewables Can’t Favorably Transform Grid Electricity

ourfiniteworld.com/2016/08/31/intermittent-renewables-cant-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

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.”

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An Updated Version of the “Peak Oil” Story

ourfiniteworld.com/2016/08/08/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

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Overly Simple Energy-Economy Models Give Misleading Answers

https://ourfiniteworld.com/2016/07/25/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

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