Wednesday, February 27, 2013

The End of the Shale Bubble?

It’s been a little more than a year since I launched the present series of posts on the end of America’s global empire and the future of democracy in the wake of this nation’s imperial age. Over the next few posts I plan on wrapping that theme up and moving on.  However traumatic the decline and fall of the American empire turns out to be, after all, it’s just one part of the broader trajectory that this blog seeks to explore, and other parts of that trajectory deserve discussion as well.

I’d planned to have this week’s post take last week’s discussion of voluntary associations further, and talk about some of the other roles that can be filled, in a time of economic contraction and social disarray, by groups of people using the toolkit of democratic process and traditional ways of managing group activities and assets. Still, that topic is going to have to wait another week, because one of the other dimensions of the broader trajectory just mentioned is moving rapidly toward crisis.

It’s hard to imagine that anybody in today’s America has escaped the flurry of enthusiastic media coverage of the fracking phenomenon.  Still, that coverage has included so much misinformation that it’s probably a good idea to recap the basics here. Hydrofracturing—“fracking” in oil industry slang—is an old trick that has been used for decades to get oil and natural gas out of rock that isn’t porous enough for conventional methods to get at them. As oil and gas extraction techniques go, it’s fairly money-, energy- and resource-intensive, and so it didn’t see a great deal of use until fairly recently.

Then the price of oil climbed to the vicinity of $100 a barrel and stayed there. Soaring oil prices drove a tectonic shift in the US petroleum industry, making it economically feasible to drill for oil in deposits that weren’t worth the effort when prices were lower. One of those deposits was the Bakken shale, a sprawling formation of underground rock in the northern Great Plains, which was discovered back in the 1970s and sat neglected ever since due to low oil prices. To get any significant amount of oil out of the Bakken, you have to use fracking technology, since the shale isn’t porous enough to let go of its oil any other way.  Once the rising price of crude oil made the Bakken a paying proposition, drilling crews headed that way and got to work, launching a lively boom.

Another thoroughly explored rock formation further east, the Marcellus shale, attracted attention from the drilling rigs for a different reason, or rather a different pair of reasons.  The Marcellus contains no oil to speak of, but some parts of it have gas that is high in natural gas liquids—“wet gas” is the industry term for this—and since those liquids can replace petroleum in some applications, they can be sold at a much higher price than natural gas.  Meanwhile, companies across the natural gas industry looked at the ongoing depletion of US coal reserves, and the likelihood of government mandates favoring natural gas over coal for power generation, and decided that these added up to a rosy future for natural gas prices.  Several natural gas production firms thus started snapping up leases in the Marcellus country of Pennsylvania and neighboring states, and a second boom got under way.

As drilling in the Bakken and Marcellus shales took off, several other shale deposits, some containing oil and natural gas, others just natural gas, came in for the same sort of treatment. The result was a modest temporary increase in US petroleum production, and a more substantial but equally temporary increase in US natural gas production.  It could never be anything more than temporary, for reasons hardwired into the way fracking technology works.

If you’ve ever shaken a can of soda pop good and hard and then opened it, you know something about fracking that countless column inches of media cheerleading on the subject have sedulously avoided. The technique is different, to be sure, but the effect of hydrofracturing on oil and gas trapped in shale is not unlike the effect of a hard shake on the carbon dioxide dissolved in soda pop:  in both cases, you get a sudden rush toward the outlet, which releases most of what you’re going to get.  Oil and gas production from fracked wells thus starts out high but suffers ferocious decline rates—up to 90% in the first year alone.  Where a conventional, unfracked well can produce enough oil or gas to turn a profit for decades if it’s well managed, fracked wells in tight shales like the Bakken and Marcellus quite often stop becoming a significant source of oil or gas within a few years of drilling.

The obvious response to this problem is to drill more wells, and this accordingly happened. That isn’t a panacea, however. Oil and gas exploration is a highly sophisticated science, and oil and gas drilling companies can normally figure out the best sites for wells long before the drill bit hits the ground. Since they are in business to make money, they normally drill the best sites first. When that sensible habit intersects with the rapid production decline rates found in fracked wells, the result is a brutal form of economic arithmetic:  as the best sites are drilled and the largest reserves drained, drilling companies have to drill more and more wells to keep the same amount of oil or gas flowing.  Costs go up without increasing production, and unless prices rise, profits get hammered and companies start to go broke.

They start to go broke even more quickly if the price of the resource they’re extracting goes down as the costs of maintaining production go up.  In the case of natural gas, that’s exactly what happened. Each natural gas production company drew up its projections of future prices on the assumption that ordinary trends in production would continue.  As company after company piled into shale gas, though, production soared, and the harsh economic downturn that followed the 2008 housing market crash kept plummeting natural gas prices from spurring increased use of the resource; so many people were so broke that even cheap natural gas was too expensive for any unnecessary use.

Up to that point, the fracking story followed a trajectory painfully familiar to anyone who knows their way around the economics of alternative energy.  From the building of the first solar steam engines before the turn of the last century, through the boom-and-bust cycle of alternative energy sources in the late 1970s, right up to the ethanol plants that were launched with so much fanfare a decade ago and sold for scrap much more quietly a few years later, the pattern’s the same, a repeated rhythm of great expectations followed by shattered dreams. . 

Here’s how it works.  A media panic over the availability of some energy resource or other sparks frantic efforts to come up with a response that won’t require anybody to change their lifestyles or, heaven help us, conserve. Out of the flurry of available resources and technologies, one or two seize the attention of the media and, shortly thereafter, the imagination of the general public.  Money pours into whatever the chosen solution happens to be, as investors convince themselves that there’s plenty of profit to be made backing a supposedly sure thing, and nobody takes the time to ask hard questions.  In particular, investors tend to lose track of the fact that something can be technically feasible without being economically viable, and rosy estimates of projected cash flow and return on investment take the place of meaningful analysis.

Then come the first financial troubles, brushed aside by cheerleading “analysts” as teething troubles or the results of irrelevant factors certain to pass off in short order.  The next round of bad news follows promptly, and then the one after that; the first investors begin to pull out; sooner or later, one of the hot companies that has become an icon in the new industry goes suddenly and messily bankrupt, and the rush for the exits begins.  Barring government subsidies big enough to keep some shrunken form of the new industry stumbling along thereafter, that’s usually the end of the road for the former solution du jour, and decades can pass before investors are willing to put their money into the same resource or technology again.

That’s the way that the fracking story started, too. By the time it was well under way, though, a jarring new note had sounded:  the most prestigious of the US mass media suddenly started parroting the most sanguine daydreams of the fracking industry.  They insisted at the top of their lungs that the relatively modest increases in oil and gas production from fracked shales marked a revolutionary new era, in which the United States would inevitably regain the energy independence it last had in the 1950s, and prosperity would return for all—or at least for all who jumped aboard the new bandwagon as soon as possible. Happy days, we were told, were here again.

What made this barrage of propaganda all the more fascinating was the immense gaps that separated it from the realities on and under the ground in Pennsylvania and North Dakota. The drastic depletion rates from fracked wells rarely got a mention, and the estimates of how much oil and gas were to be found in the various shale deposits zoomed upwards with wild abandon.  Nor did the frenzy stop there; blatant falsehoods were served up repeatedly by people who had every reason to know that they were false—I’m thinking here of the supposedly energy-literate pundits who insisted, repeatedly and loudly, that the Green River shale in the southwest was just like the Bakken and Marcellus shales, and would yield abundant oil and gas once it was fracked. (The Green River shale, for those who haven’t been keeping score, contains no oil or gas at all; instead, it contains kerogen, a waxy hydrocarbon goo that would have turned into oil or gas if it had stayed deep underground for a few million years longer, and kerogen can’t be extracted by fracking—or, for that matter, by any other economically viable method.)

Those who were paying attention to all the hoopla may have noticed that the vaporous claims being retailed by the mainstream media around the fracking boom resembled nothing so much as the equally insubstantial arguments most of the same media were serving up around the housing boom in the years immediately before the 2008 crash.  The similarity isn’t accidental, either. The same thing happened in both cases:  Wall Street got into the act.

A recent report from financial analyst Deborah Rogers, Shale and Wall Street (you can download a copy in PDF format here), offers a helpful glimpse into the three-ring speculative circus that sprang up around shale oil and shale gas during the last three years or so.  Those of my readers who suffer from the delusion that Wall Street might have learned something from the disastrous end of the housing bubble are in for a disappointment:  the same antics, executed with the same blissful disregard for basic honesty and probity, got trotted out again, with results that will be coming down hard on what’s left of the US economy in the months immediately ahead of us. 

If you remember the housing bubble, you know what happened.  Leases on undrilled shale fields were bundled and flipped on the basis of grotesquely inflated claims of their income potential; newly minted investment vehicles of more than Byzantine complexity—VPPs, "volumetric production payments," are an example you’ll be hearing about quite a bit in a few months, once the court cases begin—were pushed on poorly informed investors and promptly began to crash and burn; as the price of natural gas dropped and fracking operations became more and more unprofitable, "pump and dump" operations talked up the prospects of next to worthless properties, which could then be unloaded on chumps before the bottom fell out.  It’s an old story, if a tawdry one, and all the evidence suggests that it’s likely to finish running its usual course in the months immediately ahead.

There are at least two points worth making as that happens. The first is that we can expect more of the same in the years immediately ahead.  Wall Street culture—not to mention the entire suite of economic expectations that guides the behavior of governments, businesses, and most individuals in today’s America—assumes that the close-to-zero return on investment that’s become standard in the last few years is a temporary anomaly, and that a good investment ought to bring in what used to be considered a good annual return:  4%, 6%, 8%, or more. What only a few thinkers on the fringes have grasped is that such returns are only normal in a growing economy, and we no longer have a growing economy.

Sustained economic growth, of the kind that went on from the beginning of the industrial revolution around 1700 to the peak of conventional oil production around 2005, is a rare anomaly in human history.  It became a dominant historical force over the last three centuries because cheap abundant energy from fossil fuels could be brought into the economy at an ever-increasing rate, and it stopped because geological limits to fossil fuel extraction put further increases in energy consumption permanently out of reach. Now that fossil fuels are neither cheap nor abundant, and the quest for new energy sources vast and concentrated enough to replace them has repeatedly drawn a blank, we face several centuries of sustained economic contraction—which means that what until recently counted as the groundrules of economics have just been turned on their head.

You will not find many people on Wall Street capable of grasping this. The burden of an outdated but emotionally compelling economic orthodoxy, to say nothing of a corporate and class culture that accords economic growth the sort of unquestioned aura of goodness other cultures assign to their gods, make the end of growth and the coming of permanent economic decline unthinkable to the financial industry, or for that matter to the millions of people in the industrial world who rely on investments to pay their bills.  There’s a strong temptation to assume that those 8% per annum returns must still be out there, and when something shows up that appears to embody that hope, plenty of people are willing to rush into it and leave the hard questions for later.  Equally, of course, the gap thus opened between expectations and reality quickly becomes a happy hunting ground for scoundrels of every stripe.

Vigorous enforcement of the securities laws might be able to stop the resulting spiral into a permanent bubble-and-bust economy. For all the partisan bickering in Washington DC, though, a firm bipartisan consensus since the days of George W. Bush has placed even Wall Street’s most monumental acts of piracy above the reach of the law.  The Bush and Obama administrations both went out of their way to turn a blind eye toward the housing bubble’s spectacular frauds, and there’s no reason to think Obama’s appointees in the Justice Department will get around to doing their jobs this time either.  Once the imminent shale bust comes and goes, in other words, it’s a safe bet that there will be more bubbles, each one propping up the otherwise dismal prospects of the financial industry for a little while, and then delivering another body blow to the economies of America and the world as it bursts.

This isn’t merely a problem for those who have investments, or those whose jobs depend in one way or another on the services the financial industry provides when it’s not too busy committing securities fraud to get around to it. The coming of a permanent bubble-and-bust economy puts a full stop at the end of any remaining prospect for even the most tentative national transition away from our current state of dependence on fossil fuels.  Pick a project, any project, from so sensible a step as rebuilding the nation’s long-neglected railroads all the way to such pie-in-the-sky vaporware as solar power satellites, and it’s going to take plenty of investment capital.  If it’s to be done on any scale, furthermore, we’re talking about a period of decades in which more capital every year will have to flow into the project. 

The transition to a bubble-and-bust economy makes that impossible.  Bubbles last for an average of three years or so, so even if the bubble-blowers on Wall Street happen by accident on some project that might actually help, it will hardly have time to get started before the bubble turns to bust, the people who invested in the project get burned, and the whole thing tumbles down into disillusionment and  bankruptcy.  If past experience is anything to go by, furthermore, most of the money thus raised will be diverted from useful purposes into the absurd bonuses and salaries bankers and brokers think society owes them for their services. 

Over the longer run, a repeated drumbeat of failed investments and unpunished fraud puts the entire system of investment itself at risk.  The trust that leads people to invest their assets, rather than hiding them in a hole in the ground, is a commons; like any commons, it can be destroyed by abuse; and since the federal government has abandoned its statutory duty to protect that commons by enforcing laws against securities fraud, a classic tragedy of the commons is the most likely outcome, wrecking the system by which our society directs surplus wealth toward productive uses and putting any collective response to the end of the fossil fuel age permanently out of reach.

All these are crucial issues. Still, there’s a second point of more immediate importance. I don’t think anybody knows exactly how big the shale bubble has become, but it’s been one of Wall Street’s few really large profit centers over the last three years.  It’s quite possible that the bubble is large enough to cause a major financial panic when it bursts, and send the United States and the world down into yet another sharp economic downturn.  As Yogi Berra famously pointed out, it’s tough to make predictions, especially about the future; still, I don’t think it’s out of place to suggest that sensible preparations for hard times might be wise just now, and if any of my readers happen to have anything invested in the shale or financial industries, I’d encourage them to consider other options in the fairly near term.

124 comments:

Ruben said...

Thanks JMG.

I have been googling foggy memories of the fallacy of a renewables build-out recently, with little success.

"...puts a full stop at the end of any remaining prospect for even the most tentative national transition away from our current state of dependence on fossil fuels."

If anybody has critiques and sources for the argument that a large-scale renewables buildout cannot happen, I would love to have some links.

Thank you.

Darren Urquhart said...

Thanks JMG. One of your best. You have identified the relationship between the greatest PR stunt of all time (US energy independence on the back of fracking), the fact that the elephant known as peak oil has not left the room and the tragedy of the Presidential-sanctioned fraud and criminality of Wall Street that will not only go unpunished but actively stymies the ability to react to the current predicament.

The PR story in particular has been something to behold. Some economic commentators here in Australia who are probably the best in the land IMO have been gushing in their repeating of the great PR yarn. "The US phoenix rises" - that sort of stuff. To me the story has all the BS hallmarks of the Iraq-WMD story.

Thanks for articulating these themes so clearly.

Joel Caris said...

Yeesh. I know you've been talking about this bubble, as has Kunstler and others, but the idea that it might be coming down in the next few months is a touch unnerving. To be honest, I had no idea that Wall Street was engaging in the same bundling play with natural gas leases as they were with mortgages. Hardly a surprise, though.

I keep thinking we're on the verge of another major blow to the economy--maybe something similar to scale as 2008. It's been a bit too quiet, which makes me think another unraveling is just ahead. This notion, though, that we're entering into an extended period of bubble-and-bust economics is frightening but far too logical. I hadn't thought of it in that manner, but it makes perfect sense the way you lay it out. We can't get past the idea of growth. Just because it's ending doesn't mean most are going to be willing to recognize it.

It's frustrating. My roommates listen to NPR fairly regularly, so I keep getting doses of their economic and political programming. It mostly drives me up the wall. Here you have a number of fairly smart people, capable of grappling with problems and proposing (theoretically) intelligent solutions, and they're all stuck within a set of assumptions that no longer apply. So all that ability is for naught! It's just wheel-spinning, without any recognition of our actual problems, and so it ends up being mostly infuriating. There's so much we could do to better deal with the harsh future we have ahead of us, but few people recognize the reality that future is going to take, so most of what we could do to make things better won't be done. Instead, we're going to flail around within the frame work of expired assumptions, likely make things worse more often than not, and then scratch our heads wondering why the heck the world won't start behaving right.

This is one more reason I mostly stay local. It's so much less frustrating, and I know I'm doing some good things. Today I monitored a cow giving birth. A ridiculous, disgusting, powerful and beautiful process that ended in new life--honest growth, if you will (setting aside the question of if there are already too many cows in the world.) Tomorrow I'll write a new blog post. Friday I'll likely be bucking some odd tons of hay. Before long, I'll be starting the garden. Next Wednesday, I'll be off to my second Grange meeting. We'll see what happens with this bubble--it may not effect my life too terribly much, though I'm sure it'll have its impacts. I worry about my friends and family, though, and my community as well. I'll just keep trying to spread alternative knowledge about what's happening in our society, keep growing and raising food, keep integrating into and helping build my local community, and hope to make things a tiny bit better.

Anyway, thanks for this analysis. The bubble-and-bust future is another bit of great insight from you that will help me figure out the future. As always, it's going to be fascinating to see how it all plays out, even as it no doubt proves quite the challenge.

Gideon's Laptop said...

@ Ruben

Renewable Energy: The Vision And A Dose Of Reality


http://theautomaticearth.com/Energy/renewable-energy-the-vision-and-a-dose-of-reality.html

Red Neck Girl said...

I'm wondering how this bubble bust cycle is going to affect the livestock industry. A lot of people here in the Pac. N. W. that had horses if they were close enough to BLM land turned their papered horses loose when they couldn't feed them anymore.

At the same time the Federal land has been deliberately stripped of it's wild horse population so cattle can get full use of the range, which degrades it compared to horses. I know that cattle drives will be coming back and there's a pool of good horses being winnowed by natural forces. Perhaps fifty years of cattle drives and shipping cows back east will be coming back 'relatively' soon. Or we could drive them to the coast where they could be slaughtered, salted and shipped to foreign countries.

Ah! If I were only twenty again! So many horses, so little time! I've got to admit, I like horses better than most people. When it comes right down to it, I like animals better than most people!


Wadulisi



John Michael Greer said...

Ruben, I'll be interested to see what responses you get. My main critique has always been that we no longer have money, time, energy, and raw materials to spare from day-to-day maintenance to make a sufficiently massive buildout possible -- well, not without the average American accepting a Third World lifestyle for the next two decades or so, and the political viability of that suggestion is best calculated in imaginary numbers.

Darren, I didn't think of comparing the shale oil hoopla with Bush's WMD fraud, but of course you have a point. It's interesting that the quest to scrape the last oil out of the bottom of the barrel should attract so many dishonesties.

John Michael Greer said...

Joel, yes, it's unnerving. I'm pretty well positioned, or as well positioned as a writer whose sales depend on disposable income can be, but I know it's still going to be a very rough ride for everyone. All we can do is to take it one step at a time.

Gideon's Laptop said...

@ Ruben

The main part of the lecture is on how most top climate scientists in the world are outright lying about how dire the global climate stats are and continue to lowball the numbers and models, i.e. not including any positive feedback loops into the climate model simulations.

Kevin Anderson is more of an engineer than a scientist, although he wears both hats. He knows what it takes to build infrastructure in the Real World as opposed to Ivory Tower pipe dreams.

He covers renewable energy in this talk as a side issue to climate change but does an eye opening presentation.

After I watched it (58 minutes, he speaks Very Fast so hang on) the quote by Harlan Ellison popped into my head, "… Mad Dogs have kneed us in the groin, they've rubbed dirt in our eyes and rabbit-punched their way to a first-round decision."

As if global financial collapse is not enough, the collapse in climate patterns will be a 'positive feedback loop' towards killing off all large scale renewable projects.
‪Cabot Institute Annual Lecture 2012‬ by Professor Kevin Anderson
He is the Deputy Director of the Tyndall Centre for Climate Change Research andholds a joint chair in Energy and Climate Change at the School of Mechanical, Aerospace and Civil Engineering at the University of Manchester and School of Environmental Sciences Manchester Business School.
http://www.youtube.com/watch?v=RInrvSjW90U

Robert Martini said...

JMG,

There is something salient and thought-provoking about your post tonight, despite it lacking the usual historic depth. It was not even a few hours ago, I sat through a "sustainability" talk at my college which I found profoundly lacking in critical thinking, expectedly I watched the speaker jump headlong into a predetermined conclusion disconnected from any sort of logical science. In the Q&A afterwards, I did my best to illuminate his poorly constructed argument, only to find he doubled down on his viewpoint with another, completely invented argument, with no basis in reality. Soon, the talk was over and all twenty or so people shuffled out of the room including white haired professors, family and students. Afterwards,a meek middle aged woman, a mother of a student, came up to me for clarification about my question. She didn't seem to understand anything about optimal foraging theory despite claiming to be a biologist by trade. Eventually our discussion led us from climate change to EROI and then "renewable energy." As her eyes became large with doubt and uncertainty, I could only recall the feeling that I was telling a child that Santa Claus didn't exist. We exchanged information and I directed her towards some solid academic information, but left the building with a feeling of exasperation. When your a child, you look to adults for the answers, and when your an adult you look to authority for answers. Each time you shed a layer of faith, faith in technology, faith in government, digging ever deeper into the fabric of reality. Are we in need of a movement, political in nature? Are we simply a fringe-group, the children on Cassandra, cursed of the ability to communicate our greatest of fears? Are we the fortunate who never enjoyed the taste of the lotus? Can complex idea's be focused into a abridged political motto, or should they? Should we keep our idea's to ourselves, lest the reflex of shooting the messenger of dire news become the status quo once more?


I have already begun the path of redefining happiness, by improving my health, attitude and well-being. However, there are so many folks who will never connect the dots or come to terms with the future your niche of readers will find all to familiar. What stories does history tell us about those who are rudely shaken awake into an unforgiving world? The next of several economics decouplings are coming but how do we best deal with the lotus-eaters when the last lotus withers?

Hal said...

In addition to all of the other inflection-point type changes in vital trends that have been pointed out here and elsewhere, I think another qualitative change happened with the housing bust. Take most bubbles from the past - be they tulips, exotic foreign investments, beachfront property, even up to the tech bubble. These are things that don't have quite the same ripple effect as basic housing. This has an effect not only in the, if you will, backward direction, that is, wiping out a lot of people's accumulated wealth. As bad as the effects of some of those crashes were, once done, they were done and books could be cleared. Investors damaged may have been limited in their ability to play in the next round, but their losses were probably done, or at least I can't think of any reason why they wouldn't be.

Real estate, however, is something we all stay "invested" in in some form or another. We either hold property that isn't worth what it was before, we are trying to buy in a market in which credit is not as easy as it once was, or we are renting from someone who faces those problems. Any "recovery" that has happened since the housing bust is not only possible due to the universal nature of the investment, but it is tangibly felt an direly needed by millions. So, when the next bust happens, I can imagine a secondary ripple effect back into housing that wouldn't have happened in previous busts, as investment losses feed into defaults, which depress values, and hence credit and income streams.

In other words, the housing bust projected risk forward as well as backward.

This is just speculation on my part, but sounds like a very dangerous double-whammy.

If I were to try to think the current bubble you have painted for us through, it is possible I could paint a similar picture with respect to energy-related bubbles. At least in the current environment. There may have been energy-related bubbles in the past, but they occurred in an environment of expansion of energy resources, so the damage could be absorbed.

Anyway, I am not an economist, and this is just idle 2 am speculation. I have seeds to plant some time tomorrow...

Richard Larson said...

Indeed. I saw the fraud clearly enough not to invest at all, what was a surprise was just how low the price for natural gas dropped. It might be a binary thought, but the growing supply met the dropping demand of a failed economy. Less than 2 bucks!

Now of course, every process that can use the stuff is piling into the supply equation. They are rushing to meet the failed expectations!

If there is anyone yet out there, well, I guess it would be better phrased, all those yet out there that know the details of this post and own any share of stock - as processed by Wall Street - needs to have their head examined.

Much better to plant fruit trees with the money!





Leo said...

Glad the shale bubble hasn't hit here, might miss the boom-bust cycle.

http://www.democrats.org.au/campaigns/getting-ready-for-peak-oil/
Linked that earlier, but the site died almost immediately. Best plan by a political group I've seen, note their centrist.

Had the orientation for the specific school in the uni I'm in, and saw all the projects they had. Everything from optimizing solar ponds, adding wax heat sinks to cool solar panels (improves efficiency), solar hot water heaters, home hydrogen systems and liquid methane airplane fuel (infrastructure assessment). Also a lab for geothermal equipment built/designed by students.

The professor in charge of my program mentioned that some of the energy companies had a bad year because demand dropped 10%. This was apparently due to all the energy conservation the government did to lessen the carbon tax's effect. So something was done.





Odin's Raven said...

This seems to be a stage in a transition from gangs of politically connected banksters looting the public by fraud and 'quantitative easing', to gangs of politically connected thugs looting their neighbors goods after faith in the currency collapses.

Approliving said...

Hi JMG,

The suggestion that we are heading into a severe bubble-and-bust phase of economic history seems very plausible imo. Yet the world never really broke free of bubble-and-bust to begin with: we (i.e. primarily the Western World) had a few halcyon decades between WW2 and the stagflation of the 1970's, and the second economic halcyon of the 1980's-late 2000's was punctuated by various economic dramas such as the Asian crisis of the late 90's and the popping of the tech bubble in the early 2000's.
The difference now of course is that the underlying long run economic trend is downward: each new bubble from now on will, as you suggest, do significant permanent damage to the economy in the long run because the subsidy of cheap abundant energy will be less and less available to dampen the inherent negative feedbacks of bursting bubbles. To put it another way, past and future economic bubbles are occurring on the back of a "superbubble" which has been inflating since the dawn of the industrial era and is now starting to pop.
As the future bubbles do cumulative permanent damage to consumer and business confidence on the downward slope of this superbubble, perhaps the corporations of old (i.e. the sort you discussed last week) might return and start to supplant contemporary-style corporations? I imagine that such corporations, designed to fulfil a specific real-world purpose within a set timeframe and then be disbanded after that purpose is fulfilled, would be much better suited to the difficult and volatile economic conditions that will be normal on the downward slope of the global economic superbubble.

Renaissance Man said...

And as I read your post, this came to mind:

"...There seems to be an awful lot
of charatans 'round here.
Hustlers, cheats, and anglers,
fixers, sharps, and mutineers.

Trickery and subterfuge
and corporato cheats.
Conspire to fast reduce us
to the stamping of our feet.
This is not the truth you tell me,
but some terrible, evil joke.

Looks to me like the counterfeit blues
have got you by the throat."

-- Corb Lund "Counterfeit Blues"

Now, I have a couple of good friends with whom I share a lot of good dinner talk, but am forced to avoid any discussion about shale oil, shale gas, or climate disruption because they absolutely believe the story as presented in the mainstream media.
My trust in the story according to the mainstream media began to erode in the 1970s and evaporated to nothing by the 1990s.
I trust and believe in the sources that tell me that we are disrupting the climate, that shale oil is a stopgap at best and a cruel pump and dump hoax at worst, that energy is about to become severely constrained and our current suburban sprawl lifestyle is going to become a shabby, hollowed out shell of itself, exactly as portrayed in some apocalyptic zombie movie, only over decades, not days.
"Common Sense is merely a collection of prejudices acquired before the age of 18. The tests of truth are logical consistency, agreement with experience, and economy of explanation." -- Albert Einstein

Eiskrystal said...

It's good the fracking bubble got pummeled a bit with the "gas in the water supply" issues otherwise things would be much worse and more widespread. I know a few other countries seriously looked into it and i doubt the math would have stopped them otherwise.

No longer being able to say fracking will save us and with no other super-new things on the horizon, America is going to have to take a good hard look at energy again which is good. The main problem will be hammering down the "fracking would have saved America if it weren't for them investors" routine that is pretty inevitable.

Ruben - Tom Murphy at "Do the Math" has done some renewable specific articles. You could start there.

Cherokee Organics said...

Hi JMG,

You'll love this...

I'm not sure, but did you know that BHP Billiton which is one of Australia's biggest companies, invested US$20bn in gas fracking in the US?

Was BHP Billiton Smart To Bet $20 Billion On Gas Fracking?

Some of my favourite quotes from the article:

"BHP Billiton Chief Marius Kloppers just placed a $20 billion bet on U.S. natural gas. That’s pretty risky, even for him."

and the Pièce de résistance is...

"BHP Billiton's Marius Kloppers isn't scared of betting big on fracking, despite having no experience with it. "Shale gas is like coal mining," he shrugs."

Now into the present and it is with great interest that in the past week:

Know when to fold em

A quote for those who don't follow URL links:

"BHP Billiton’s announcement last week that Marius Kloppers will be replaced as chief executive on May 10 has focused media attention again on the role boards play in pushing out leaders."

I can't make this stuff up! Since you mentioned fracking I've been keeping an eye out for what is going on. By the way, someone made heaps of mad cash out of the sale of acreage in the Fayetteville Shale and also the US company Petrohawk Energy to BHP Billiton. Well done you!

Oh yeah, BHP Billiton have been through a massive period of investment write offs too. Not good for the share price...

You know I'm thinking that the difference between the CPI as it is expressed and the official interest rates is a financial expression of the loss of wealth in society. It wouldn't have occurred to me except for the discussions last week about Social Security.

By the way as a general comment to everyone who contributes here, both last weeks essay and the comments were outstanding.

Regards

Chris

Master Oogway said...

@Ruben; you might try reading Vaclav Smil; a noted researcher. I find his reasoning a bit uneven and put that down to his being frightened by his own conclusions.

Always a pleasure Mr. Greer.

Cherokee Organics said...

Hi all you supporters of Social Security as it currently operates in the US (you know who you are).

I'm only kidding. hehe!

My brain is processing your response comments from last week and I have some further thoughts to share in addition to further probing questions for you. But, I still need a bit of time to sort it all out in my own head. The subject is large and the misapprehensions are many.

As a hint I think you are confusing a defined benefit scheme with an allocated pension scheme. Anyway, that should give you a head start on research...

Regards

Chris

Cherokee Organics said...

Ruben,

Are you stirring us?

Look, go and live with renewable energy sources for a year and then repeat the same claim.

I'm in a sunnier location than a lot of the readers here and with a large 3.4kW PV array and batteries I can only use 3.5kWh/day on average. Winter is a bit touch and go (although I'm working on sorting that problem).

Do you have any idea how big a PV array would need to be to power an aluminium smelter? The answer is bigger than you can imagine, or is economically feasible which is why it won't ever happen.

Stop dreaming dude.

Chris

Karl K said...

Living here in Central NY where the shale gas/hydrofracking bullseye has been focused (to keep the Ponzi going), I am so delighted to read your analysis. I still have neighbors convinced that our economic salvation requires us to sacrifice our air, water, and landscape to the gods of Chesapeake, but thanks to the amazing work of a relatively few good people, we (NY) have so far held off the fracking industry. We do fear the next phase (and true intent of the industry) might be the exploitation of the underlying Utica Shale, but I am hopeful that the crashing and burning of the Marcellus "play" will be a lesson for everyone. Yeah, right. Ha ha. Anyway, thanks for usurping your planned topic for this week. It is great to read some good news for a change. Well done.

Yupped said...

The production numbers behind the fracking story have always looked weak, especially when the story was inflated up to US energy independence levels. But for every well-packaged sales story, there does seem to be a parade of willing buyers. The "it's different this time" story always seems to find traction somewhere.

Like you said, there are a lot of us who have been programmed, and have retirement plans that depend on, a certain percentage return on assets. So that explains some of it. But there also seems to be an absence of healthy skepticism on the part of buyers, that hard-nosed show-me sort of attitude that should be reflexive when fancy guys in suits start make promises. I dimly remember that attitude being prevalent back in my youth, at least in Europe; a sort of basic sense that you shouldn't trust or defer to wealthy executives, that things that look too good to be true probably are. We all seem to be so credulous these days. Maybe hard-times will fix that.

phil harris said...

JMG
Two comments from me: this and a following one.
I submit separately a serendipitous 'question and answer' from current 'Drum Beat' at The Oil Drum. @Ghung who comments occasionally on Archdruid's blog could make a better informed comment than me. ROCKMAN (see my 2nd submission) has 30+ years in ‘the oil patch'.

Meanwhile, all kinds of deals hang in the air as 'investors' try for long term government-backed guarantees to be able to extract higher future rents from large enough western populations, or at least from those with sufficient existing infrastructure and with some prospect of being able to pay for such 'locked-in' essentials like NG & electricity. It is not just ‘renewables’ that are looking uncertain in this climate: nuclear will quite likely not get built, nor yet many a NG pipeline to connect many ‘stranded’ supplies, even if existing large retail NG grids (‘markets’) are maintained for a while yet. Even some oil lines look dubious. I understand pipeline issues surface for the new suppliers of oil & NG in the USA, and much NG is commonly flared off in N Dakota even if the oil is collected by tanker. And in EU some German Lander (happen to be conservative-led) contemplate needing a civic form of 'nationalisation' of their electricity grids as a means to cope with wind and solar and with electricity import/export in the mix. Europe of course will burn all of Algeria’s natural resources as a continuing cost-effective ‘short term’ solution, it seems, but our geo-politics looks almost as fragile as North America.
best
Phil

phil harris said...

My 2nd & follow-on submission:
(Apologies to the good folk over at The Oil Drum: the questions seemed reasonable and the convincing answers authoritative and straightforwardly honest.)
best
Phil

enemy of state on February 27, 2013 - 11:56pm
[...] I don't know whether it’s true, but just because fracking has been around for fourty or more years, doesn't mean it can't/couldn't be improved or made more economical. That’s what these cornucopian folks are claiming. ...

speculawyer on February 28, 2013 - 12:40am
[But] there needs to be a roadmap to lower prices. For example, with PV panels it was the price of silicon ingot's dropping, using lower quality silicon for PV, and (mostly) opening up huge PV fabs in China that caused prices to drop. With fracking . . . well, ...
But I'm not all that familiar with the inputs to a fracturing operation. Are there some that will cause the price to drop? I suspect the 3D seismic imaging will get cheaper & better and thus help them determine where to drill with a little less cost. Perhaps some of the equipment will start being built in China such that equipment costs drop? ....

ROCKMAN on February 28, 2013 - 4:17am
spec - "But I'm not all that familiar with the inputs to a fracturing operation.” It’s actually very simple: water, some chemicals, propant (sand or ceramic beads) and a **** LOAD of horsepower. Figure out how to get all those horses down that 6” hole a lot cheaper and the oil patch will make you a multi-multi millionaire. Even taking inflation into account it has not gotten cheaper. And never will IMHO. The biggest reason why frac’s cost so much more (say on a per pound of propant) is demand. When frac’ng became very active the price more than doubled. Frac’ng could get much cheaper in the future: just drop the well count 70%+. The technology used to frac a well today has not changed significantly for 25+ years. In fact more than a few of the frac trucks running today are that old. Just like drill rigs: a DW floater that goes for $700k per day can be had for $300k per day when demand drops.
The only aspect that has reduced in price is the cost of locations and the vertical sections of the wells. Build one location and drill one vertical section for a 6,000’ lateral instead of two wells with 3,000’ laterals. OTOH 4 years ago they would have pumped 2 or 3 frac stages into the shorter laterals but now will pump 20+ frac stages in the longer lateral. In fact some of the frac jobs on Eagle Ford wells are costing more than it cost to drill the well. So the net effect is that the 6,000’ lateral is costing more than the two 3,000’ laterals combined. They are pumping more frac stages because they need them to make the wells as profitable as possible.
“I suspect the 3D seismic imaging will get cheaper & better and thus help them determine where to drill with a little less cost.” Nope. The cost per square mile of 3d has consistently gone up over time. Again for a similar reason as the increased number of frac stages has driven up those costs. Too long a tech explanation but the quality of the data and the level of processing had to increase as we chased deeper and smaller targets. But there is an odd savings produced by 3d seis: it has greatly reduced the number of wells drilled. The development of 3d seis has caused more wells to not be drilled than it has caused to be drilled. There are many companies that won’t even evaluate a prospect if there’s no 3d. The good news is that 3d has increased the success rate. As I’ve said before finding oil/NG has never been easier. The problem is that there just aren’t that many conventional prospects left to drill especially in the US. Which is why the shale plays are so hot: without them at least half of the companies in the US would go out of business. ... cont.

- See more at: http://www.theoildrum.com/node/9862#more

John D. Wheeler said...

Funny you should write about this, I wanted to report that here in the heart of the Marcellus as a Realtor I've been hearing about gas companies letting their leases expire. Definitely a sign the party is winding down.

As to the economic damage, I suspect there will be less direct damage from Wall Street failures. What will really hurt is when the price of natural gas goes back up. Many people are working under the assumption that natural gas prices are permanently low. There has even been talk about how low natural gas prices will reignite manufacturing in the United States.

In other news, did you see what happened in Italy this week? A new political party sprung up over the Internet and did about as well as the major party candidates. That seems like it goes with what you were talking about several weeks ago.

DesertedPictures said...

I think you might be surprised how much the upper-middle class and rich can avert changing their lifestyles, while simultaneously persuing a transition to a more sustainable economy. Just look at the results of halfhearted attempts in Europe to change to sustainable energy: the EU as a whole has set targets for every country so that it get's 20% of it's energy out of renewable energy-sources in 2020.

The results are unsurprisingly both disastrous: it's still much cheaper to put oil in an energy-plant then to use that same oil to create (for example) an windmill. So countries like Germany and Belgium created huge subsidies for people to buy their own solar panels. Energy-companies got artificial (and real peak oil) higher costs for producing electricity. In Germany and eastern Europe this has lead to a new category of people called the 'energy-poor'.

The middle class (and working people with some money on the side) meanwhile put the solar panels on their roofs and are able to continue their lifestyles for another decade. This is the unfortunate reality of a declining society that decides to devote a lot of resources to a transition: the costs will not be shared equally but will be imposed upon the least powerful.

Now granted, European countries aren't doing nearly enough to actually transitioning on time but I'm surprised how little renewable programs suffer from the grave austerity measures. Maybe that's because governments found a new source of income: charging 'dirty energy' to make 'clean energy' more viable.

My hopeful thought is that some sort of transition might be possible: but my depressing conclusion might be that the people that caused or problems in the first place, probably will suffer the least during this.

Michelle said...

The deplorable state of our public transit is something I've lamented for quite a while. I was reminded of its feebleness recently by a conversation with a young British woman who's trying to get from the college where she's on exchange to my house for her Spring Break. I thought she summed it up succinctly when she said, regarding the lack of any transit options other than Greyhound bus or private car: "It's pretty rubbish."

Justin Wade said...

My favorite detail from the report is that energy companies include strippers and prostitutes in its job growth claims as a result of energy drilling.

One note on bubbles - there is a common fallacy that bubbles produce some underlying value. I.e. the dot com bubble gave us the internet. Its really the other way around, the underlying value gives rise to the bubble, and the dynamics of the bubble bursting hurts or destroys the underlying value.

My hunch is that there is something even more devilish lurking behind the bubble economy we've been living in. We have an ideology of protracted growth economics atop a reality of protracted contraction. The gap between the ideology and reality is the construct of money, i.e. the solution to contraction or sluggish growth is to print money/QE and pump up the DOW with unrealistic projections and mathematical constructs like securities. Seems like the credibility of the currency is being burned at both ends, so to speak.

Joy said...

"...right up to the ethanol plants that were launched with so much fanfare a decade ago and sold for scrap much more quietly a few years later..."
This hits very close to home. In my neck of the Indiana woods, an ethanol plant, built in the 80's for $180 million, is being sold off for $2.5 million.
JUDGE OK'S NEW ENERGY SALE
http://tinyurl.com/bpjno4h

Some are still in denial though, thinking that this is unusual and hoping that the plant can be used for something other than scrap. Note the tone of wonderment in the agricultural economics professor's statement, "This is the first one I've seen that clearly looked like a scrap deal. I have no knowledge of this happening anywhere else."
HOPE FOR REVIVING ETHANOL FACILITY?
http://tinyurl.com/cqz8jkk

Bill Pulliam said...

One of the things that amuses me the most about this is that fracking and shale oil/gas are widely described in the media as "new" discoveries, and I think most people actually believe this. Like so many other things, we who were there in the 1970s when these deposits were already well known and the fracking techniques were already being developed know that the only thing "new" here is the high price of oil, making it (temporarily) "profitable" to go after these low-quality deposits. I always maintain that the fracking boom is not a sign of any new beginning, it is a sign of the end that we are going after those lousy reserves already. It's like eating the hedgerow weeds at the end of a long hard lean winter when the food stores are running out.

Re: the timing... as one of the people whose only surprise about the housing bubble was that it took so long to burst, I'm wondering why you think the fracking bubble's collapse might be imminent. I was amazed at how the unsustainable housing market was "sustained" by increasingly complex methods for a decade or more beyond the point of all rationality. Which of course made the popping all the more catastrophic. Is there any reason to suspect the same won't happen here, or that we are already so far into the insane part of the bubble that even the most bizarre of schemes can't keep it going?

M said...

Thank you for the heads-up. I've been actively pursuing many of the courses of action suggested here at TADR, including efforts to make my community more walkable and bikeable, heavy involvement with my CSA, and learning skills like canning. I'm also contemplating a run for city council.

I know we have further to go, but my wife does not fully share my stance on what the future has in store (and of course neither does my three year old.) I am continuing to expand our home economy to meet the shrinking global economy, but I'm a bit stumped as to what kind of home business I might venture into. I'm planning to turn my stand alone two car garage into some kind of workspace, but I can't figure out what might be feasible--obviously it will be a while until blacksmithing really takes off, for instance. Maybe soapmaking? Knife sharpening? Small appliance/bicycle repair? What small businesses will people absolutely need during a coming bust? And not want or be able to do themselves? I hope it's okay to ask readers for some suggestions. I have a good range of general skills, from welding to woodworking.

Most people in my Hudson Valley town are currently fixated on making it attractive to tourists, concentrating on art galleries, restaurants--even a fancy wedding hall. I find this very short term at best, somewhat delusional at worst. But what is out there that really makes sense on a local, necessity-based scale that isn't too capital intensive?

Mister Roboto said...

Yes, we are at the end of the Age Of Growth, and only voluminous government debt-spending and accounting trickery has been able to preserve an illusion of growth over the past few years. I can't help but feel sorry for both the Paul Krugmans who shill for eternal borrow-and-spend Keynesianism and the Ron Pauls who think that as soon as we reign in government spending, we can get back to infinite growth on a finite planet. When you have that much delusional thinking all across the political spectrum, it stands to reason that people would see boondoggles such as shale-fracking as a panacea.

And speaking of bubbles, I can't help but wonder how many libertarian gold-bugs realize that gold is in a bubble along with other commodities on account of all the "free money" that the Zero-percent Interest Rate Policy has dumped on the speculative sector of the economy?

SMJ said...

Hello JMG,

What about 3D printing - there's been a lot of hype about it, do you think it could also become a bubble at some point?

DickLawrence said...

JMG,
I would guess you've been reading David Hughes report (or at least the summary - the report is 155 pages I think) on prospects for 'tight' oil & gas over at the Post-Carbon site. We had David at one of our ASPO conferences a few years back, before the fracking boom took off. Randy Udall, one of our ASPO-USA co-founders, also published a recent article on the bubble-nature of this boom.

There's production, and then there's recoverable reserves (or URR): all the hype has been based on the rapid growth of production, mostly from N. Dakota. My question is (not necessarily to you JMG, but to anyone out there): do the estimates of tight oil & gas URR of these plays vary wildly between USGS and critics such as David H.? or do they generally agree on the ultimate recoverable and primarily disagree on projected rates of extraction, how many holes we need to poke into the ground, and the cost of those holes? Does the 'ferocious depletion rate' of these plays make a huge difference in the URR calculation? or are they independent?

Thanks in advance for any light someone may be able to shed on this question.

Dick Lawrence

Andy Brown said...

Great essay, and I think pretty much right on the mark. I think the next bubble is ripe and standing by for Wall Street -- education. There's a huge amount of money sloshing around in education -- public schools and university alike -- it's already hooked up in multiple ways to the government trough, it's reputed to be a sector untethered to normal economics (which is after all the hallmark of a bubble enthusiasm). Like shale fracking, the only thing that could make current education trajectory "sustainable" (sic) is a huge influx of sucker capital. I suppose in the rubble we'll be organizing our one-room schoolhouses again. So that at least is a silver lining.

barath said...

JMG,

Shale production has definitely looked like a bubble, but as someone who doesn't follow it closely I don't know much about what stage the bubble is in. What are you seeing that indicates that we're a few months rather than a few years from it popping?

Ruben,

A couple of a years back I did an analysis of how fast the world could build non-fossil alternative energy sources. My conclusion was that in an all out effort it might be possible to replace half of today's energy sources with alternatives in 20 years, and that's a best-case scenario.

Jason Heppenstall said...

It's interesting that today the EU announced plans to outlaw those huge inflated bonuses that financiers in the City of London assume is their birthright. This, of course, would be a huge threat to a bubble and bust economy - as well as the super yacht industry - which by the way, would probably suit the upper echelons of the current government quite well.

As far as fracking in the UK goes, there is a similar propaganda onslaught underway. The only problem (for the fracker backers) is that it's almost impossible to flip land leases in the overcrowded UK, and it's my understanding that bubbles rely on this kind of thing.

Still, if the European trend in petroleum consumption continues as it is, we'll not have much need for hydrocarbons in a few years anyway.

Gideon's Laptop said...

Another audio talk by Kevin Anderson on realistic paths to co2 reduction that also overlap with the Alt energy scene.

Decision time is closing in.

Humanity still has a very slim window to decide which energy fork in the road to choose, but as the old saying goes, you can't ride two horses with one ass


http://vimeo.com/39555673

Ael said...

Depletion of US coal reserves?

Isn't production of coal about 1 billion tons a year? Aren't there recoverable reserves of several hundred billion? Sounds like we have a century or two before panic sets in.

(Of course there may be other impacts to digging out and burning a hundred billion tons of coal, but that is a different topic).

Robo said...

The fracking reality is starting to leak out into the mainstream. I just read this recent article in Harper's Magazine..

http://harpers.org/archive/2013/03/bakken-business/

The rueful conclusion here is that all of us who live within the petroleum economy are dependent upon its products and responsible for the resulting mess, no matter how individually aware and regretful we might be.

gregorach said...

Of course Wall Street learned something from the collapse of the housing bubble - they learned that they can get away with just about anything, and not only will they not go to jail, they'll get to keep the money. As you say, it's a classic tragedy of the commons - the rational economic behaviour is for them to maximise their gains in the short term, regardless of how badly it degrades the future performance of the system. Even economists have unreasonably high discount rates in practice.

William Hunter Duncan said...

That will be interesting for Obama, if that bubble pops in the next year. He's parroted that BS about 100 years of natural gas in every major address since 2011. If there's actually an uproar when the bubble bursts, it will give him reason to lock down, I guess. What are the odds, do you suppose they use the next blown bubble to initiate another war in the Middle East?

jollyreaper said...

The oldest game ever played is trying to get a free ride, doing less than your share of the work while getting more than your share of the results. It's funny how this is called shirking and goldbricking among the poor but by a number of different, virtuous things when practiced by men and women of priviledge. It reminds me of old stereotypes, the stock character who always has an angle, some kind of scheme that will be the shortcut to success.

There's a lot of virtue in the concept of "Work smarter, not harder." That's the sort of thing that gives us technology, is virtuous. But that's so much different from "Scheme smarter, not harder."

That's what all these bubbles make me think of, and it sure seems like a lot of work to put into creating scams. Why not honest work instead?

Thijs Goverde said...

On a side note, here in the Netherlands we're still sitting on a reserve of gas that can be got out in the oldfashioned way.
Recently, the region directly above that supply (the province of Groningen) has been experiencing an uptick in a phenomenon never seen there until 20 years ago: earthquakes.
The Netherlands are not in an earthquake zone. Our houses are prone to being damaged by even a minor quake.
However, our Finance Secretary's position is: Hey, too bad, guys, we can't afford not to sell that gas. Good luck with those houses!

We are truly a modern democracy: a government of the people, by the {something or other}, for the {something or other, not necessarily the same as the something or other mentioned previously}.

Michael Petro said...

Maybe it's just me, but I detect a note of uncharacteristic anger in this post.

I read you faithfully for your thinking, and for talking points, but this one in particular has an appealing piquancy.

I agree with Mr. Urquhart: One of your best.

CJ said...

Ripped right from today's headlines: http://finance.yahoo.com/news/gas-boom-projected-grow-decades-021200096.html

Brad K. said...

If we cannot break the fraud cycle that creates the derivatives-based boom and bust cycles, perhaps taxing derivatives directly might help to deflate the cycle -- maybe an "intangible properties" excise tax.

Thanks.

Doc said...

Once again, the historical context bears fruit - we are being fracked by a system where the banksters print their own reality on worthless FRN that somehow have illusionary value. I recently finished The Long Descent and feel that we should begin the long ascent before we reach rock bottom (which has already been fracked).
I do hold one illusion, that at any time the great director can snap the shutter, call it a wrap and that we all end up in Star Trek uniforms riding on space ships.
Thank you from one displace Ashlandian to another - your work has led me to think deeper about context, i will have some entries into the science for lay-persons contest, as the future unfolds. Stay well.
namaste' doc

wildwoodchapel said...

I'm scared, John. I'm scared for my family. We've done nothing to prepare for this. My wife and I work a 40-minute interstate drive away. We live 3 miles from a small town on that same interstate. We live on an indutrial farm worked by share-cropping tennants. We have a small-to-medium size garden space tilled. We don't compost. Never tried. I'm a part-time minister for my Christian congregation; I preach for them once a month and teach Sunday school. I'm almost through The Long Descent and almost through my second reading of The Druid Handbook.

Dear God, I feel lost and don't know what to do. Has this shale bubble thing made any preperation I might make now too-little, too-late? Is there nothing left but pointless lamenting that I should have started all this five years ago when I first heard about you? I know I"m thinking apocalypticly (sp?) but I'm afraid that maybe for me it's the only way.

I don't know any other way to contact you than this. I am desperate. My wife and children are all but oblivious to what is likely to start happening soon. I try to talk to my wife about it but she says it's just too depressing and dismisses it.

If you want to delete this comment I understand, but if you'd like to leave a reply on my begun-then-abandoned blog, I'd be grateful.

Dan said...

Hi JMG, in reading this year's series of posts, I can't help but notice that you've thus far been silent on the possibility of expatriation. While peak oil is a global problem, it's affecting different countries and regions at different paces, as Stuart Staniford over at Early Warning has been discussing. And while the US's current preeminence in the global financial system means that crises here send shockwaves throughout the world, it's only a matter of time before the world finds a new global reserve currency to mitigate the effects of the US's mistakes. (Wonder what will happen to the continuing bailouts and the "quantitative easement" backing them up once that happens...) And some countries - such as Chile, with its fiscal discipline, extensive natural resources, and the prominent role local self-sufficiency and family/community bonds still play in the culture - seem poised to handle peak oil much more smoothly than the US or Europe. Since many, if not most, of the problems that currently beset the US (not the least of which is the federal government's response to the other problems), it seems like a uniquely bad place to be in the coming decades, both in terms of financial/material stability and the finer things in life.

I'm in my 20s and I've never been especially patriotic, and I'm increasingly seeing fewer and fewer reasons to stick around. Peak oil is something we're all having to adapt to, of course, but, if I can help it, I'd really rather not be stuck in a purely reactionary mode of having the rest of my life be defined by simply responding to crisis after crisis without pursuing my relatively modest and flexible goals in life more proactively. After all, this seems to be very much in line with your magical philosophy (something which, as a fellow polytheist/animist, I basically share). Forgive me if I'm putting words into your mouth, though.

I'd love to hear your thoughts on this issue. And in any case, thanks for writing what is hands down one of the most informative, prescient, and best-thought-out blogs out there.

Dan

anna west said...

Thank you JMG. You have a real skill at teasing out the critical to understand from what is often a confusing blurr and making it seem so clear and obvious. Many of us out in the blogoshphere appreciate your clarity and I just wanted to give you the internet equivalent of a pat on the back and my thanks.

Chris said...

I really enjoyed reading this post as it summarized a lot of reading I have done and helped connect the dots on disconnected ideas and thoughts I have on peak oil and the production of shale deposits in North America. Generally, your line of reasoning makes sense to me; we are living in the twilight of the American empire and can expect our standard of living to ratchet steadily lower due to dwindling energy reserves.

My beef (there had to be one I guess, or I would not be writing) is with your statement of imminent crisis in the months ahead. It seems that the claim of imminent crisis or dislocation is made repeatedly by many writers on the topic of peak oil and declining economic health. Meanwhile, the system (political, economic, social, environmental ...) continues to lurch along, and in some manner copes with the most recent problem to confront it. This allows the general public to ignore the on-going decline as the most recent crisis was yet again weathered, and indeed seems to strengthen the proposition that there is indeed no problem on the Titanic. Lost in the noise of all of this is general recognition of the long term problems we are facing, and and any mainstream discussion of it. At some point the system may finally seize up spectacularly due to the proverbial straw that broke the camel's back, but will that be months from now or years, or might we fade away like the British Empire over the course of the decades since the end of the Second World War?
I realize I am not stating anything particularly new or contrary to your general argument here, but imminent crisis is a difficult view to hold to or promote in the face of contrary evidence ... everything is, after all, still bumping along.

Thanks for the excellent article.

Carlo said...

I agree that this post is one of the best of a long string of well written, compelling and vital posts. I just received my copy of "Not The Future We Ordered" yesterday, and yesterday evening on the Nightly Business Report there was a guy pooh-poohing the whole Peak Oil thing. I've long expected the coming resource shortages, Warren Johnson, the author of "Muddling Toward Frugality," was my favorite professor back at SDSU.

I see the troubles moving in on us, and I’d like to do battle with the inevitability of decline. I’m encouraged by the efforts underway in California to pursue energy efficiency and the work of the Rocky Mountain Institute and others to define an alternative future, although I fully understand the limits like those pointed out in the link that Gideon’s Laptop offered us to The Automatic Earth.

So much of it boils down to the mythic vision that guides us. I was in 6th grade when I caught my first episode of Star Trek – and whoa did that make the world shinier. The idea that we were on a path of destiny where the human race could become a galactic civilization and all the wonderful stories I read written on that theme.

So, here we are, facing a long descent – perhaps destined to a natural, seral process before we recover to a new state of high civilization, the interregnum… If only (yeah – if only) we could follow a new myth. The myth of how the great ape found itself at a crossroads. The second crossroads the species faced after straightening itself and leaving its base nature for a higher calling.

This time, the species must reoccupy its nature, not as a master to enslave the processes of nature, but as the thoughtful being of nature itself, made up of everything, as consciousness reaching from human mind through leaf, surging tide and bees’ wing. Our scientists of all disciplines are reaching into nature in new ways. Healing the thin envelope of natural process that supports our existence will give us a greater knowledge of it. The possibilities for a species that no longer needs a harness on the forces of nature, but can leverage the incredible power already here to drive its destiny has surely achieved the next evolutionary step.

Imagine living in the shadow of the myth that could bring us to this. Looking back, the eve of industrial civilization’s destruction is just the fire of creativity rekindled.

sv koho said...

Thanks for a good intro to the shale gas fracking bubble. It is a subject about which regularly blog, partly because I live in frackbubble wyoming. Shale gas at $3 is well below the cost of production which depending upon the field, is in the mid $8's but old conventional gas is profitable at a buck or 2. Pure frac gas well drilling is falling off a cliff and drillers are moving to oil/gas/ng liquids wells that are profitable because of the oil with gas is produced called associated gas as a bastard child. The bubble may deflate or pop as you state but it is more due to the low price than for geologic or finance reasons. Get gas back to $10-13 which it was a few years back and you will see frac gas in spades. This is a good news/bad news story. Good news it popped. Bad news, it will inflate again worse than ever. The real story should be the EROEI of these unconventional fuels which are already single digits for all of them. The lower the net energy, the sooner finance will dry up. The depletion rates are not as high as 90%/year in any of the major fields I follow and one of my hobbies are looking at well production logs but 2 and 3 year decline rates of 85-90 % are definitely seen but some of the early frac wells in the Barnett Field in Texas are still in production since the 90's when it began there in earnest. Decline rates are not the best metric because some pressures in say the Haynesville(LA) shale start with enormous pressures above 8000 psi, so when they decline 90%, you are still producing a lot of gas compared to longer life conventional wells which start lower but have a long tail profile. My point is that calling for the gas bubble to pop is unfortunately premature. Sure big indebted players like Chesapeake may go under but Exxon, the biggest wont. Net energy will kill frac gas since the frack process can involve a dozens or two 3000-6000 hp trucks running at once shaking the earth and darkening the sky and stampeding wild horses! Since 30-40% of our new gas is associated with frac oil, it is the decline of frac oil or a big jump in crude prices that will kill frac gas and make it uneconomical to produce at $3 but get it back to double digit levels as is in Europe and Asia right now and you ain't seen nuttin, honey.

Ben Simon said...

Dear John;
I went to the link-[http://theautomaticearth.com/Energy/renewable-energy-the-vision-and-a-dose-of-reality.html.] and studied it. I realized that some of what it presented has already been voiced by you, but in less detail. What did strike me hard was the idea that the effort to provide renewable energy sources is a vain and dangerous venture. “Vain” because on close examination it becomes obvious that nothing will be gained from the effort and like the consequences of pursuing relief of serious medical problems with various alternative medicine approaches, the end result is more than just failure in many instances, through the misallocation of resources. A second aspect that you have begun to expose is that maneuvers by powerful institutions are preventing remedial efforts to turn things around and enriching the manipulators in an obscene and pernicious way. This seems to be a recent development in the situation, at least in its pervasiveness. I think this is related to the successful rise of totalitarian socio-economic entities (governments, corporations , the media etc.) and the effects of their systemic use of high power computer systems for economic and political shenanigans. These seem to be a regular feature, at the present time. Sadly, the means to deal with such does not appear to be available. Your call to try to establish local action centers, I think is a possible approach along with wide publicity as to the need. However, the Emperor without clothes situation is in front of us, but it is hard to recognize. The enormity of what is just down the road is too difficult to perceive properly, because of the requirement to be ruthlessly imaginative. I am afraid that your optimism has become less justified by the present turn of events as demonstrated by the economic bubble and thievery processes that you have identified and mark our times.
The task of changing the processes that generate the way that our civilization operates in order to insure the continuation of human existence at some level of joyful experience of life in this world, appears ,in my view, to be almost impossible to perform. I , rejoice with having had to opportunity to be alive and be a witness of this world and its happenings and I deeply wish that ways can be found for humanity to continue. I consider being informed about what is actually happening, as a paramount initial step for participation in the effort to affect desirable changes. In this, you, John have been immeasurably valuable and important. Please continue courageously with your efforts. I will continue to try to do what I can, even with my time, here, running out.
Thank you,
Ben Simon

Ozark Chinquapin said...

I'm with you 100% on the general situation, but I'm curious why you think the crash is likely to be within months. I remember around new year's when you mentioned that you didn't think the bubble would burst this year but rather in 2014. What has you to change your mind?

John Michael Greer said...

Robert, I don't think a political movement is a useful response at this point, because participation in a political movement so easily becomes an excuse to avoid making necessary changes in each of our lives. Once we, as individuals, families, and community groups, get our own act together and are in a position to show the rest of society that there truly is another option, then we can talk about politics on the larger scale.

Hal, excellent. You get today's gold star. You're quite right -- not only because housing (and, equally, energy) are far more essential to day-to-day survival than, say, the high-tech industries that were central to the previous bubble, but also because the impact of the housing bubble was largely papered over by "extend and pretend" policies that allow big firms to treat worthless securities as assets. The result is not unlike dry rot -- you've got some very imposing structures that are barely able to support their own weight, and may come apart very suddenly.

Richard, true enough. I've long thought the best investment for a hedge fund would be hedgerows.

Leo, thanks for the link. It's exactly the vulnerability of universities and colleges to funding cuts and government pressure that makes it essential to get this stuff into the hands of basement inventors and local community groups, who can't be bought off so easily.

Raven, sure, if you want to buy into that repeatedly failed scenario.

Approliving, good. The inherent instabilities of a capitalist economic system were reined in nicely between the 1930s and the 1990s by financial reforms such as the Glass-Steagell Act, which put much-needed firewalls between the speculative economy and the economy that produces goods and services. Once those were scrapped, we landed right back in boom-and-bust territory. As for the future usefulness of old-fashioned single-purpose corporations, well, yes -- that's one of the reasons I brought them into the discussion!

Renaissance, that would make a perfect musical accompaniment to this week's post. Thank you!

John Michael Greer said...

Eiskrystal, some people will cling to the fantasy no matter what. What makes me hopeful, though, is that each bubble that pops seems to bring a new openness to the peak oil narrative -- and this one may do so in a very big way, once it can be shown that the people who were insisting peak oil is disproven by fracking were simply shilling for stock market cheats.

Cherokee, Sinopec also got taken -- they just announced a big purchase in the shale industry. One of these days it's going to sink in that buying a great investment opportunity from an American firm is right up there with answering one of those email scam artists from Nigeria who need your help to get a million dollars out of some African country...

Karl, tell your friends in the anti-fracking scene in NY to keep up the good work. Here in western Maryland, we dodged the bullet once gas prices crashed -- the gas in this corner of the Marcellus is dry gas, thus hopelessly uneconomic these days. Once the whole market implodes, it'll be a decade at least before there's another attempt, and by then you may be able to get some sensible legislation in place.

Yupped, it's precisely because people think they're so cynical these days that they're so easy to bamboozle.

Phil, Europe's in as deep a mess as the US, though admittedly it's a different mess with different probable consequences. As for Rockman, he's one of the main reasons I read The Oil Drum regularly -- it's always good to get a reality check from someone who actually works out there punching holes in the ground.

John, thanks for the info on shale leases! That's worth knowing. I'm a little less sanguine about the financial fallout than you are -- just as in 2008, chaos in the capital markets works out to job losses and other economic troubles -- but you're right that the rising price of natural gas won't help either. As for Italy, yes, I've been watching that very closely.

Deserted, it's early days yet. In comparable historical situations, the rich have usually ended up against the wall, in one way or another, as things wound down. I wonder how many of them have even begun to suspect that they're busy cutting their own throats.

Michelle, since I don't own a car, I can certainly sympathize!

Justin, if I'm understanding you correctly, you're saying that the gap between a shrinking real economy and an apparently growing paper economy is increasing, and being filled with bubbles. If so, you're quite probably correct -- and the results will not be pretty.

Joy, thank you for the links! The professor is clueless; such plants have been being sold for scrap for a while now.

John Michael Greer said...

Bill, that's a reasonable question. I'd point to the fact that shale leases are being abandoned rather than flipped, and assets are being sold off to anybody who will pay for them, at a fraction of their assessed value, while the first signs of major financial trouble in the industry are being heard. That usually happens a few months before the bottom drops out. Of course I could be wrong, but that's my sense of where we are in the bubble.

M, there's no one good answer for that. You need to consider your talents and interests, and compare them to what your neighbors and other people in your community want and need, before making a decision and getting the necessary training.

Mister R., no argument there.

SMJ, good! It's entirely possible that 3D printing could turn into the basis for a bubble -- look at the way that its partisans finesse the need for raw materials and energy to make their technology go, and you've certainly got the purblind enthusiasm necessary to get a bubble off the ground. Still, trying to predict what's going to strike the fancy of the investing public next is a sucker's game. It could as well be thorium mines, or biodiesel firms, or anything else.

Dick, heck of a good question, which I don't have the data to answer. As for David Hughes' work, I've read it, along with a number of other sources, and I've also simply watched the shale business follow the standard speculative bubble logic -- Galbraith's The Great Crash 1929 lays that out memorably, and once you know the pattern, it's easy to recognize.

Andy, that's entirely possible. There's already a huge bubble in education loans, which is probably a couple of years from popping.

Barath, see my response to Bill Pulliam above. The desperation with which shale assets are being sold off for a fraction of their assessed value suggests to me that crunch time is near.

Jason, my guess is that the implosion of the fracking frenzy over here will be big and painful enough to bring attempts to do the same thing elsewhere to a screeching halt.

Gideon, I disagree. That decision was made around 1980; at this point it's purely a matter of facing up to the consequences, and figuring out how not to make things worse.

Ael, every recent study not sponsored by the coal industry has shown that the standard estimates for remaining coal reserves are hugely inflated, and much of what's left is of such poor quality and so difficult to extract that the energy to be gotten by burning it is less than the energy you need to get it out of the ground. Richard Heinberg's book Blackout is a good summary of the issues here.

John Michael Greer said...

Robo, thanks for the link!

Gregorach, true enough. The irony is that if they keep it up long enough, they'll guarantee the end of what's left of the rule of law in this country, by providing a sufficiently massive constituency for whichever demagogue is most ready, willing, and able to hang them from lampposts.

William, my guess is that that's not on the boards at this point. Our last two wars in the Middle East were disastrous for US interests there, and as our national bankruptcy proceedings draw closer, the issue of paying for them without causing a run on Treasury debt will be an increasing concern. Expect plenty of toothless blunder as we proceed down the curve of decline.

Jollyreaper, I'll cover that in an upcoming post. The short form is that honest work doesn't pay the kind of salaries that a good scam does.

Thijs, fascinating. I hope the earthquakes aren't associated with subsidence; your country doesn't have a lot of spare height...

Michael, uncharacteristic? I've been snapping and snarling at various people all along!

CJ, oh man. They are smoking their shorts, aren't they?

Brad, it could be stopped in in its tracks easily, by reenacting the Glass-Steagall Act and enforcing existing laws against securities fraud. The problem is simply the level of graft in the executive and legislative branches that prevents what could be done from being done.

Wildwood, first of all, it's okay to be scared. The first step in facing up to fears is admitting they exist, and allowing yourself to feel them. Second, the fracking bubble isn't the end of the world, it just means another round of hard times on the heels of the last one, and so you're not stuck in a too-little-too-late situation unless you choose to be. Third, there's plenty you can do that will make a difference; for that matter, if you've got a church community and a garden, you're already way ahead of most Americans.

As for the rest, I think it's probably time for another blog post for people in your position -- there are a lot of them, and this blog's stats have climbed sharply enough that I suspect most of 'em haven't been reading long enough to have gotten the last one. Stay tuned; I'll have something to say in the next week or two.

Dan, do you really want to be an American in a foreign country at a time when blaming Americans for everything that's wrong with the world is likely to become a worldwide full-contact sport? The assumption of privilege that so many Americans have absorbed, as citizens of the current global empire, will not shield you from an angry mob, or from local governments that decide that throwing you and your assets to that mob is a great way to win popular support.

John Michael Greer said...

Anna, thank you!

Chris, you're stretching what I said far out of context. The kind of crisis that's imminent is the same sort of thing that happened in 2008 -- that is, a sharp financial downturn, job losses, the implosion of an industry that had been riding high on a speculative bubble, and so on. Of course the system as a whole will keep lurching along, just as it did in 2008.

Carlo, finding new narratives is an important part of the work ahead. I'm not a great fan of stories of the kind you've suggested here, for reasons I'll explain in an upcoming sequence of posts; still, it's not my job to decide which narratives the future will find most useful.

Koho, we'll see. I've mostly been watching the financial end of things, and that's showing all the signs of a bubble about to pop.

Ben, thank you. I think, for what it's worth, that you're overestimating the effectiveness of the various power structures we've got at this point, and underestimating the range of possibilities still open to individuals, families, and communities as the age of abundance comes to its end. More on this in future posts!

John Michael Greer said...

Unknown (offlist), please note the reference to "comments relevant to the topic of the current week's post" in the text above the comment box. Asking for recommendations for a history of the world doesn't cut it.

John Michael Greer said...

Ozark, the fire sales of shale leases and other assets now under way are a good sign that things may go bust in a hurry; so is the way that some parts of the mainstream media are starting to back away from their usual role as cheerleaders for the bubble. I could be wrong, of course, but that's what has me thinking that it's going to pop this year.

John D. Wheeler said...

@Ruben,

Richard Heinberg answered that questioned at length in "Searching for a Miracle" [http://www.postcarbon.org/new-site-files/Reports/Searching_for_a_Miracle_web10nov09.pdf] To make a very long story short, wind and solar technically could provide approximately all the energy the world currently uses, for an approximate cost of $60 trillion dollars, or very very roughly the world GDP for one year. (That's raw gigajoules, not taking conversion and storage issues into account.) I'll let you decide whether that is "possible".

Unknown said...

(Deborah Bender)

A personal anecdote about the rapid exhaustion of fracked wells.

Seven or eight years ago, I inherited a tiny fractional interest in an old Texas oil field. At the time I received it, that interest was worth nothing because the wells had not been productive in a long time.

About four years ago, the field began producing oil and gas again, presumably from horizontal drilling or fracking. Over the next year, I received cumulative royalties about the size of one month's mortgage payment, nothing to sneeze at.

The following year, the royalties were enough to pay one or two utility bills. The third year's royalties were enough to buy a meal at a mid-priced restaurant. I'm not complaining; what I received was an unexpected and undeserved windfall.

I don't know whether the wells are dry or the drop in natural gas prices makes it uneconomic to pump. But I'm an oil heiress!

Captcha sroomph which about sums it up.

Christian Smith said...

I'm a post grad in debt, and while I know most get-rich-quick schemes are too good to be true, it seems a relatively safe bet to bet AGAINST fracking on the stock market.

For anyone more knowledgeable than I, should I invest in a put option on fracturing companies?

John Paulson made 3 BILLION in 2008 betting likewise against bundled mortgages, perhaps I can make my pittance investment, however feeble, into 3, 4, or 5 pittances?

Leo said...

Its probably a good thing that the first party here to talk openly about peak oil is from the centre. Unlike what you've said about abandoning the centre in the politics of America, Australia hasn't. The main parties are centre-left and centre-right. Mind you, as an American political scientist pointed out in the paper a while ago, compared to the American democrats, our right-wing count as communists.

Budget cuts would be the main danger here, government pressure against those projects isn't likely here. Looking at some of it, the governments slowly increasing support to those types of projects and conservation

Of the current projects their (all added fairly recently), the easiest to replicate on a small scale would be the 2 metre wide solar ponds or the attachments to solar panels.

latheChuck said...

Just a quick comment on 3D printing: A friend of mine has one, and the hype is true! You can make ANYTHING with it... anything, that is, out of ABS plastic, that fits within a 3" cube, that you have a CAD design file for, that you can wait a few hours for (each unit), that can be built-up in layers with little overhang. So, it's GREAT for desk decorations and doll-house furniture, and maybe for ham radio coil forms, but not so good for anything you might want to expose to harsh solvents, high temperatures, or physical stress (e.g. bicycle parts). We suspect that it might be good for making simple patterns, for sand-casting metal objects of actual value, such as hammer heads or (rough) gears, but we don't have a foundry (yet).

OK. I lied. The hype isn't really true.

latheChuck said...

As I was using a small piezo-start butane-fired blowtorch to solder some copper pipe into a ham radio antenna, I looked at that clean, quiet, hot, blue flame, and I thought "I'm gonna miss you when you're gone."

Tim Smith said...

Just a very general comment. I am currently reading Nassim Taleb's "Antifragile". Now Taleb never mentions peak oil, or resource depletion of any sort. But the conclusions that he draws point out, without a doubt, that we have managed to construct an extremely fragile society/culture. I hope, with you, that it will unravel in a more-or-less orderly way, that we will revert to a caring society in which local organizations will take over what we have unwittingly assigned to the nation state.

Steelkilt said...

Another great post...

NPR had a report this evening that really underscored how MSM are swallowing the misinformation wholly.

http://www.npr.org/2013/02/28/173173548/texas-study-points-to-a-longer-natural-gas-boom

Perfect timing...

onething said...

I'm confused about ethanol factories being sold for pennies on the dollar. Gasoline is still 10% ethanol. Aren't we still subsidizing corn for it?

LewisLucanBooks said...

Several of the posters mention denial and delusional thinking. I have several dear friends who have taught me a lot of skills to make riding down the long descent a bit more comfortable.

It's hard not to roll my eyes when they state that there's a "vast pool of oil" under South Dakota. But I wonder if they really believe that as then they follow that up with "if the darned environmentalists let us pump it." My friends have already figured out a narrative to follow when the bubble bursts.

So I keep my head down and my mouth shut and keep working on my "chicken palace" that I want up and running in a couple of months. And am grateful for their help and advice in the meantime.

void_genesis said...

Is the behavior of wall street/investors actually rational?

By analogy a small tribe that finds its traditional food source would start consuming different kinds of food. As each attempted replacement food is found to be inedible or toxic it is rejected and another one tried. The alternatives are simply starving or being poisoned (with a small chance of finding a new food).

While my personal perspective is that there is no way our society is going to avoid major upheavals and reinvention of our financial/political systems there may still be a chance of a new energy technology emerging through the chaos (possibly LENR). Perhaps a smaller, emerging power center will be in a better position to develop and harness it than a failing power like the USA that becomes too bogged down in its accumulated problems.

backyardfeast said...

@ Deserted Pictures: just to add that it doesn't look like those European middle-class renewable energy subsidies are going to escape the austerity measures--they have been a kind of bubble of their own.

See, for example, http://www.time.com/time/world/article/0,8599,2106390,00.html

"Will Austerity Derail Europe's Clean Energy Movement?"

godozo said...

You have just managed to scare the living sh*t out of me. Just by describing that our country has shifted over to a Kleptocracy (rule by theft and stripping of anything of worth off things) and thus will be unable to do anything but fall apart at a faster and faster rate.

On the other hand, a couple of personal endeavors (personal improvement) has been bearing fruit as of recent, so if nothing else a keener, sharper me will be able to face the collapse head-on (or know when the time has come to surrender...)

Rudy Mann said...

The world is a huge casino that relies on suckers to keep it going. It's been that way since we forgot that dream time is real time. The Aboriginals of Australia understood this before colonization, with some still hanging in their sacred knowledge and culture.
Due to global environment changes which will be least felt in Australia, the non-Aboriginal population will quickly disappear worldwide, and the real dream keepers, with the aid of special science, will slowly repopulate the planet but keep numbers very low and spiritual. It will almost seem like a collective out-of-body experience resulting in a decision to migrate as a single entity, to another dimension where the collective one will join others to continue to endless journey.

Richard Larson said...

More acreage in oil and gas plays than there is in corn and wheat:

http://www.resilience.org/stories/2013-02-25/the-shale-phenomenon-fabulous-miracle-with-a-fatal-flaw

I also read a recent year there was 42 billion dollars worth of new natgas-fracked wells drilled to make 32 billion dollars worth of natgas.

We will soon see the real results of that!

John Michael Greer said...

Deborah, the field may also have been opened up to regular pumping because of the increased price of oil -- a lot of very marginal fields got put back into production after oil spiked. Still, the decline of your royalties shows the extent to which, one way or another, the bottom of the barrel is being scraped.

Christian, there is no such thing as a safe bet in the stock market, not least because people who know a lot more about it than either of us have already staked out their own positions. Don't put any money into it you can't afford to lose.

Leo, that's very good to hear.

Chuck, that's about what I've heard from others. As usual, the gap between hype and reality is deep and wide.

Tim, I haven't read that yet, and I should.

Steelkilt, very typical for the last stages of a bubble. Do you remember the frantic outpouring of studies pimping the idea of endless real estate appreciation just as the 2008 crisis was hitting?

Onething, yes, but that didn't prevent a huge overbuilding of ethanol plants, capable of producing far more than we use, and financed in ways that presupposed unrealistic profit margins.

Lewis, sometimes you just have to do that.

Void, no, because most of the money doesn't actually go to anything useful -- it goes to prop up the absurd subculture of extravagance called Wall Street.

Godozo, good. Just remember that we're facing decline, not collapse, and you've still got room to maneuver and time to prepare for each stage as we rattle down the long slope.

Rudy, er, and what makes your particular historical mythology more useful than the others that are competing for space in the collective imagination of our time?

John Michael Greer said...

Richard, typical bubble logic, with a typical bubble outcome!

mallow said...

JMG, do you not think it's also inherent in capitalism that regulations restricting it will always be undone eventually by those with a financial interest in doing so? From what I understand, the original regulations were mostly motivated by a fear of communism. As soon as that passed the regulations themselves didn't last long beyond it. So it seems to me like a continual loop of increasing inequality eventually leading to threat of social revolution which eventually prompts effective measures to pacify the masses by the investor/political class, leading to a pacified and therefore no longer threatening mass, which leads to a no-longer-scared investor class which therefore goes back to increasing inequality again starting the cycle all over. Is there much point in advocating regulation when there's no reason to believe that that cycle can be stopped? Or is that like asking whether there's any point to anything in the absence of progress?!

Maybe it's irrelevant if capitalism (at least as we've known it for the past 300 years) is a dying system anyway.Although maybe a similar dynamic happens in other systems - like the populations swings and living conditions around the Black death.

Cherokee Organics said...

Hi JMG,

The funny - in a kind of absurd Monty Python way - is that with Sinopec the Chinese are swapping your currency - which they have plenty of and are very keen to get rid of them - for real assets right around the world. They're doing it even if those assets are marginal. It is a very rational mid to long term strategy.

In the past few days, to my great relief, we received 60mm (2+2/5 inches) of rain courtesy of cyclone Rusty from all the way up in the NW of the continent. It is still going to be hot right up until about mid to late April, but an explosion of growth has just begun. An extract from the Dorothea Mackellar poem seems apt, even if I disagree about the sunburnt bit:

I love a sunburnt country,
A land of sweeping plains,
Of ragged mountain ranges,
Of droughts and flooding rains.
I love her far horizons,
I love her jewel-sea,
Her beauty and her terror -
The wide brown land for me!

Hi Leo,

In our hometown, we were once the leaders in solar ponds. Well worth the visit.

Cheetham Salt Works

Rudy,

Stop smoking.

Regards

Chris

Cherokee Organics said...

Hi JMG,

We are cooking here:

Australia breaks hottest summer record

The heat has been unrelenting. In the first bout of rain a couple of days ago, the top soil was so parched that the water which was running quite hard in my collection drain never made it to the absorption swale.

Regards

Chris

Josh Floyd said...

@ Ruben

Eiskrystal mentioned Tom Murphy's Do the Math, which I'd highly recommend also. This post, in which he discusses what he calls the Energy Trap, is particularly relevant to your question: http://physics.ucsd.edu/do-the-math/2011/10/the-energy-trap/

And if you're interested in some pretty solid quantitative work that tends to support the broad hypothesis, this article by Damon Honnery and Patrick Moriarty is worth looking at: http://www.sciencedirect.com/science/article/pii/S0360319910023657 (this just gives you the abstract, if you're interested in more you should be able to track down my contact details pretty easily)

Basis for my own take on your question (specifically for the Australian context) is here: http://beyondthisbriefanomaly.org/2012/07/14/a-rough-guide-to-visualising-energy-density-2/
You could make your own call on what you think the numbers presented there imply.

All the best,
Josh

Nathan said...

@Steelkit and @JMG:

I am wondering if coverage of this story (and others like it) is actually intentional malfeasance on the part of the average journalist? I think it could just be rooted in the destruction of public education discussed the previous handful of essays. If the average citizen/consumer doesn't understand that the industrial economy runs on an ever-increasing amount of fossil fuels, than why would the average NPR hack?

Fortunately, a discerning reader can get the information they need out of propaganda pieces like the NPR story precisely because the writer doesn't know enough to hide the truth.

Quote:

"It probably is reaching its plateau of production, which is about 10 percent of U.S. demand," Tinker says.

Let the boom-times roll!

Hal said...

In future ages, the devotees of the Halacious school of Green Wizardry will claim descent from the original "Hal," of whom little is known except for certain exchanges in the Sacred Archives, and that he was awarded the coveted Gold Star in February 2013, by the old reckoning. "The order would be a lot more prosperous if anyone had actually found this Gold Star, but we do have several good hand tools, including a steel shovel that according to legend belonged to the original Hal."

Unknown said...

I guess the thing is is that over time fewer and fewer became involved in the process of energy creation. Now we're really in a jam.

Jim R said...

Until and unless the "analysts" can get EROI (sometimes written EROEI) through their thick skulls, these bubbles are destined to be smaller and smaller over time.

There are things like ethanol or whatever Solyndra was working on, for which the EROI is well below 1.0, and the "analysts" promote them anyway.

And, of course, the point of your essay: things like maintaining the railroads, or putting solar on household rooftops, or geothermal wells ... these things are likely to have a positive EROI, but not nearly as large as the 100:1 of conventional oil. In a marketplace where the dollar-value of energy is wildly variable, the underlying EROI may not be discovered for years. So of course, by the time EROI raises its ugly head, the defunct $-ROI will have obscured these opportunities, which will have been squandered, and will be no longer possible.

Stu from Rutherford said...

JMG,
Thanks for inserting some important current events into the stream.
The weekly rig count by Baker Hughes shows a decline of 8 for gas in the US, and decline of 12 gas rigs in Canada. (URL is http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm?showpage=na).
Oil rig count is up, which is not surprising, since the price was high when these projects were decided on (weeks or months ago). There was a net increase in vertical rigs. I think that means either exploration or the beginning of a project. Maybe the pro's can chime in on that.

Jetfire said...

One might almost suppose that the best solution to our ills is a dictator- not in the modern, autocratic sense, but in the Roman model, where a single citizen is given absolute power for a fixed duration of time in order to respond to a crisis.

But I can't spot any Cincinattuses among our current crop of leaders, and anyone who would volunteer themselves for such a position is of course not to be trusted.

Helix said...

@Christian,

JMG's response is right on target. I don't know what the interest on your (presumably student loan) debt is, but one way to think about it is that every dollar uesd to pay down that debt "earns" whatever interest your loan rate is. And it's darn hard to get any kind of guaranteed return of any significance on investments these days. Especially after you pay taxes on any gains you may make.

Approliving said...

The difference I think between the return of old-style corporations on one hand and the return of old-style voluntary associations and democratic processes on the other hand, is that the former is more likely to return by accident. I could imagine a situation where a few corporations were lucky/efficient enough to actually accomplish something useful after the previous bust and before being wiped out by the next bust. From this lucky accident, something similar to the old-style corporation will evolve in the context of a collapsing economy, possibly without those involved even realising that they are effectively reinventing it. As the current set of economic intellectuals lose their credibility in a collapsing economy, I think people will respond by re-evaluating their economic priorities (e.g. adopting a less money-oriented point of view and focusing more on real-world results) and a new set of intellectuals with a very different, better-adapted set of ideas will come to dominance. I don't think that people will allow themselves to lose all hope for good and let things fall apart completely. Even if most people are ignorant of the collapse of past societies, or currently think it can't happen to us, the fact that information is even there will inform the way our society responds to collapse. Negative feedbacks can have their own negative feedbacks.

Approliving said...

PS I know you've said before that people won't just sit on their hands in the face of collapse. What I'm saying is that our society might have a lot more resilience than appearances indicate: remove a few relatively recent inappropriate assumptions from our intellectual repertoire, and the collapse might turn out fairly mild by historical standards (climate change notwithstanding). Some of these inappropriate assumptions might naturally fall away by their own, and depending on what ways of thinking replace them they might fall away on their own before it's too late.

David Gyllenhaal said...

Mr. Greer,

This is not strictly speaking related to this week's post so please forgive me. However, no particular post has seemed a specifically appropriate point at which to table this idea, but I believe it might be useful.

I just finished a BA in history, and came to the following conclusions.

1) All arguments and definite stances on the human civilisational trajectory circa this minute depend on a historical meta-narrative, where the hunter-gatherer "point zero" occupies the crucial position.

2) The hunter-gatherer "point zero" is analytically unavailable.

This is not to deny that there are no extant hunter gatherer societies available for study. It is to deny that hunter gatherer societies which have not been massively restructured by contact with civilisation are analytically available. No space to argue this but it is true, and has been for some time.

Anyways, what I'm really getting at is that I respect your approach to "traditional life ways" more than any other broad reaching historical commentator I have encountered. You seem interested in treating indigenous peoples as living breathing fallible human beings capable of diversity, cruelty, and brilliance, rather than yielding tectonic devices in a historical metanarrative.

So I was wondering if you might be willing to countenance, at some point, a comparative treatment of this topic from your own perspective, using some of the most prominent metanarrativists on the contemporary market as the points of departure.

The two works that come immediately to mind are Derrick Jensen's "Endgame" and Steven Pinker's "The Better Angels of Our Nature." The battle cry of a self-proclaimed "indigenist" juxtaposes nicely with a civilisational paean that exalts a continuous Western Ascent away from tribal violence to a Modern Monopoly on "self control," "empathy," "morality," and "reason."

I'm quite radically out of sympathy with both works of course, (although I'm much more afraid of Pinker's book, as it will almost certainly become a guiding light for neoliberal aspirations for a decade at least, to the planet's sorrow) but I think they define the contemporary fork rather perfectly. And both of them hinge on variant attitudes toward the tectonic phantom of the "point zero" hunter gatherer society.

An extended treatment would be an absurd request of you of course. But if you ever did find time or inclination to address this idea in any format, I would be very grateful.

It weighs on my mind heavily these days. Despite feeling old and tired already, I am technically, at 23, still part of the youth demographic, the people whose decisions are going to really count. The phantom of the hunter gatherer haunts this generation like no other, I am finding. Whether it's talking about our "unnatural" reliance on newly poisonous sugar, or exalting the elevated moral sentiments and capacities for self control that the internet and modern cognitive science has brought us, in contrast to our impulsive ancestors, it seems to dominate our thoughts, regardless of where we are on the spectrum.

Joseph Nemeth said...

Excellent post, JMG.

morenewyorknews said...

Most powerful essay i ever read from JMG.Covered everything i thought about shale gas and shale oil.
I have a question JMG:
The recent news about 2 trillion dollars(the figure now jumped to 20 trillion dollars) shale oil find in Australia seems suspicious to me.Is this news correct?
http://www.telegraph.co.uk/news/worldnews/australiaandthepacific/australia/9822955/Trillions-of-dollars-worth-of-oil-found-in-Australian-outback.html

phil harris said...

JMG and @Nathan et al
Further to anchoring American perception of petroleum consumption in reality: it is worth a try!

It is quite difficult in the ordinary way to carry numbers and categories around in our heads. I am no exception and as you say, again found The Oil Drum useful, particularly useful.
http://www.theoildrum.com/node/9702

American 'conventional' 'crude oil' extraction / production was in long term decline over decades but recently stabilised after 2005, and is about 5 million barrels a day. The USA still makes use of 'total liquid fuel', that is 'crude oil' + 'others', to the extent of about 18 million barrels a day. (The total 'liquids' consumption was more than 20M bbl/d in 2007, but has come down since.) US domestic production of 'total liquids' has risen 35% since 2007; the rise entirely made up from 'other', rather than from previous ‘conventional’ sources. Most of the rise comes in about equal measure from Biofuel and from oil from shale, but there is a not insignificant contribution from extra natural gas liquids (NGL), like propane, which can be bottled as liquid for various uses. NGL and Biofuel are not the same as crude oil.

The net result, thenr, is that US must still import about 45% of its 'total liquids'. What is more, imports must still meet 50% of the US requirement for the 'real thing', that is for 'crude oil'. Shale oil has reduced imports of crude from about 60% of requirement, to 50% of requirement. Which, I presume is the '10% of requirement' quoted by Nathan. This seems a very long way from ‘independence’, by any realistic route, unless we factor in a very dramatic further reduction of American consumption of transport fuel.
best
Phil

KWohlmut said...

Off but related topic -- has anyone else had trouble ordering JMG's latest book from Stylus books online? I see one person in these comments says they have received it. When I try to register on their site, a necessary step before buying, I get a complicated PHP error page. I've tried it in three different browsers, same result. I don't even see a registration link outside of the shopping cart. I'm stymied.

Cherokee Organics said...

Hi JMG,

The shale game is an old one. Back in the 19th century the same thing happened with the expansion of the railroads.

The initial investors received extremely good returns from their investments. Then as the years progressed and the costs of operating and maintaining the railroads increased, the investment returns decreased significantly and many people lost their shirts.

The reason for the increase in operating and maintenance costs of those companies is that over time the rail infrastructure and rolling stock had to be replaced. This cost was not taken into account and thus led to very high initial returns and then accelerating costs wiped those out.

This led to - after much resistance from the business community and heated debate - the inclusion of the cost of asset replacement (depreciation) in the books of those railroad companies.

The problem today is that because companies can externalise costs by either dumping wastes into the environment and/or extracting resources from that environment as cheaply as possible, they'd be crazy not to do it.

This is another tragedy of the commons.

The ability to calculate an accurate cost for the use of the commons has not been seriously considered by our society and as such it is widely ignored.

There is also an investment maxim that says, "past performance is no guide to future performance". Such is hard won wisdom.

I have faith that your writing is good enough to sustain you during a downturn.

PS: The rise of internships in the US in businesses is also a tragedy of the commons. I exclude people who are doing internships in return for food and accomodation. Agriculture has many examples of these and they are very similar to guild instructions / systems.

Regards

Chris

Cherokee Organics said...

Hi morenewyorknews,

Coober Pedy is literally in the middle of nowhere. I've been there. It is so hot that most people live in underground houses which are ex-opal mines. Obtaining the massive quantities of water to frack the rocks would be a real problem. As it is they operate a solar desalinisation plant for water supply for the town. It is an arid land with extremes of temperature.

The nearest capital city is in Adelaide, which also has problems with its water supply as it is located at the end of the Murray River (think high salt levels from irrigation). They've even shut down the port to the city for container ships so freight travels by road or rail from Melbourne.

Imagine the cost and energy involved in a massive pipeline to either Melbourne or Sydney. Dunno, but there are some serious technical issues involved in extraction. The final EROEI would be very low, if positive.

There are hot rocks around that area and companies have been drilling there for years on end trying to establish viable geothermal electricity generation.

Two words, good luck!

Chris

Unknown said...

There is a way to keep the growth paradigm running. Eliminate 98% of the planets human population, ensure you are one of the survivors and that your bank owns the paper to every mortgaged asset, and then ride the wave of rebuilding.

Now think about what is going on with all the terrorism inspired legislation designed to control civilian populations, the biological mechanisms being experimented with and tell me there ain't a very scary agenda being run.

phil harris said...

@WKohlmut
I ordered my copy from Britain from Karnac books. here http://www.karnacbooks.com/Product.asp?PID=32927

Have just about finished reading and am still digesting. I like JMG's definition of 'hope'. So does the reviewer at Karnac books, but her paraphrase would not be mine. 'Hope' in a Dark Age needs its own durable internal 'energy' source - as always.
best
Phil

Jim R said...

Reading through Joy's article on the South Bend ethanol plant headed for scrap. ...
Those of us who have been following The Oil Drum have known these things would end this way since before they were built. I seem to recall a debate with venture capitalist Vinod Khosla about the wisdom of this endeavor.

An interesting side note -- the oil/gas industry has known for maybe six or eight decades how to convert natural gas directly into ethanol in a refinery. It bypasses all those messy agricultural and zymurgical steps, and has always been cheaper from an energy perspective. However, they have not built refineries to do this task because it would not be profitable over the 2 or 3 decade life of the refinery. And because the zymurgists received a $.50/gallon subsidy, while the chemists did not.

Repent said...

I'm now terrified of you because you've indicated that you are an active freemason. (Any relation to Willam Greer- the man who killed JFK?)

http://www.youtube.com/watch?feature=endscreen&v=DJPkTfXtdbU&NR=1

Ruben said...

@ all who have sent in suggestions, thank you. I was hoping most for specific analysis of why material shortages--steel, rare earths, etc--will make a renewables buildout impossible. Some of the links given get pretty close to that.

@Gideon, thanks for that. I follow TAE, but re-reading that one was useful, and they quoted another blog that was also good.

I have seen the Kevin Anderson video, and hit the bottle pretty hard. Maybe that is why I don't remember anything about renewables in it ;-)

@Master Oogway. Thanks for the Vaclav Smil link. I will follow up on him.

@Cherokee--judging by your comment, I think my request for information wasn't clear enough. No, I think it is pretty obvious we won't have a major renewables build-out, but I think a lot of things that most people choose to ignore, so I always try to have a lot of references when I write things. And while I don't know how much PV it would take to smelt aluminum, I wouldn't even try. Maybe a solar furnace, but as an industrial designer, I am well aware of how little aluminum that would smelt. And we sure do like our aluminum....

@ Eiskrystal and Barath, thank you.

@ John D Wheeler--that pdf from Post Carbon looks good. They look at "dependence on additional resources", which is what I am chasing. I will look through their citations.

@ Josh, I have read all the Do the Math posts, but when I searched through his blog on this quest I didn't twig on that post. Thank you.

Jamie McMillin said...
This comment has been removed by the author.
Liquid Paradigm said...

@Unknown

"Now think about what is going on with all the terrorism inspired legislation designed to control civilian populations, the biological mechanisms being experimented with and tell me there ain't a very scary agenda being run."

Okay: There ain't a very scary agenda being run.

There's a bureaucratic slow-creep panic occurring as the limits of the natural world are starting to prove unyielding toward our delusions of eternal plastic prosperity and paper growth. The Myth of Progress has trapped most of us in a binary thinking model which prevents us from stepping back and considering real causes and effects. You should go back and read through JMG's posts which deal with utopian/apocalyptic thinking.

This was also pretty good - http://www.skepticalscience.com/recursive-fury-huffpo.html

As at least one variant of the saying goes, never attribute to malice what can be attributed to incompetence.

stravinsky7 said...

Thanks, JMG. Keep on fighting the good fight. You have done me a world of good. My father in law says there are two types of people, builders and destroyers.. You build me up, you build up our country(side?), a hard task for a lonely Druid in the 21st! Thanks!

John Michael Greer said...

Mallow, a similar dynamic happens in all systems. That's the way systems stay in balance, by a series of complex swings around a midpoint. That said, sometimes the midpoint shifts a little, or a lot.

Cherokee, delighted to hear about the rain! As for the Chinese, exactly -- they're no fools; they know perfectly well their dollar collection will be worth nothing in the not too distant future, so they're spending it like there's no tomorrow. For the dollar, there isn't.

Nathan, I suspect the proportions of ignorance and mendacity differ from one journalist to another, and of course there are various flavors of journalistic bad faith -- believing something because doing so will make you money is a common habit, now as ever.

Hal, good! Let me guess -- down through the years, the handle of the shovel has been replaced four times, and the blade twice...

Unknown, a nice summary.

Jim, another nice summary. The crucial point just now is precisely that the vagaries of bubble economics are distorting priorities, so that resources that might be put to good use are being wasted on useless or actively harmful projects instead.

Stu, it would be interesting to see that compared to seasonal trends, etc.

Jetfire, any person who would win enough support to get the job would by definition have committed himself to do all the wrong things.

Approliving, the problem there is that it's not just a matter of mistaken ideas and assumptions. There are also mistaken actions and their legacies, and those can't be changed in the twinkling of an eye. Even if everybody in the US suddenly started agreeing with me, we'd be in for a very hard time, because all of our society's infrastructure is geared to a world of cheap abundant energy that doesn't exist any more, and will have to be scrapped and replaced with whatever we still have the resources to build -- which isn't that much. I may do a post on this a bit further on.

David, it may be off topic for this particular post, but you've raised an issue that's extremely important for the broader theme I'm developing in this blog. I suspect you know that the books you've mentioned are simply the latest rehashes of an old quarrel that goes back centuries -- Jensen is basically rehashing Rousseau, and Pinker is doing the same thing to Hobbes; both rehashes are stuck in a particular mode of relating to history which produced high-grade nonsense, and they agree on far more than they disagree -- they're simply slapping different value signs on the same imaginary linear trajectory through time. I'll be discussing this in much more detail when I finish the current series of posts on the end of the American empire, and move into the next sequence.

John Michael Greer said...

Joseph, thank you.

News, claims like that surface every few years. Do you remember how, a decade ago, Caspian Sea oil fields were going to flood the world with cheap crude oil? The Telegraph story gets its information from unnamed consultants working for the oil company that's doing the exploratory drilling, and can count on a stock price boost in the wake of news of this kind, however dubious it turns out to be in retrospect.

Phil, exactly. We'll achieve energy independence down the road, all right, but it'll be because the US is too broke to import any, and has to sell a fair amount of its production overseas to get hard currency for necessary imports.

KWohlmut, I've contacted the site and they say they've fixed it. Let me know if you have any further problems.

Cherokee, well, I appreciate your faith, but my income dropped quite a bit in the post-2008 crunch. It didn't help that two major US bookstore chains went bankrupt and never paid publishers for millions of books they'd sold, meaning that the authors of those millions of books didn't get royalty payments on them, either.

Unknown, you really ought to lay off the thriller novels, you know. Wipe out 98 per cent of the population, and there won't be any wave of rebuilding -- existing stocks of housing, manufactured goods, and everything else will be enough for everyone left for decades, meaning that the economy will grind completely to a halt and leave the paper held by banks as worthless as Confederate dollars in 1866.

I could go on -- your scenario has enough holes to fly a herd of hippogriffs through -- but why bother? The point I'd encourage you to consider is why you, and so many other people these days, have such a powerful craving for narratives that accuse somebody you don't like of pursuing sinister agendas.

Jim, exactly. This is another example of the way that bubble economics fosters economic distortions.

Repent, sure, you should be terrified because I spend my spare time raising money for free clinics for children with language problems and other local and global charitable needs. It disgusts me that so many people are so eager to spread a set of weary and repeatedly disproved lies about an organization that has done a huge amount of good in the world, and very little evil. If that's your idea of a helpful contribution to the discussion, I think you need to take your internet handle's advice.

Stravinsky, thank you!

dltrammel said...

M said:
I am continuing to expand our home economy to meet the shrinking global economy, but I'm a bit stumped as to what kind of home business I might venture into. I'm planning to turn my stand alone two car garage into some kind of workspace, but I can't figure out what might be feasible--obviously it will be a while until blacksmithing really takes off, for instance. Maybe soapmaking? Knife sharpening? Small appliance/bicycle repair? What small businesses will people absolutely need during a coming bust? And not want or be able to do themselves? I hope it's okay to ask readers for some suggestions. I have a good range of general skills, from welding to woodworking."

M, we have a forum just for this question over on GreenWizards.org
GW Circle - Your Craft

My suggestion would be take up small appliance repair. As money gets tighter more and more people will have to get their appliances repaired rather than tossing it into the trash and replacing it at Walmart.

Wildwoodchapel said:
Dear God, I feel lost and don't know what to do. Has this shale bubble thing made any preperation I might make now too-little, too-late? Is there nothing left but pointless lamenting that I should have started all this five years ago when I first heard about you? I know I"m thinking apocalypticly (sp?) but I'm afraid that maybe for me it's the only way.

As JMG said, its ok to be scared, its what you do after that which counts. And you are ahead of most people with that garden too.

Basic needs such as food are a great way to start, and can be done slowly and cheaply too.

With your family, I find that it helps not to talk about preparations as something to do re: Peak Oil, but to address it as something more concrete.

The Midwest is about to be hit again with a ton of snow. People will be stuck in their homes. So now would be a good time to talk over with your wife, the idea of stockpiling a few weeks worth of food just so in the unlikely event your area has some sort of situation that makes it hard to get to town, that you are prepared.

Once you get her thinking that looking forward to possible events that would make her life miserable, and not as something hard to quantify as "vaguely bothersome" like Peak Oil, will make it easier on you.

Next I'd be looking at ridesharing in your area. Perhaps with co-workers. Even something where you both meet halfway, will help cut your fuel bill when gas goes up sharply.

There will be some trade-offs, as sahring means you must make compromises with those you ride with, but doing it now while you have the resources to fall back on if needed (taking your own car in when you can't share), will make the transition easier.

You can find other helpful ideas and a community of like minded people over on GreenWizards.Org

Dennis D said...

I am thinking that the concept of money is a type of commons, which is being badly abused. I come to work, trade real energy for digital representations of dollars, then go to my local store and trade those digital bits for real items. The system works because, at a local level, the rule of law still works and everybody has faith in the value of those bits and pieces of paper. However, I am seeing that the bigger the institution, the rule of law is sporadically applied, and am losing faith that I will ever see the real value I presently attach to those digital dollars caught in the retirement system (actually I have written off most of those promises, and any value I see in the future will be a bonus)
So am I correct in seeing “faith” in the monetary system as a commons? And those with the ability to freely emit fresh money without corresponding value destroying that commons?

jollyreaper said...

The question about sustainability also comes down to "How much energy do you really need to live well?" These are questions I don't really have the answer for, not yet.

Hypothetically, could we handle a 50% per capita drop in consumption? What would that look like? Work closer to home, take mass transit, eat locally, build homes that aren't energy hogs, etc.

They say 40% of our food in this country is wasted. How much of this could really be saved?

Whenever anyone with sense talks about budgeting, it's always easier to save a buck than make a buck. And when it comes to conservation, there's much about our built society that's not worth saving and wouldn't be missed.

3,000 SQFT mcmansion in the burbclave, two full-sized luxury cars, private schools for Muffy and Buffy, expensive vacations, the expense of keeping up appearances and buying things you don't need to impress people you don't like. How much could that lifestyle change while preserving things of true value?

I'm thinking back to articles I read about displaced nobility, those who escaped the fall of old regimes and who are living out their days in apartments they wouldn't have found fit for their servants, reminiscing about bygone days. The irony is that they consider their positions a devastating humiliation while most of the rest of the world would love to have their problems.

Ruben said...

@dltrammel and M

I agree with small appliance repair. I would add shoe repair and solar hot water installation. And farming of course, if you like hard work and little money.

Ceworthe said...

JMG- for those people who insist you are one of the Space Lizards for being a Mason, I would suggest you say with a wink, "But of course, why do you think I have this beard? It's to hide my lizard's wattle, Bwahhaahhaa!!!" Then watch them run! :-D

Cherokee Organics said...

Hi JMG,

It seems as if the money economy is outpacing the real world economy:

Dow Jones spikes to all time record

The article also mentioned that fuel costs were up for people at the pump and we are certainly seeing that here despite having a stronger currency. This is one of the binds that the US will face as the dollar is continued to be devalued. Especially if 50% of Oil consumed is imported.

I certainly wasn't making light of your situation. A couple of weeks before you commented about your personal involvement with the Borders debacle back a few years, I too had commented that I took a big hit to my meagre income. It was an unpleasant time. I have been considering for some time now, what expenses I can cut back on should the need arise.

The concept of limitations is particularly difficult for people to grasp. The reason is that they can switch on a light, go to a petrol station and fill up, cruise the fully stocked supermarket, get free content on the Internet etc... They miss the point that all of these things are representations of energy because they have only a cursory involvement with them.

Hi jollyreaper,

Quote: "Hypothetically, could we handle a 50% per capita drop in consumption?"

The answer is yes. However, the question should be rephrased, "What are other people doing day to day in the world to live with 50% of the available energy, goods and services that you currently enjoy access to?"

Here are two bits of peasant wisdom for you from Down Under:

- It is not how much people earn, but what they do with what they earn; and

- Land is there to save you money, not make it.

Regards

Chris

Stu from Rutherford said...

JMG said: "it would be interesting to see that compared to seasonal trends, etc." (with regard to weekly rig counts, in this case natural gas).

Yes, it would be, and I'll keep my eye out for something a little more illuminating to share with the comment board. Apples-with-oranges can come into this, since it's one thing to drill 400 wells if the output will stay up for 5-10 years, and quite another to drill 400 if the output will degrade 60% in the first year.
Of course, "The Oil Drum" is a good start, and I'll try to visit every week.

I *can* tell you that this number has dropped by well over 50% in the past 18-24 months.

Lidia17 said...

@DennisD, this is a wonderfully valid concept explored by Thomas Greco, among others.

Here's a podcast where he explains that the credit commons is something that we have relinquished to the banks for free.

http://c-realm.com/podcasts/crealm/265-legal-tender-and-the-credit-clearing-function/

"it's our collective credit that supports the dollar"

Around 9:06
"We give our collective credit to the banks, and then we beg them to lend some of it back to us, and we pay them interest for the privilege. So this is a situation which has enabled the concentration of power and the concentration of wealth in ever-fewer hands…"

"We basically GIVE it to the banks and we ask the banks to lend it back to us."


======================
The privatized-GMO-crop juggernaut is another instance of our relinquishing a commons without the hint of a struggle. In this case the concession is so abject that we haven't even retained the possible; we've stood idly by as the well has been intentionally poisoned.

http://independentsciencenews.org/commentaries/regulators-discover-a-hidden-viral-gene-in-commercial-gmo-crops/



Loch Wade said...

Excellent and well-spoken article. You're right on. Peak Oil will NOT go away by wishes or fracking.

Cherokee Organics said...

Hi JMG,

Well this generous facility sounds familiar on an international stage. I wonder what the motivation would be in setting it up given that there is no present need?

Mother of all bailout funds

I can only speculate that there is some fear that credit markets may possibly freeze up again at some point in the future? Dunno, but for us it is big.

Regards

Chris

Liquid Paradigm said...

I read this morning that the city council of Fort Collins, CO, last night voted to ban all fracking within the city. The governor (a wholly owned subsidiary of the Colorado Petroleum Association) last week threatened to sue any municipality which tried to ban fracking.

Colossal desperation, now laced with anger. Interesting times ahead.

Jim R said...

Someone mentioned the 3-d printer again in this thread.
It has occurred to me that such devices might have a niche application in the creation of small plastic parts for appliance repair. It would be especially useful if equipped with a somewhat tougher polymer than the 3-d prints I have seen so far (which are extremely fragile).

The niche would exist so long as polymer stock is available, and there's microcomputer technology that can manage the complexity of the task. I think one of those two things will set the limit for this niche.

phil harris said...

JMG
I appreciate many of the themes that have emerged in comments here – but refer to one in particular, the theme being ‘theft’, ‘fleeced’, ‘loss of customary rights’, ‘re-writing the rule book’ in favour of – you name it. The sort of thing observed during times of major shifts – e.g. at the end of [any] empire; transitions during the making of America; the emergence of industrial society in England; revolutions etc.

Nothing toatally inevitable, perhaps it seems to me about these meta-results; Solon 599 BC re-wrote the rule book for a while and obtained a degree of resilience and social commonsense without resorting so much to expansion into other peoples’ space and social and physical resources? (Religions continued to write some of the lessons into their rule-books for a long while afterwards, to try to factor-in monetary stability when large scale social-theft, even more than the more personal kind, was recognised as having a pretty universal downside. And that was a long while before coal and oil.)

BTW, the link I provided earlier was to a paper by Kumhof (IMF Research Dept.); “unequal = indebted”.

I forgot to link to the paper that includes the reference to Solon reforms. For any here who are interested, scroll down a fair bit for the to me mind-boggling introduction to monetary history.
http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf
best
Phil H

Repent said...

"
Repent, sure, you should be terrified because I spend my spare time raising money for free clinics for children with language problems and other local and global charitable needs. It disgusts me that so many people are so eager to spread a set of weary and repeatedly disproved lies about an organization that has done a huge amount of good in the world, and very little evil. If that's your idea of a helpful contribution to the discussion, I think you need to take your internet handle's advice."

I sincerely apologise for those remarks; I didn't think the consequences through. You're amoung the best minds out there; herding cats in the right direction. I was wrong, and I admit that I was wrong in posting those comments to your board.

(I've read too much paranoia online about secret societies and media garbage about illuminati and free masons, sometimes its hard to judge where reality lies)

I'll understand if I'm banned from your site for this matter.