Peak Oil Joining the Dots

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Nov 8, 2013 (3 years and 9 months ago)

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Peak Oil

Joining
the

Dots




-
Some thoughts by Nick Outram






Introduction

I’ll be blunt: we are just years away from the most profound changes ever to hit humanity
as a whole
and the

implications are
-
at best
-

not pretty and
-
at

worst
-

devastating
. Most people may be vaguely aware for some
time to come that things are not quite right, that the economy is not what it used to be, that prices are going
up and up for example, but the full

and awful realisation of what is happening will pro
bably escape most
people for a some

time to come. When it does the shock is going to be like a passenger
on the

Titanic

finding
out the ship

has a couple of hours left before it sinks forever into the
icy

sea. Personally I would have liked to
know this was going to happen while the ship was still in the docks but we have already set sail, in fact the
iceberg is
already
well in sight for those that are looking....


The major assumptions and conclusions are
listed here

in summary
:


Part 1: Assumptions

1.

Current society is totally dependant

you could say addicted to
-

non
-
renewable fossil

fuel resources.

2.

The
global
production
output
of
oil

is about to go into
a
permanent
decline.

3.

The ‘Export Land Model’ will pro
ve to be correct

causing this decline to be

sharper

than anticipated.

4.

Alternatives,
Renewables and ‘Fantasy
-
Tech’ will not be able to save
us from
the hardship
period
ahead.

5.

Summing up: The next decade will see a crippling energy crisis that will bring the

global economy to its
knees and force changes in many existing branches of human activity.


Part2: Conclusions

1.

Energy costs will soar
,
gas,
coal and nuclear usage will rise,
and global

warming will increase.

2.

Commodities and food costs will rise.

3.

Transport

will be hit the hardest by the energy crisis.

4.

Conservation and energy efficiency will rise out of necessity.

5.

Financial instruments will be devastated {pensions, savings

and a note on property
}.

6.

The need to find local sustainable solutions will give rise
to the re
-
emergence of communit
y and localised
food production.

7.

If the energy descent is too rapid, conservation measures prove ineffective or we cannot build up
alternatives quickly enough then the market force of demand destruction will take over and
ult
imately

risks
ending society as we know it [This is a worse case outcome

I’ll let you be the judge of this one]


Part3: Preparations

and Prosperity

Part4: Final Thoughts and a Speculative Timeline


Part 1: Assumptions



1. Current society is totally depen
dant

you could say addicted to
-

oil/
non
-
renewable

fossil fuel resources.


A large amount of current consumption is unnecessary from a survival perspective. I would go so far as to say
that consumption is now primarily concerned with the survival of the gl
obal economic system. The next picture
shows the type of ‘stuff’ needed by an average American family

(I’m not having a go at Americans per
-
se here:
they are just further up the consumption ‘progress’ curve than we are)
:




Typical h
ousehold goods

the
av
erage American family


-
Most of it probably comes from China and a good deal of these products are made with oil and transporte
d
using oil derivatives (petrol and

diesel).
As a society we are
/have been

saturated in
cheap
oil and energy
.

The by
-
products of
this situation are everywhere around us from bloated SUVs/Chelsea tractors to bloated
waistlines and the concept of the ‘throw
-
away society’.
Each yea
r we use up a cubic mile of oil;

here it is (with
the Eiffel Tower for
size
comparison):


One cubic mile
of oil every year.



Electricity generated
-
mostly from Coal and Gas
-

helps to keep the lights on: oil does the rest:





Energy usage as shown by night
-
time electrical lighting


global composite picture
.



There’s another thing that last picture shows tha
t you might have noticed. The
shaded

patches show where
most of the oil and gas are actually present. Notice how the brightest parts of the World, the rich energy
intensive parts, are also the ones with low amounts of

shading
? That’s a clue to the problem.

Let

s be a bit
more specific though:




-
The number crunchers at the International Energy Agency came up with the graph above and
it’s

quite an eye
opener

when comprehended
. It’s also

IMO
-

complete rubbish

from a predictive perspective
. It shows that ov
er
the coming two decades overall energy usage will increase (by
~
50%), the wealthy advanced nations will
continue to gobble up massive quantities of oil and all this oil will be supplied by our
good
friends in the Middle
East, Russia and some bits of Afri
ca and South America. I would like to give them

a pat on the back right now
for

keeping the family in the first picture
spend
spending away

and even borrowing more money from their
future
-

to fund their happy existence.
There’s only one problem: it isn’t
going to happen




The
global
production
output
of
oil

is about to go into

a

permanent
decline.


Wha
t can be said with any certainty

about this
?

Have a look at this:




World Oil and Gas discoveries and Production 1900
-
2000



The top graph shows that most
of the oil that we ever discovered

especially the nice big easy fields like
Ghawar in
Saudi

Arabia or Canterell in Mexico
-

where discovered a long long
time ago.

The amount of oil and
gas we discover each year has been falling for a long time and at the s
ame time the amount we extract and
consume from those discoveries has been going up and up.

An oil field is not like a big tank of freely flowing oil

it’s more like a giant
deeply
buried S
lush Puppy.

Each well added
has its own lifetime and
production cur
ve
and when
all the production from all the wells drilled into a field
is

summed you get a bell shaped curve that
equates to the entire fields output

over the
fields’

lifetime
:





Now I could go on and on and on about this but I’m not going to as I can
already sense a few yawns forming

from the non
-
geologists (most of you)
. You’ll have to take my word for it that
many
-
worried
-

people with far
more oil Industry experience and far more mathematical ability than me have calculated that given the amount
of
Production already discovered and how long it has been since we last made any major discoveries we are
effectively ‘up shit creek without a paddle’ wrt.
w
h
ere we are globally on that

oil bell curve. Simply put, as we

approach

the

peak of this
production
cu
rve (and some of the aforementioned

think we are a couple of years
past it

mind!) the strains between demand and supply intensify greatly.




Pissed off Hummer owner


One thing that is clear for all to see is that demand for this product is not going to g
o away as countries like
China and India Industrialise and Russia, Brazil, Mexico,
Venezuela, a good chunk of the Middle E
ast and
many other places all try and improve their standard of living towards ‘Yankee Doodle’ standards.

The global
average is

less
than 5 barrels per person per year

the US consumes 25, UK consumes 10.95, China uses just
1.8 (but they are catching up fast!)…
[Source:
http://www.nati
onmaster.com/graph/ene_oil_con_percap
-
energy
-
oil
-
consumption
-
per
-
capita

]


A photo taken at the same spot 20 years ago and now with some future projections:



to

to



What about Gas then? The
Red

line on the bottom chart
of the first picture
doesn’t
p
aint a much rosier picture.
Peak Gas production could come as little as 5 to 10 years after Peak Oil production by some estimates
. Gas
prices tend to be coupled with oil prices to some extent

if oil peaks and rises in price Gas probably will too and
subst
antially
. Other non
-
renewables like Coal and Uranium also have peaks

more on this later.


It’s important to realise that
we are not running out of oil

at this point
.
There will still be oil and gas to extract for
decades to come

lots of it in fact. The d
own slope simply means that it will be harder and harder to fill the gap
between supply and demand and we will have to put more and more effort into finding what’s left and pumping
it
out from places that we have already found

and this
itself
will take mo
re of the energy we have left to do so
.


The implications of this demand
-
supply gap form most of the other dots that need to be joined to get a picture
of where we are heading

in the decades ahead

but the next section digs a bit deeper into the idea hinte
d at
above: that all the countries who
currently say they
have loads of oil and are still able to export

the stuff

are
rapidly growing themselves…



The ‘Export Land Model’ will prove to be correct
causing this decline to be
sharper

than anticipated.


OK,
this ones going to take a bit of explaining but it’s quite a simple and sensible concept so bear with me. If a
country has
lots
more oil than it can use internally it belongs in the ‘Export Land’ club
. As Export Land countries
develop they use more and mor
e of their own oil for internal usage

their populations grow and per
-
capita
usage increases as well. They

look to places like America and

want the
freewheeling

Yankee Lifestyle



everything in picture1 could/should be theirs, and why not? They posses on
of the
world’s

mos
t valuable
commodities: oil
, and so they are to use a word ‘minted’
. Petrol
prices are cheap
, heavily subsidized by the

oil
-
rich

state in fact, this leads to almost zero regard for conservation or energy efficiencies.

As a result
populati
ons explode and internal ener
gy usage goes through the roof.
Saudi Arabia
currently
uses
almost as
much oil per capita as

the US


[24.4 bpppy]


Some Export Land countries have ‘Grand Visions’ and come up with ‘diversification’ plans for a world post
-
oil:





‘The World’

manmade artificial islands and ‘The Burj Dubai’ tallest skyscraper

coming to an Export
Land country near you…


>
The irony th
at there is not going to be much global

tourism and a great global economy post Peak Oil
seems to be lost on t
hem…


Eventually a country that was once a great
oil
exporting nation sees its NET exports being eroded more and
more because it has to keep a greater and greater proportion of its production to itself

and lo and behold this
is exactly the situation that
most ‘Export Land’ countries find themselves in.




As reported by ‘The Peninsula’ High oil prices are helping to accelerate the momentum of the Gulf region’s
construction sector and its rising contribution to individual country’s GDP. The Gulf countries a
lone account for
more than 2100 existing and planned construction projects currently valued at US 1.2 trillion. The region is
seeing a steady upturn


with the enormous infrastructure growth from high profile building projects such as
the Pearl Qatar proje
ct, Lusail Development project, Dubai Waterfront and Palm Deira.


-
FreePressRelease article




-
ELM diagram, Jeffrey J Brown

aka “Westexes”@TOD
.


The

diagram above shows the example of a country that hits
its
peak production
rate
of 2 million barrels per
day at year 0 with a 1 million bpd
internal
consumption

rate
. Over the next decade consumption continues to
grow (
green line

at 2.5%) while production
(
Blue line
)
declines at 5% per year. The
production
decline goes
from 2mbpd to around 1.3mbpd

or about
a

37% decline
-

but the NET export decline
(
Red Line
)
is 100%, i.e.
the country leaves Export Land and now belongs to the growing band of ‘Import Land’ countries.


After decades of

feeding oil to the world


t
he UK will leave Export Land in the next year or

two…

An estimate of
future UK oil production

not a pretty picture (dots are actual production):




UK North Sea Oil Production

with a curve fitting exercise [Khebab:TOD]



The UKs import
-
export model
is shown
in the next diagram


note the upper bound o
f the optimistic DTI
forecast pushes the date we exit ‘Export Land’ status out by about 5 years. That would be good if true but its
not going to help that much, we should
k
no
w

where we are very soon.
The Orange wedge represent about
£36.5 Billion @ $80/bar
rel if the DTI have their forecasts wrong and growing exponentially with time

I will save
the juiciest conclusions
to
the next section but I think you
are starting to
get the picture:


>
Having run out of Net Oil t
he

UK is
stuffed

(like every other

Impo
rt Land
’ country
)




The US
itself
is heavily reliant on Oil imports having peaked its production in 1971. Since then it has been
sponging of Export Lands to fuel its ravenous demand for oil. After the 1
st

energy crisis in the 70s like most
advanced nation
s it implemented Energy Efficiencies which saw the overall growth in consumption per capita
level off. In addition during this time it has increasingly moved away from more energy intensive manufacturing
to a service based economy. Never the less, a declin
e in available NET oil
to import as illustrated below c
ould
have a devastating effect on the country


and probably will
:






Source: EnergyBulletin [
http://www.energybulletin.net/33200.html

]



The E
xport Land

Model predicts sharper than expected declines in oil available to the
open
global
oil
market,
the implications of sharp declines are

much

more serious than a lower decline over a longer

period that might
give us time to adjust to the new si
tuation.


If this assumption is correct
-
and so far the
facts seem to be bearing it out
-

the global shock could be

far more

severe

than predicted
.


Alternatives,
Renewables and ‘Fantasy
-
Tech’ will
help but will
not be able to
save

us from

the hardship
per
iod
ahead.


There are a bunch of
promising
replacements for oil and fossil fuels available or on the drawing board. I am not
going to argue that is not the case. Someone may even have a
“Mr.
Fusion


device tucked away in their
basement

fingers crossed.
Som
e
other more likely
possibilities include:




Conservation and Energy Efficiency (a whole section on this later!)



Mass public transport



Hybrids and PHEVs (Plug in Hybrids)



Wind power



Solar power (heating and thin film electric

PV
)



Ocean wave and thermal ene
rgies



[BioFuels
, SynFuels
]



[Fusion]


The problem with the renewables is they represent such a low % (0.5%) of current energy
production

that even
if they expanded at 20% per year it would take 25 years to get up to around half of our current energy
require
ments by which time

-
BAU
-

these requirements may have easily doubled
. All replacements energy
sources in the past have been more energy dense than the ones that preceded them

coal replaced wood, oil
replaced coal


and it still took half a century to make
the transition
. The renewable energy sources are so
dilute, intermittent and tech heavy
(
in some cases
)

that they make poor and costly replacements for simply
burning buried concentrated sunlight.
Despite this
, renewables will be deployed in massive quanti
ties in the
decades to come.


There’s another aspect to this

though that is the real cause for concern
. It appears to me that

we should be
seriously
preparing before
a
crisis
not after it
.
The time to start the replacement
of fossil fuels
was in 1975 not
n
ow or when the crisis is upon us
.
Is it likely that hundreds of millions of people are going to go out and buy
hybrid cars for example if and when petrol prices double

or
triple
? It has taken 20 years of slowly rising prices
(due to the heaviest taxation r
egime in the world) to make Europeans more energy aware and
as a result
purchase smaller fuel efficient cars. The US is entirely unprepared for a steep price shock and will feel the full
force

of it
.

It seems almost inevitable that a deep recession will re
sult and this seems incompatible with all
these people rushing out to buy new vehicles.
During the good times people buy cars, during the bad
times they will use their
existing
car

a lot

less
, i.e. their demand for fuel will be destroyed



I got the follow
ing graph from a website called EnergyFiles


as we approach the red line things get increasingly
sticky
:







A word on
BioFuels
, they are touted as being carbon friendly and a great hope

as fossil fuel replacements

but
just have a look at the graph below
:



Lifetime environmental Impact of various transport fuels (Swiss Study

Ref[1])



(The diagram above shows a picture) …in which the whole environmental impact has been calculated using
the method

of ecological scarcity….

It is true that the environment
al impacts of vehicle operation (dark grey)
are much higher when fossil fuel is used in comparison to biofuels; however this is overcompensated by the
many very high environmental impacts in agricultural production. The causes of this are soil acidificatio
n and
excessive fertilizer use in European and Swiss agriculture. In the case of tropical agriculture it is biodiversity
loss, air pollution caused by clear
-
cutting and the toxicity of pesticides

.

.

(
And
from
their
Conclusion section) …
If energy plants we
re cultivated in Switzerland on a large scale, it would
have a negative influence on the food self
-
sufficiency of the country, or would cause added environmental
impact by requiring the intensification of food production. Therefore our energy problems will

not be solved by
biofuels alone. Only if the biomass is transformed into energy efficiently and in an environmentally friendly way,
while consumption is reduced and energy efficiency increased, could these alternative energy carriers play a
role in our fu
ture energy supply that should not be neglected in conjunction with other renewable energy forms.


-
Swiss Biofuel Impact Study

Ref[1]



>
To sum up: Biofuels are not a panacea and
,

unless

we
tread very carefully
,

this path is likely to do more
overall dam
age to the planet as a whole than fossil fuels! (As well as causing massive food price inflation in
some cases)
.
Damn
!




Fusion


here’s a

fantasy tech


for you if ever there was one. I used to be a big fan of this

as an idea

and
perhaps one day it may c
ome to fruition if we can muddle through the next 50 years, but I think if we do it is
more likely to be on a bas
is that emphasises

renewable over large scale physics experiments. So what’s the
problem? Well two things: timescales and
T
ritium.


Jokingly
, i
t

s been said that

commercial

Fusion has been 50 years away ever since the
19
50s

when the idea
was first explored
.
A lot of progress has been made
since then
and a large scale experi
ment is now planned in
Cadarache

in France: The ITER project
.

After ITER c
omes DEMO (a prototype commercial plant). The
Fusion
timeline

is shown

below
:



Fair
-
clip Fusion timeline


-
So, with a fair wind and assuming everything goes to plan, we should have something up and running
providing an amount of power to the Grid by mid
to late 2050s. This is hardly going to prevent the hardships of
the 2010s, 2020s, 2030s and 2040s and it will hardly make a dint in the next three decades either because
there is a bigger problem that most Fusion researchers are keeping
mum
about: Tritium.



…the current goal is to get to a prototype reactor by 2060, however this requires 56 kg of tritium/year.
However, at best, the world supply of tritium in 2027 is expected to be 30 kg. This, and similar problems, leads
him to state that “commercial nucle
ar fusion energy will always be 50 years away.”


-
Michael Dittmar speaking at ASPO 2007




You need a Fusion plant to create Tritium and you can’t role out another one until you have
extracted
enough

from an existing fusion plant

(Tritium is a rare
-
Earth m
etal that is slowly created by
nuclear
transmutation in the
thick metallic blanket that will

surround the reactor as it operates
)
.


>
Unless the boffins can sort this one out it looks like the
classic
chicken and egg situation that
kill
s

the golden goose





-
So
what

will the world be like if these assumptions

turn out to be true
? What Conclusions can be drawn?

What
can be done? Are there any positive outcomes? How can we prepare?

This is the purpose of the following
sections.





Part 2: Conclusions


Ene
rgy costs will soar
;

gas,
coal and nuclear usage will rise, global warming
will increase.



Since 2003 electricity prices have risen by around 50% and gas prices by a huge 90%. That means that the
average household electricity bill has risen by £141 to £38
3 and the average household gas bill by £300 to
£630

-
EnergyWatch



This is during ‘normal times’ but you can almost hear

the train approaching down the track. In a world post
Peak Oil these increases are going to seem like chump change as supplies run dow
n. The £1000 bill each
household now faces could easily
go up 5 to 10 times

in the decade ahead and it won’
t stop there

it is these
price increases that will be the driving force for efficiencies
. Unlike other commodities (and we’ll come on to
these in a
minute) it

s not like you can simply double mining efforts

and get twice as much stuff out. With
energy

and oil can be thought of as concentrated energy
-

you face the law of diminishing returns

as
extraction
costs can quickly spiral.

This is called ‘Energ
y Returned on Energy Invested’ or

EROEI’
.


Once upon a time oil derricks used to look like this


not much more than piles of wood
:




Turn of the century oil field in Texas


Now they look more like this:




Deep Water Rig in some
deep w
ater…



Each one c
osting billions and billions to develop, deploy and run
.



In terms of real dollars, a barrel of oil has basically doubled in value from its early 1980s price. But the average
cost to build a new MODU

(Mobile Offshore Drilling Unit)

has more than quadruple
d. Or looking at it another
way (to remove the dollars and

inflation), it cost about 1 million barrels of oil to build a jackup in the early 1980s
whereas it costs about 2million barrels of oil today. Thus, the value of the commodity that rigs obtain is no
t
keeping pace with the cost o
f

building new rigs to get at that commodity, even while the market is booming.


-
Rigzone.com
rig
report



The Export Land

Model suggests that Net global oil available to importing countries

and that basically means
rich deve
loped nations that can afford it at any price
-

will decrease rapidly. Once the peak is widely
acknowledged it is likely to result in hoarding by exporters as they perceive that their reserves will be worth
much more in future years. Offsetting this will be

their desire and need for hard currency to maintain

internal

economic growth. The result is likely to be that oil field production is pushed beyond reasonable limits and post
peak declines will be even more rapid than expected.



The next
<Mexican>
govern
ment will have to make some difficult decisions about the oil industry. The decline
in the country's main oilfield, Cantarell, is much more rapid than had been forecast. Under current projections,
in 2008, the field will be producing only a quarter of what

it has been producing over the past five years.

Over the past 20 years, Cantarell has been the world's fourth biggest oil field, producing over 2m bpd. Cantarell
has supplied around two
-
thirds of the daily production of Petróleos Mexicanos, the state
-
owne
d oil monopoly.
Mexico is the world's sixth biggest oil producer



The big issue with Cantarell is the increased presence of gas in the field. This appears to have been the
result of
a short
-
termist plan for keeping production from the field up
. In the pas
t three years, the state
-
oil
company drilled over 50 new wells in the field. These enabled the company to keep production up but in the
longer term such overexploitation will mean that less of the field's oil reserves are recovered.


-
Mexico & NAFTA Report
, Copyright 2006 Latin American Newsletters


At a recent reunion of retired Pemex executives, former chief financial officer Ernesto Marcos recalled, a
colleague urged that "the next president be told as soon as possible that
we may soon not have enough oi
l
for our own requirements and none for exports
." That's an ominous forecast for Mexico's economy and for
the United States, which relies on Mexico for 8 percent of its oil.


-
The Oil Drum: “Trouble South of the border, Mexico’s Oil Production”



Erm, “Ic
eberg ahead Presidento!”


>
The collapse of the Mexican Cantarell oilfield will result in a large chunk of US oil imports being erased. For
the Mexican state it will mean severe hardships ahead as the revenue they where relying on to fund growth
begin to e
vaporate. Rising prices, food inflation, riots, the collapse of the Mexican state and the mass exodus
of people North to the US are all possible outcomes

within a decade
. The US/Mexican border is likely to come
to resemble the 38
th

parallel diving North an
d South Korea.



Gas:

The decline in oil will put extra pressure on gas usage which itself could peak in the 2020s

or sooner
.
Unlike Oil though gas tends to be a highly localised commodity

by which I mean supplier and consumer are
close. It is entirely po
ssible to liquefy Natural Gas and transport it long distances without pipelines

like oil
tankers
-

but the liquefaction process itself is energy intensive and this will increase the price and there tends to
be a big NIMBY

(Not In My BackYard)

element to th
e refineries. The following graph is a bit scary

it shows
US, Canada and Mexico gas field discovery (Blue line, smoothed and shifted 23 years) versus actual gas
production in Red/Pink. This is a pretty good fit and is bad news for the Yanks if true

North

American Gas
production is about to go off a cliff…:




Source: “Natural Gas: How big is the problem” :
http://www.theoildrum.com/story/2006/11/27/61031/618



As more countries enter g
as decline

potentially very rapid gas decline
-

the global market for
liquefied
gas will
be put under increasing strain and the price

of this commodity

will inevitably rise.

The same old suspects that
supply the Oil: ME, Russia, etc. will be called on to s
hip Gas. The Export Land Model will go into overdrive.



Old Man Coal’

to the rescue? Well perhaps for a time. I am almost certain that coal will see
resurgence

out of
necessity, but coal is the dirtiest of all fossil fuels and will significantly impact gl
obal warming. We cannot have
it all

growth, Global Warming and dirtier fossil fuel usage form three sides of a triangle from which we cannot
escape. Interestingly China has already abandoned plans to divert coal to a
nasty little
process called ‘Coal To
L
iquids’ that the Nazis used in the 2
nd

world war to create fuels, due to the massive increase in coal production
required. CTL technology will turn out to be just another messy, polluting red
-
herring.

Given the desperate
times ahead I’ve no doubt it will b
e used though. If the petrol man says it’s a new ‘eco
-
friendly’ blend of BioFuel
and Coal
-
To
-
Liquids punch his lights out with impunity.



Nuclear

then? While nuclear emits low carbon when in operation Uranium mining and the construction of the
huge numbers

of power plants required to replace oil, gas and coal will put a lot of carbon into the atmosphere.
But
again
it will be done anyway out of necessity. Nuclear is not going to be a popular option due to the
‘Chernobyl
Fear
Effect’ so there is going to have

to be some pretty good selling done by governments until the
full force of Peak Oil consequences hit home

and people don’t care about Nuclear meltdown as much
.
There
are currently only 31 countries with nuclear generating capability.
Somehow
France

has su
ccessfully managed
to sell the idea

with a large % of their electricity generated by nuclear. No one seems too worried that at the
heart of Europe

lies the W
orlds
2
nd

largest deployment of n
uclear power as a % of electrical generating
capacity (only Lithua
nia produces more, source:
NationMaster
)
. In addition Nuclear, despite what you might
believe, is also a non ren
ew
able resource like foss
il fuels and the costs of Uranium extraction are going to go
sky
-
high

but as it is so valuable an end fuel these costs will be absorbed

(there is a financial gain opportunity
here that we will come back to later


:o)




(Globally)
There are currently some
439 plants, producing 371 GWe and in 2005 this was 15% of the world
electric power generation. There are currently 30 reactors under construction.

..

A 7 GWe reactor needs 180 tons of uranium/year. And the 371 GWe production from 439 reactors adds up to a
need for 67,000 ton/year.
With a 1


2% growth for 20 years, this will lead to a need for between 51 and
130,000 tons of uranium. The reserve is thus going to run out in less than 50 years
.


-
Michael Dittmar speaking at ASPO 2007


[I.e. e
ven at
the
present

day


non
-
crisis


growth rate
of
1
-
2% we run out in 50 years…]



>
Once the energy crisis hits and the full magnitude of the problem sinks in nuclear plants will start
springing up like mushrooms…



Finally:
Global Warming
. This one is interesting. The fir
st thing that needs to be asked is th
is: What is the total
amount of fossil fuel that we

are
expecting to get out of the ground? If you take the optimistic predictions of the
I
E
A, the same group that think oil will continue to flow in

increasing

rivers fro
m OPEC

for decades on end
, then
I would agree we do have a pr
oblem. If you consider a more ‘P
eak xyz’ point of view then, yes, temperatures
will continue to rise (there is already enough carbon in the atmosphere to account for an additional 1 or two
degree

increase) but the most dire consequences of the forecasts: a 5 degree rise for example, do not occur.
Combating global warming is a rich mans game in the sense that an economy will be ‘wasting’ a significant
fraction of the energy content of the carbon so
urce in order to sequestrate it away from the carbon cycle. For
this reason when the global economy goes into a nosedive the efforts towards GW mitigation will not be
abandoned entirely but will be put on a back burner as we go all out to increase the tota
l available en
ergy to
avoid an energy crunch:


>
Within a decade the
‘Global
Energy Crisis


will replace

Global Warming


as the single biggest threat
to
mankind’s future


and
the vast majority of people

don’t even know it

s coming

yet

Exiting times
no?


Conclusion:
The age of cheap
energy

is
now
over
. E
nergy prices are set to accelerate upwards taking a larger
and larger share of
your
personal income [10%
-
-
>25%]

with them {transport, heating, lighting, cooking, etc.]
.

In
an attem
pt to maintain a high ener
gy society

an
d by direct substitution

the remaining fossil fuels will come
under increased pressure and cost
s of these

will
also
rise. Gas and coal will peak in turn. Nuclear usage will
increase

causing an earlier peak than currently predicted
.



Commodit
ies and food costs will rise.


Mass is a form of crystallised energy both in the ‘Cosmic’
sense of
E=mc
2
and the more down to earth
understanding
that it takes a lot of energy to find, extract and refine the stuff we use. Once upon a time

going
back to Ro
man times and beyond
-

we used to send a man with a shovel into the bowels of the Earth to pick
and claw the stuff out. Now we use these monsters:





Hence, t
he application of vast quantities of fossil fuel resources h
as transformed the extraction

process

beyond
all recognition.
By
liberally
applying cheap energy we have increasingly leveraged one non
-
renewable resource
to get at all the others. In this light is it any wonde
r that commodity prices
have been falling for so long

even as
demand has grown
?
Thi
s

dem
and for all commodities
soaring

to new heights

as a new Industrial Revolution
breaks out in the East. Due to this demand side growth commodity prices
have recently risen and
will
continue
to
rise in the short to medium term. Post Peak, supply side con
straints

will cause the price of Energy to rise and
this will continue to cause
commodity price
s

to increase
even as overall demand falls
:





[Source:
http://www.japaninc.
com/files/images/mgz_72_commo
-
price
-
cycles.JPG

]



Looking

at over two

hundred

years of commodity

prices in the graph above there is a strong correlation
between
base
energy price increases and metal/metal products and agricultural products. Wars and Indu
strial
re
volutions have caused sharp increases in all categories. We are about to enter a phase of ‘permanent war’
for the last remaining energy resources and this will cause energy prices and all commodity prices to rise in
unison.



NEW YORK, Sept 10
-
Fue
l shortages in the U.S. Midwest are raising concerns corn farmers may have trouble
harvesting their bumper crop this autumn.


Farmers planted the largest corn crop since 1944 last spring after prices hit a 10
-
year high of $4.37 a bushel in
early 2007. The
U.S. Department of Agriculture has estimated a record crop of more than 13 billion bushels.


But farmers said supplies of the ultra low
sulphur

diesel needed for harvesting equipment are running low,
particularly in the corn
-
growing regions of Minnesota, N
ebraska, and Iowa.


In Iowa, fuel shortages are anticipated as retailers report having only about 80 percent of their normal supply,
said John Scott, a corn and soy farmer in west central Iowa.


"Worse case scenario is our crop stands in the field until we

have fuel to harvest it," said Scott, who has stored
about one week's supply of fuel in anticipation of shortages, but not enough to tide him over for the six
-
week
harvest season.


-
From Reuters



S
o let me see if I get this right: US farmers will have bi
llions of ‘bushels’ of corn to turn into bio
-
fuel to keep the
SUVs running but they won’t be able to harvest the crop because they might not have enough fuel...


Mmmmm… There’s something not quite right here is there?


Simply put the so called ‘Green Revo
lution’ of the 50s and 60s was merely the massive application of fossil
fuels
directly
to the land and
the
farming methodology

used
. Nitrogen based fertilisers are currently made with
Natural Gas, crops are sprayed with pesticides

watered with fuel powered

water pumps

and then diesel based
tractors are used to harvest them. The whole lot is carted off (by road haulage) to a biodiesal plant (for fuel), or
perhaps a Corn
-
Flake factory, where it is processed and repackaged to be then transported hundreds more
miles to the consumer

perhaps
via a central depot if it’s a large supermarket.
Once there it is transported
home in a car, stuck in the Fridge and thrown away two weeks later after it has accidentally passed its sell by
date.
The “32,000 mile BLT” in acti
on
….


The whole complex process of getting food from field to your mouth adds an energy content that goes way
above the in
trinsic calories in the food
. For every calorie
of solar energy
the sun
put
s

into growing the food
in
the field
an additional 4 to

10
calories
are
added

to produce, package and

ship it to your mouth:


>

To a large extent y
ou are eating
non
-
renewable
fossil fuels
.


A breakdown of the Energy inputs to the food we eat:


Source: Swivel.com:
http://www.swivel.com/graphs/show/21368509






C
onclusion
:
even if we where to put a halt to diverting basic food commodities like corn to biodiesal production
-

food prices are going to rise dramatically as energy prices rise: we are already see
ing “Agflation”

agricultural
(price) inflation
-

but this hasn’t really got going yet. A rise in localised, community and personal food production
for ‘just in time’ consumption
is another conclusion,
it also tastes better! (See, its
not

all bad news!! :o)

M
ore
on this later.…




Transport will be hit the hardest by the energy crisis
.



MONTREAL
Sept 18
th

2007
--

The head of the International Air Transport Association says the continuing high
price of oil and the turmoil in credit markets are causes for con
cern in 2008.


Giovanni Bisignani, IATA's director
-
general, said yesterday
airlines are expected to post a net profit of
US$5.6 billion in 2007
.


"
It's one per cent, it's not much
," he added



-
From “
The London Free Press

:



-
If this guy thinks $80 a ba
rrel is a ‘cause for concern’ he is going to have a heart attack when it hits $150
+
, and
so will his industry.


The air travel Industry has always existed pretty much on a knife edge with wafer thin margins. A lot of the fuel
price increases of the last 5

years have been absorbed by efficiencies and layoffs. When underlying energy
costs go up [they currently represent around 30% of operating costs] the airlines will have no choice but to
either pass on the increases in the form of ‘surcharges’ or go bankru
pt. Air travel is about to get significantly
more expensive, tourism will get more localised as the Energy cost component of travel rises and people
generally have less money to spend on leisure.


Of all the culprits of this harrowing tale of peak and decl
ine the internal combustion engine

(ICE)

should hang
its head in shame and admit that it was mostly its responsibility. But what a ride it has been. Its given us the
freedom of movement for two or more generations that previous generations could only dream

of. I don’t blame
it really, its been too good a drug hasn’t it?


Here are a couple of nice looking pie charts showing World Energy Consumption and end product usage:






About 98% of US oil usage goes directly to transport. I think it is pretty obvious
that
personal ownership of
this
sort of thing is to blame:




Ironically t
he SUV is an anomaly that arose out of American car manufactures desire to circumvent the new
fuel efficiency standards being imposed as a result of the 1
st

energy crisis back in th
e 70s and early 80s. If they
could get an SUV in the same class as a ‘Light Truck’ they would not have to meet the requirement. SUVs and
‘Chelsea Tractors’ will represent the insanity of a bygone age within a decade. They will represent a fairly good
scrap

value recycling opportunity though, the one above weighs in around 4 tons…



As we are not prepared most people will simply use their existing car less. The US will be especially hard hit as
it has built a society that is almost entirely reliant on the ca
r and
the existence of
cheap
energy
to power it.


Conclusion: getting to and from work, food that is flown in from Portugal (the 32,000mile BLT), cheap
weekends in Barcelona, Fly
-
to
-
let, Skiing and summer holidays: all these and more will get very expensiv
e,
shrink in popularity and eventually cease in many cases.
Passenger miles will shrink as people will simply not
be able to afford to drive their existing gas guzzlers, advanced economies based around the car that have not
implemented high taxation regime
s will suffer the most. The price of 2
nd

hand large cars

even luxury ones
-

will drop through the floor.
The world is about to get a lot bigger again.




Bonus
!
: I just have to pop this picture in that I found

it’s a New US Recreational Vehicle (RV) that

is so large
it can swallow a Mercedes ‘S’ Class sports car

now that’s what I’m talking about!

(Little Johnny looks so
happy!)



Conservation and energy efficiency will rise out of necessity.




“A toothbrush does little but clean teeth. Alcohol is impor
tant mostly for making people more or less drunk. An
automobile can take one reliably to
a destination and back,
its further features are of small consequences …

There being so little to be said, much must be invented. Social distinction must be associated

with a
house…sexual
fulfilment

with a particular
auto
mobile, social acceptance with a mouthwash,
etc We live
surrounded by a systematic appeal to a dream world which all mature, scientific reality would reject. We, quite
literally, advertise our commitmen
t to immaturity, mendacity and profound gullibility. It is the hallmark of our
culture.”

-
John Kenneth Galbraith, the late American economist




-
or to put another way, we don’t really need a lot of the dross that we have come to accept
and surround
oursel
ves with
as the necessities of life in the advanced nations
, as a result there is massive scope for
conservation of demand.

8mpg Hummers H2s also point to massive efficiency gains possible in transport.


> As we are forced to lower the energy bar
-
by lack
of supply
-

all manner of conservation and efficiency
measures will surface in order to get the same ‘bang for the buck’ that we have come to enjoy in the
age of cheap energy.

The driving force for this so far appears to be concerns over Global Warming but
it will soon be driven by Demand Destruction.


The big story of the next half century is going to be how we transition from a society based on munching at an
ever increasing rate through a mountain of non
-
renewable easily extracted Earth
-
goodies to sustain
able model
based on recycling and renewables. I have to say that given the progress we are making towards the latter and
the amount of time we have left ticking on the clock before change is forced upon us it is looking increasingly
likely that the transit
ion period is going to be very messy indeed. Democratic politician tend to be reactive to
problems by nature but the scale of the problem is likely to overwhelm when it hits. The perfect storm in fact.






But have
you

started the transition yet?



Ano
th
er area that will see major efficiency improvements is going to be in building design. We already have all
the technology to make dramatic improvements but once more we see that there is little call for deployment as
we are awash in cheap energy. Greater i
nsulation, triple glazing, passive solar, and of course smaller in size:
McMansions are going the way of the SUV



Financial instruments will be devastated {pensions, savings

and a note on
property
}.



“It's difficult to get a man to understand something
if his salary depends on him not understanding it.”



Upton Sinclair




This section

caused
me some concern

and to some extent
the financial meltdown scenario
should probably go
into the ‘worse case’
section
but IMO is entirely possible if we simply cont
in
ue along current lines

i.e. n
o
-
one
has to push a big red button marked ‘Doomsday’ for this to occur just as no
-
one pushed a big red button called
‘Credit Crunch’ in

August 2007
.

We may already be seeing the effects of Peak Oil even if that point has not
b
een reached yet

as we inch closer and closer to the peak the strains between supply and demand increase
and so will energy prices: this is already happening. Higher energy prices begin working their way through into
the system and cause fractures to appea
r, but let’s stop a minute to revue how we got here.


60 years

ago the world had

just endured a devastating war in which
up to

100million
where
killed. The powers
that be are determined to create a fairer more secure world that is based on trading

(Democra
cies) or
mass
S
ocialism (USSR/China). In the West an attempt to provide for
the
future wellbeing
of workers
leads to
a
guaranteed
pension becoming

a birthright
, backed initially by state and eventually by a whole industry of
financial services with all the
ir associated paraphernalia. The top of the service economy food pyramid is
formed

from the maintenance of
these
various financial assets
. Countries that where once strong
manufacturing bases shift

their production to Newly Industrialising Countries (NICs)

and move increasingly to
services. In the meantime the fat
support
base of the pyramid (Energy) expands constantly able to support an
ever higher peak.
Globalisation
precedes

apace, the observation that capita
l finds its most efficient point

of
applicatio
n leads to a complex intertwined networked economy. Efficiencies expand, just in time delivery
seeks
to
remove the need for
any
delivery failure capacity / buffer stocks, etc, etc.

The road and ocean networks
effectively become warehouses as huge trucks an
d ships ply their trade.

Ever rising asset prices
and
historically low interest rates
tempt people to

treat their houses like ATM machines
.


A
powerful paradigm is born and with each generation it is re
-
enforced: ‘the people’ come to expect
that things wil
l
always

be better in the future so they c
ome to rely more and more on this faith
to fund
their present existence. The ability to always sell to the next person at a higher price in a seemingly
never ending game of ‘greater fool’ has created a bubble that
is so large and so pervasive it is almost
impossible to distinguish it from the civilisation it has come to represent…


It is no co
-
incidence that it is mostly
older

people lining up to get t
heir money out of Northern Rock;

who horde
foodstuffs during mini

petrol blockades, who stock candles ‘just in case’. These people can remember how
things used to be before this mass shift in thinking. These same people reel in horror at the financial attitudes
and spending patterns of the young, if you don’t believe me

I dare you to tell your Grandma how big your
mortgage is, what’s in your current account or how much you spend of a weekend on ‘going out’…

;
o)


Increasingly, the money that fuels
the
current
‘growth’ of
our socie
ty is borrowed from the future
-
a future
b
ased
on this
relatively
new paradigm of

continuous exponential expansion. Like bacteria in a jam jar that have
stumbled across the last remaining globs of jammy fruit we have been on a feeding frenzy funded ultimately by
Earths non
-
renewable energy resourc
es.




Money used to be backed by Gold which had a natural

supply increase


limited
by
our ability to dig the stuff out
of the ground (about 1.5% per year tops).

As it was much more difficult to pay back loans with Interest
under
this regime

many people go
t into so much trouble (even becoming slaves in the process
!
) that many religions
-
which in effect where the state at the time
-

band the lending of money or “usury”. This is still the case in the
Muslim Religion. Nowadays

w
e just print more of the stuff
-
t
here is no limit to the increase in
the
money supply
that can be pumped in
to a fiat based currency system:




German 100 Trillion Mark note from 1924


Even governments

have been lulled into thinking that the current exponential growth situation is normal

and
natural
. The US
debt now stands

at over $9 Trillion increasing by $1.4 Billion every single day
:



[US debt clock:
http://www.brillig.com/debt_clock/

]


Each time someone signs on the dotted line of a

mortgage the banks create more money to pump into the
system. Long gone are the days when banks simply lent out the savings

that

people put into them.
Fuelled by
the ‘pay in the

better

future’ paradigm, the consumer is now king and must be enabled to spen
d at all costs.
Any hint of a failure in consum
erism tolls the death bell to our expansionist economies
. And spend they have:
50% of global manufactures are now ‘Made in China’ and a good chunk of this money
-
along with large
amounts of Chinese sa
vings

fo
r they have not forgotten the bad times just yet
-

has then been re
-
invested back
in the US helping to keep Interest Rates
there
artificially low and the wheels falling of the machine:




Chinese Money Mountain




All this debt has created a dangerous situ
ation though. The central banks
now
have far less flexibility to control
economies that are heavily indebted without triggering either an Inflationary spiral at one

end

of the spread or a
deep recession at the other. I find it unlikely that the FED will ch
oose to honour the value of its dollar currency
and help its foreign investors
out rather than go down

the route of a short term fix by

injecti
ng

capital back into
a collapsing economy with rate cuts.
As I write the FED has
just
cut the rate, well there’s
a surprise:



The Federal Reserve's move Tuesday

(18
th

Sep
t 2007)

to slash short
-
term interest rates by half a percentage
point gave the financial markets a boost, lifting stock prices and lubricating credit markets that have seized up
as subprime mortgage
s melted down.


That cut
-

the first since 2003
-

was twice as big as many experts had anticipated.

.

.


Moreover, the rate cut adds fuel to worries that the Fed's efforts to bolster the financial markets could heat up
inflation and force Americans to spen
d more on imported goods.


-
Mercurynews.com



The Chinese must be licking their lips and wounds at the same time…



When the Energy Peak is passed, the music stops and people realise there aren’t enough chairs to sit down on
there will be a kind of panic n
ot seen before. The future
governments and
people

thought would pay for their
present excesses will no longer exist and this ‘future
growth premium’ built into some
assets will quickly
evaporate (e.g. High PE Ratios

for stocks and high house prices
). For a

while it may be possible to mask the
shrinking economy by pumping paper money into it destroying saving
s

as it goes (Inflate
-
away)
-
like an addict
getting one boost fix after another
-

but e
ventually the whole edifice could

collapse taking the financial se
rvice
sector and by implication the Pension hopes of millions with it.



House prices themselves may appear to be static or even increasing slightly
as
central
bank
s

pump liquid
it
y
into the markets
but when real inflation is taken into account they will be

dropping
in value
like a stone
. A
s
defaults on mortgages rise due to economic hardships the
risk
premium on loans will also
have to be
raise
d


mortgage repayments will rise and this will fuel the slump

in prices
. We have been living through a period of
hi
storically low Interest Rates and this is set to change as
Inflation and
the credit risk premium on lending
money both
increase.

The Credit Crunch is simply a man
-
made foretaste of what is to come; soon Mother
Nature will be coming in to bat by pulling the

energy rug from beneath us and when she swings you better have
your helmet on!


Conclusion: The dollar and other fiat currencies will continue to devalue rapidly in

an attempt to inflate away the

huge debt burden.

Savings will tumble in real value

as Infl
ation bites. Ultimately a high proportion of stocks may
end up seriously devalued

their ‘future growth premium’ factor eroded away.

A ‘worst case’ scenario would
see the death of the financial system as we know it and a return to non
-
fiat ‘hard’ currencie
s like gold
or silver,
return to
a barter based society is also a possibility if this where to happen.



[I will have a stab at thinking about what may prosper later, its not all doom and gloom, well maybe not… :o]





The need to find local sustainable so
lutions will give rise to the re
-
emergence of communit
y and localised food production


Are
there any historic presidents that can give us an indication of what might happen once we start sliding
down the slope of having less energy to use? There is one rec
ent example that might give some clues: Cuba.
In the early 90s, after the collapse of the Soviet Union, Cuba experienced a dramatic drop in oil imports
. Almost
overnight they found
that they had to survive with
10
%
of the
e
nergy that

they had been used to.


Being a Communist state Cuba had more of a command and control economy than the UK and certainly US
(remember Hurricane Katrina?) They where able to rapidly mobilize local
in
-
place community
groups

to form a
response. They implemented a crash program of

local
urban
agriculture akin to the ‘Dig for Victory’ / Victory
Garden efforts of WW2. Transport fuels where rationed or ceased entirely, people got their bikes out. The
number of Calories in
people’s

diets shrank
by about 30%
and people got thinner

for s
ure


about 20lbs on
average
. Farmers suddenly found themselves ‘Numero Uno’

and not just in the food chain
-

they where paid
more than scientists and engineers
, many of whom
themselves
had to go back to farming as the economy
collapsed
. There where regular

blackouts, eventually they came up with their own local solutions to the
problems. Somehow they muddled through and survived.


For a good account of the difficulties faced and how they coped have a look at this Wiki:

http://en.wikipedia.org/wiki/Peak_oil_in_Cuba

-
a lot of lessons can be learned from this.



Conclusion:
The need to find local solutions to the problem of energy decline will give rise to a greater local
community spirit. Knowledg
e sharing via the Internet and local action groups for everything from recycling to
food production will flourish in this environment.
Urban gardening, local markets, and sustainable agriculture
will flourish.
There will be a mass return to farming of one
sort or another by the populous.
A barter system may
also spring up to swap foodstuffs
and other items: “Ebay Offline”.

Organic farming, aquaponics,
Greentech

and
permaculture

will rise in popularity and as a result the foodstuffs produced will be healthie
r than the current
Industrial fodder we are currently forced to eat.








Personal ‘voyage of discovery’ note from the author:
I have identified and am investigating

a promising farming
method
called


a
quaponics’ as a possible
holistic
lo
cal food product
ion mechanism that combines
hydroponics
and aquatic fish farming
. E
ven ve
ry small spaces can produce high

yields
, so it would appear perfect for urban
environments
. I think we will also see the return of the ‘Victory Garden’ and small scale livestock reari
ng as
food costs soar. This is all going to depend very much on how far and how fast the decline goes of course

but it
seems a logical conclusion to me. We are already

starting to see something of a move towards this, its
becoming trendy to grow your own h
erbs for example; Jamie Olivier and his home grown tomatoes! So far this
has mainly been driven by taste and green issues, ‘wallet impact’ will simply add another reason.





…City dwellers who raise chickens are springing up around the country. Groups org
anized on the Internet in
Los Angeles, Phoenix and Austin, Tex., are host to chicken
-
centric social events, and there are dozens of
books


a whole new form of chick lit


on raising chickens, including Barbara Kilarski’s “Keep Chickens!
Tending Small Floc
ks in Cities, Suburbs and Other Small Spaces,”…


-
New York Times, Sept 19
th

2007






If the energy descent is too rapid, conservation measures prove ineffective
or we cannot build up alternatives quickly enough then the market force of
demand destruction
will take over and
ultimately

risks ending society as we
know it [This is a worse case outcome

I’ll let you be the judge of this one]


If you have got this far first of all: congratulations! That’s a lot to take in.


The
direst

warnings of
the
energy decl
ine focus on
the possible collapse of our complex interconnected fossil
-
fuel based society and

its asso
ciated
food production system.
There are many complex societies

in history

that
have ceased to exist in time spans where our brain capacity has been iden
tical to the present

day
. To think that
we are somehow
cleverer

than the members of these societies is to do them a disservice. Indeed the
sheer
scale,
complex
ity

and highly interconnected and interdependent nature of the current global ‘system’ probably
m
akes it more vulnerable not less. As a general rule
:

the more parts a machine relies on to operate the more
frequently it will break down in some way.


Complex society
change and
breakdown
: If you have been following so far the natural final conclusion is
that if alternatives cannot be found and rolled out quickly enough we are heading for
some sort of

cliff.
‘Cliff is
an emotive word that conjures up Roadrunner racing off into thin air and only realising that he has run out of
road shortly before the 10,00
0 foot plunge.
A downward spiral is probably more likely or series of shocks that
break the system into stages of collapse. An orderly transition may look something like the following, with
society moving gradually from non
-
renewable, highly specialised pr
ofessions and state based security (The
Nation State is fairly modern phenomena) to one based more
around

localised, renewable self sufficiency
:




Energy descent modelling

smooth transition

model


In my opinion this is highly unlikely
as it would requir
e a degree of planning and foresight that is not apparent
and we are more likely to see one of the following

possibly the

multiple crash model (remember we are talking
here about if we cannot ‘make it’ to a new higher energy level and have to accept the d
ecline in total energy
caused by the end of fossil fuels and all its likely impacts
, i.e. TSHTF
):



Energy descent modelling

other types of transition

model




Food production
:
Walking around the
packed shelves of your local Mor
risons it may be hard to be
lieve that
we could
ever

run so short of food that it would put us at risk of starving to death. To be fair this conclusion lies
at the end of a very long series of dots but it could be just three decades away or less if we suffer a major
societal crash

h
ow long would you survive if the delivery trucks stopped rolling and those shelves where
bare? A
t its heart the problem lies
the fact that t
he current food production system
we have
evolved
is
ultimately
unsustainable because it relies on a finite supply o
f resources being applied to the land in order to
boost its productivity and that of the workers that tend to it
.
I have discovered this dying breed
or workers
are/where called “farmers” :o)
. World grain output for example has risen almost in unison with t
he number of
mouths that need feeding
coupled with our
ability to create the grain from applied
fossil
energy
, grain
production 1950 to 2005
:



Once the total net energy begins to decline the ability to produce grain
/food

will also be reduced

but the
mou
ths will
remain and
still need feeding
. If we had not started leveraging fossil fuels to boost food
productivity

to
artificially high levels
we would have hit the skids many decades ago


remember the dire
predictions of millions of Indians and ‘3
rd

world’
countries simply starving to death?

In Nature the growth of
populations is automatically self correcting

when the food resource becomes scarce due to the predator
becoming too populous then the predator population dies off quite rapidly until a new cycle
begins. This is well
known simple biology.

Our defeat of
the laws of
nature

to this point

is a triumph but it has been based on
a method that
by definition
has no future
..
.


It has been estimated that the Earth can carry around 1
-
2 billion people in a stea
dy state but we have used our
technology to leverage an increase in Energy supply that so far has taken us way beyond any normal state of
equilibrium.
This steady
-
state ‘carrying capacity’ overshoot

represents a dangerous potentially temporary
condition, l
ike the case of too many foxes eating all the chickens.

A good look at the basic realities of food
production and just how far we have gone wrong can be found here (it makes for sobering reading)
:
http://www.countercurrents.org/goodchild220907.htm




Part 3:
Preparations

and Prosperity



“To be thrown upon one's own resources, is to be cast into the very lap of fortune; for our faculties then
undergo a development and display an energy of w
hich they were previously unsusceptible.”



Benjamin Franklin




How you prepare and to what extent will very much depend on your situation. At the minimum I hope that on
reading and reflecting on all this it gives you some insight so that if and when even
ts do start to occur it doesn’t
just come
completely
out of the blue and take you entirely by surprise.


Preparations:
Here are some general thoughts on things that may help

in the decades ahead
:




Try and stay healthy

both physically and mentally. There i
s going to be a sweeping level of fear and
anxiety
upon mass
PO

awareness (Currently less than 1% of the population is even aware of any
impending supply issues)
.
The first wave of a real crisis is likely to be downplayed or sold as a

Demand
Side’ issue

i.e.
there are

simply too many mouths to feed, people buying cars, etc. etc.
As it
comes to be realised that we have to make serious changes to just about every aspect of how we do
things

in life the level of wailing and crying will reach fever pitch. Pari
s Hilton is going to be a very sad
puppy.



Get to know your neighbours and neighbourhood.



Know how to cook

don’t be pizza delivery addict
.

Cooking with the seasons is going to be cheaper.



Learn a little about cultivating home food in order to be ready to r
educe food cost impacts
.

Get an
allotment or space where you can grow some food.



Make investments in efficiencies and the cheaper renewables now, not when you can less afford them

during a recession/crisis
. Consider these investments to be ‘insurance’ if i
t makes it
any
easier to
spend the money.

Energy efficiency via insulation and solar thermal are probably the most cost
effective means. Raise the HIPs Efficiency level of your current dwelling.



Transport costs will soar and it is even a possibility that w
e may see a return of a rationing system, be
prepared to get a more efficient car, perhaps a hybrid or one of the PHEV (Plug in Electric Hybrids
when they become available

set some money aside for this purchase

now
).



Reduce debt levels to a minimum


espec
ially short term debt
.



Live close to public transport if you can
, don’t be completely reliant on the car.



Prosperity: I’m not a financial advisor so this advice comes with the usual
broad brush
disclaimer

but following
on from the assumptions and conclus
ions
above
“I would say that”:




The best investment you can make is in yourself.



For a time
I think that fiat currency backed assets like stocks will appear to do well as the underlying
support is inflati
ng too

“DOW 50,000” maybe but the

dollar will be wo
rth next to nothing

if it ever
where to happen
. Like pictures on a balloon that appear to be getting larger and larger as the balloon
inflates with hot air. At some point

though

the market may take so much fright [I predict this will be
when the full impac
t / realisation of PO hits] that the balloon pops and the ‘future growth premium’
evaporates
from these assets
very quickly.
It will probably hit the whole market even including those
companies that offer a possible solution

the Renewables.



Inflation hedg
es like Gold will do well,
the Gold/Silver ratio

is currently very high

so Silver also looks a
good buy
. Pre
-
1930s UK coinage is 50% silver…Gold is also a good bet if we continue in the
expansion phase

it’s used in loads of products and the Chinese/Indian
s/ME love the stuff. For a time
as these Nations get richer their demand for Gold and other precious metals will only rise



Uranium: this metal has
already
enjoyed a nice run but the demand is only going to go up and up.
There could be a global crash nuclea
r program declared post PO and this will cause demand to rise

very quickly
. Uranium represents the densest ‘crystallisation’ of energy that we know how to use and
currently represents a small fraction of the build costs of a power plant. You can have your
yellow cake
but don’t eat it.



With the caveat that the whole pack of cards might crumble at some point the following stocks will probably
do well:




Energy Exploration companies

post PO there will be a mad dash to find the last crumbs of oil, if it’s a
ch
oice between killing polar bears and keeping the lights on the lights will win.



Suppliers to the Energy sector


this is the old

no
-
brainer

‘picks and shovels’ recommendation.



Renewable suppliers and companies that focus on efficiencies

wind power, solar,
etc.



There a bunch of areas that will also probably do well but should probably be off
-
limits for moral
reasons: Defence firms and arms manufacturers, private / personal security, credit retrieval agencies,
etc.



General t
hings to avoid like the

plague

a
s we approach PO (or mass recognition of)
:




Anything to do with anything that is very
highly
dependant on energy and currently has wafer thin
margins

a prime example is airlines.
Airlines are like the ‘
canary in the mine


as far as the
upcoming energy cri
sis goes. As
the inevitable
surcharges rise and rise
,

demand destruction could
eventually kill the airlines off.

If you start to hear about surcharges, ‘consolidation’ in the industry and
airlines going to the wall the end is near…



Car manufactures that re
ly on big fuel thirsty prestige brands: Hummer, Land Rover come to mind.
Toyota might be OK

as it can leverage its ‘Green Badge’ built up on marks like the Prius
.



Assets that have been inflated to historically high levels
pre
-
PO
based entirely on the futur
e being
better than it is now.



Assets that are highly leveraged and rely on debt funding and the ‘Greater Fool’ (to buy in at a higher
price than you bought in at)

e.g. PROPERTY.



Finally a short
-
and by no means comprehensive
-

list of ‘very bad events’.

E
vents that would probably
trigger outcomes way beyond their boundaries like rocks in a pool (or undersea earthquakes?)


If any of
these where to happen then ‘batten down the hatches ASAP’

as you can be assured that some of sh*t will
be coming your way in

one way or another…
:




The collapse of the Mexican state
: A major oil producer

likely to lead to US recession



A peoples uprising in Saudi Arabia.

the largest producer, likely to lead to US ‘lending a hand’
, supply
disruptions, recession
.



An attack on Ir
an
:
a
top 5 producer, has warned will strike back at the West via attacking oil

supply
.



An attack on Israel by Iran
: has 70+ nukes hidden away
, depends who attacks, if its Iran then go back
one




An attempted invasion of Taiwan by China
: Could draw US into
conflict, bound to panic the market

as
two major players involved
.



A new major terrorist attack on the scale of 9/11. Confidence will be badly hit.



A collapse of confidence in the dollar

withdrawal of funds by China for example
, increased US rates
(to att
ract new bond investors/pay US debt mountain) leading to recession.



The collapse of a major player in the global derivative trading system
, classic run on the bank stuff:
could lead to a general collapse if not contained.



A collapse in confidence by the US

consumer (this one’s probably already underway!)



Global Flu endemic: will curtail travel and global GDP, worst case millions could die.



Part4: Final Thoughts and a Speculative T
imeline



It’s

unlikely that the future will pan out exactly the way

I have
mapped out in these thoughts and I have tended
to concentrate on certain aspects that may be of no interest to you and not
paid

any attention to some that are.
For example who will win the FA Cup final in 2018? [Manchester United 2:1 to Arsenal btw. ;o]

T
aking the
assumptions and conclusions I have started here it should be possible for you to flesh out some ideas of how
your own industry/profession or any other stream will be affected.


If I where to sum it all up in one sentence it would be as follows:



We have been living in an age of plenty that is drawing to a close with frightening speed, it is now time
to face up to this reality and begin the hard work of transition to something that future generations can
live within.




The actions of the next cou
ple of decades will determine humanities fate not just

for the remainder of the
century but for ever. If we fail then it’s entirely possible that we will never attain the same level of civilisation
again having already spent the most easily extracted civil
isation building resources a long time ago. Wood,
peat and a bit of coal perhaps, which would put us back to the 16th or 17th Century at best…






The following speculative timeline
(next page)
should probably be taken with an even greater pinch of salt

don’t start getting your ruler out and determining world events to the nearest month (I didn’t when making it).
What I have tried to do is place the rough order of events into some sort of context. Its based on the
assumptions and conclusions in the rest o
f the document plus a few added ones to spice up the future a bit.
The rapidity of events may surprise you, often we see shocks leading to great changes in a short space of time.
For example given the present tensions in the Middle East its entirely possib
le that a war may break out at any
time in the next month, year or decade that could affect the short term outlook considerably. The

main act
-
the

‘Peak Oil’

event
-

is placed around

2012
. If you look at the figures oil liquids production actually peaked in

2005
and so far it has not gone over that peak… In addition because of the Net Exports issue discussed even if the
global production peak is
somehow
pushed out to 2018 the NET export peak is likely to be a lot sooner

and its
effects will be felt before it

arrives
. Basically I believe we are entering the danger zone.


Energy

Food

Commodities

Financial
s

Society

?

The impending oil peak
is starting to cause
prices to rise

Some energy
-
replacement foodstuff
being hit by price rises

Productivity growth slows

banks
seek additional ways to boost
earnings. Derivative trading expands
massively: $500 Trillion in 2007

Low interest rates cause house
prices to ‘go crazy’ globally.

Huge growth in demand
for NICs, commodity
prices begin to rise

2007:
Credit

Crunch

More on more reli
ance on debt,
heavily indebted populations

Inflation fears push Gold to new
highs

Uranium price explodes

2012: Peak
of oil
production
& London
Olympics

Net oil exports falling rapidly

2014: Global
Energy Crisis
declared by
United
Nations

IEA:
Energy supply
will be “tight to 2012”

Massive government intervention programme:
Nuclear/Renewable build out declared

Speculative Timeline

United Nations Energy Revue
points to major problems ahead

Huge expansion in drilling and exploration
activities throughout decade…

Investment and rollout of renewab
les explodes

Foods transported long distances
by air get very expensive and
begin to disappear off the shelves

“Eat Local” Supermarket
Campaigns begin

Local food markets flourish
nationwide

Transported food (almost a
ll of it) getting much
more and expensive

Rise of the ‘Home Farmer’
movement.

Defaults on the up,
Interest rates
rising

Major slumps in house
prices masked by Inflation

Inflation rises

dramatically

as CB try to avoid 2
nd

credit implosion
. Gold soars to new heights…

Contraction of US Suburbia

Mexico bankrupt: food
riots break out. US
border sealed shut

“PO Ripple Effect” of
demand destruction begins
to hit richer nations.

High oil prices cause demand destruction
and more poverty in poorer Nations.

$80

$100

$200

$400

Net Oil supply halved

Transport

Nuclear build
-
out starts to come online

Air travel ‘fuel’
surcharges widespread

Massive consolidation
in air Industry

Budget airlines
go to the wall

No government bail
-
outs: National carriers go to
the wall

Road Haulage consolidation and contract
ion

Expansion of
Rail Haulage

Canal Haulage makes a comeback

Death of the SUV, rise of the PHEV

?Collapse of the Financial
System?

2000

2005

2010

2020

2030

?Gas peak hits?

Rolling black
-
outs

Return of t
he “Mr. T.”
Look…

“The Good Life”

tops British
Comedy charts

‘Work from home’
commonplace

Riots break out in many countries,
the ME is a tinder box

Age of Mass Cheap Air Travel

Renewable build
-
out starts to come online but very small impact

At last
Energy
demand

met by
supply

2000

2005

2010

2020

2030

Massive demand destruction has
occurred coupled wit
h Energy
efficiencies at every level. A leaner
meaner, bruised but surviving world
begins on a new path of existence
more in harmony with nature

ahhhh nice ending see I told you it
isn’t all bad, maybe!

Localisation and Community
are the 20s buzzwords

Stock market collapses losing 90% of its value