Cassandra's Legacy: Demand destruction and peak oil

Demand destruction and peak oil


Roger Baker is a transportation and energy reform advocate based in Austin, Texas. Long time member of ASPO, we actually met at one of the first ASPO conferences, the one held in Pisa, in 2006. Here he discusses the current situation with crude oil and the global economy. 


by Roger Baker


We are fully under the influence of petroleum demand destruction. The global oil market can't function without real oil production price discovery, which doesn't exist in the currently deflationary global economy, which forces indebted producers to sell far below cost.

Both supply and demand seem to cyclic in nature and we are not finished with the supply destruction phase, which can only be revived through a globally realistic oil trading price, which nobody knows. This is an unknown until demand destruction also runs its course. The global demand in the oil supply-demand balance that sets the global oil price cannot be known until we can understand where the global economy is headed. The global material economy seems to be contracting as the Baltic dry index, trucking, and railroad profitability seem to affirm, even ignoring oil prices and Chinese economy.

The reality is probably that a falling EROEI and the end to cheap oil after ~2005 made our finance capital investment growth less profitable. But this fundamental shift has been hidden through easy central bank credit and fiat currency generated on demand to pay interest on a growing mountain of unpayable debt, with a shift of debt from private hands to public, such as away from Wall Street toward Fed and US Treasury obligations. Now we see the world's major central banks each independently creating their own fiat currencies to preserve a trading advantage, led by the dollar as the world's standard reserve currency. (if it were up to me, things would work out a lot better if each dollar would be exchangeable on demand for a quart of conventional oil) 


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The real oil limits story; what other researchers missed | Our Finite World

The real oil limits story; what other researchers missed

For a long time, a common assumption has been that the world will eventually “run out” of oil and other non-renewable resources. Instead, we seem to be running into surpluses and low prices. What is going on that was missed by M. King Hubbert, Harold Hotelling, and by the popular understanding of supply and demand?

The underlying assumption in these models is that scarcity would appear before the final cut off of consumption. Hubbert looked at the situation from a geologist’s point of view in the 1950s to 1980s, without an understanding of the extent to which geological availability could change with higher price and improved technology. Harold Hotelling’s work came out of the conservationist movement of 1890 to 1920, which was concerned about running out of non-renewable resources. Those using supply and demand models have equivalent concerns–too little fossil fuel supply relative to demand, especially when environmental considerations are included.

Virtually no one realizes that the economy is a self-organized networked system. There are many interconnections within the system. The real situation is that as prices rise, supply tends to rise as well, because new sources of production become available at the higher price. At the same time, demand tends to fall for a variety of reasons:

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M. King Hubbert: The Limits To Oil | Zero Hedge

M. King Hubbert: The Limits To Oil

Submitted by Adam Taggart via PeakProsperity.com,

M. King Hubbert did more to raise awareness of the finite nature of global oil reserves than any other person, living or dead. He was a larger-than-life figure, who fought tirelessly to insert the limits of nature into the national dialog regarding the strategic use of resources. Yet surprisingly little has been publicly documented about the man, even though we are hurtling ever faster into a future shaped by the very limits he warned about.

In today's podcast, Chris talks with Mason Inman about his new book The Oracle Of Oil, the first in-depth biography of M. King Hubbert, to learn more about the genesis of the Peak Oil theory:

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Tomgram: Michael Klare, The Coming World of "Peak Oil Demand," Not "Peak Oil" | TomDispatch

Michael Klare, The Coming World of "Peak Oil Demand," Not "Peak Oil"

In a Greater Middle East in which one country after another has been plunged into chaos and possible failed statehood, two rival nations, Iran and Saudi Arabia, have been bedrock exceptions to the rule.  Iran, at the moment, remains so, but the Saudi royals, increasingly unnerved, have been steering their country erratically into the region’s chaos. The kingdom is now led by a decrepit 80-year-old monarch who, in commonplace meetings, has to be fed his lines by teleprompter.  Meanwhile, his 30-year-old son, Deputy Crown Prince Mohammed bin Salman, who has gained significant control over both the kingdom’s economic and military decision-making, launched a rash anti-Iranian war in Yemen, heavily dependent onair power.  It is not only Washington-backed but distinctly in the American mode of these last years: brutal yet ineffective, never-ending, a boon to the spread of terror groups, and seeded with potential blowback.

Meanwhile, in a cheap-oil, belt-tightening moment, in an increasingly edgy country, the royals are reining in budgets and undermining the good life they were previously financing for many of their citizens.  The one thing they continue to do is pump oil -- their only form of wealth -- as if there were no tomorrow, while threatening further price-depressing rises in oil production in the near future.  And that’s hardly been the end of their threats.  While taking on the Iranians (and the Russians), they have also been lashing out at the local opposition,executing a prominent dissident Shiite cleric among others and even baring their teeth at Washington.  They have reportedly threatened the Obama administration with the sell-off of hundreds of billions of dollars in American assets if a bill, now in Congress and aimed at opening the Saudis to American lawsuits over their supposed culpability for the 9/11 attacks, were to pass. (It would, however, be a sell-off that could hurt the Saudis more than anyone.)  Even at the pettiest of levels, on Barack Obama's recent arrival in Saudi Arabia for a visit with King Salman, they essentially snubbed him, a first for a White House occupant. All in all, a previously sure-footed (if extreme) Sunni regime seems increasingly unsettled; in fact, it has something of the look these days of a person holding a gun to his own head and threatening to pull the trigger. In other words, in a region already aflame, the Saudis seem to be tossing... well, oil onto any fire in sight.

And in a way, it's little wonder.  The very basis for the existence of the Saudi royals, their staggering oil reserves, is under attack -- and not by the Iranians, the Russians, or the Americans, but as TomDispatch energy specialist Michael Klare explains, by something so much larger: the potential ending of the petroleum way of life.  Tom

Debacle at Doha 
The Collapse of the Old Oil Order 
By Michael T. Klare

Sunday, April 17th was the designated moment.  The world’s leading oil producers were expected to bring fresh discipline to the chaotic petroleum market and spark a return to high prices. Meeting in Doha, the glittering capital of petroleum-rich Qatar, the oil ministers of the Organization of the Petroleum Exporting Countries (OPEC), along with such key non-OPEC producers as Russia and Mexico, were scheduled to ratify a draft agreement obliging them to freeze their oil output at current levels. In anticipation of such a deal, oil prices had begun to creep inexorably upward, from $30 per barrel in mid-January to $43 on the eve of the gathering. But far from restoring the old oil order, the meeting ended in discord, driving prices down again and revealing deep cracks in the ranks of global energy producers.

It is hard to overstate the significance of the Doha debacle. At the very least, it will perpetuate the low oil prices that have plagued the industry for the past two years, forcing smaller firms into bankruptcy and erasing hundreds of billions of dollars of investments in new production capacity. It may also have obliterated any future prospects for cooperation between OPEC and non-OPEC producers in regulating the market. Most of all, however, it demonstrated that the petroleum-fueled world we’ve known these last decades -- with oil demand always thrusting ahead of supply, ensuring steady profits for all major producers -- is no more.  Replacing it is an anemic, possibly even declining, demand for oil that is likely to force suppliers to fight one another for ever-diminishing market shares.

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Sit back, relax, and enjoy the oil thriller - Pepe Escobar — RT Op-Edge

Sit back, relax, and enjoy the oil thriller - Pepe Escobar

The famous Hollywood adage – 'nobody knows anything' – seems to perfectly apply to the current turbulence in the oil market. So in an effort to clarify where the global oil economy is heading to, let’s engage in a Battle of the Oil Analysts.

Relying on these Oil Analysts (OA) does not necessarily mean you will be handed straightforward answers, but perhaps with some luck you will see a ray of light.

Saudi Arabia is saying that they are raising oil production to 12 million barrels a day. That’s highly debatable. Russia is saying that they can raise oil production to 13 million barrels a day. OA1 cuts to the chase: “Both are bluffing. Prices are still rising. That means no one believes them.”

OA2 kicks in, reminding that, “oil price is holding because of the 1.5 million barrels a day pulled off the market by a strike in Kuwait of about 10,000 workers. That cut their 3 million barrels a day production in half. Now they are going back to work. Yet the price of oil is still rising.”

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Does Saudi Arabia's Play For Market Share Make Sense? | Zero Hedge

Does Saudi Arabia's Play For Market Share Make Sense?

Submitted by Dwayne Purvis via OilPrice.com,

Props to Saudi Arabia. Unlike other producers, including U.S. shale producers, it maintained financial strength and flexibility during the last boom. When it began to shift the paradigm of global supply, the kingdom was explicit about its goal - market share - even if it didn’t always trumpet the proactive steps it was taking towards that goal. The now-evident objective of low prices, having been achieved and sustained, begs the question of why Saudi Arabia defended its market share.

The position of Saudi Arabia among producers in 2014 resembled the position of Germany in the European Union in prior years. Both had maintained financial strength despite the prodigal habits of other members, and both were called upon to make unique sacrifices to rescue their neighbors. Germany had closer ties to its partners and seemed to see the ultimate benefit of helping. Perhaps because it didn’t have such ties, Saudi seems to have weighed the benefits differently. Indeed, Saudi had no moral obligation or economic need to sacrifice itself in order to redirect wealth to other producers.

Their actions suggest that they intended to drive prices toward a basement price—stepping supply up when prices reached the $60s, slowly tuning it down when prices hit the $40s and below, and increasing its capacity for production even as prices fell. The recent address of Saudi Oil Minister Ali Al-Naimi in Houston was straightforward and polite, but it might be crudely paraphrased as, ”Get used to the low prices. Adapt or die.”

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How oil price volatility explains these uncertain times | Energy Matters

How oil price volatility explains these uncertain times

Guest post by Tom Therramus that is the pen name of a US based Professor. The article was first published on Oil-Price.Net

The numbers say that these should be the best of times for America. The economy has been growing for five years. Unemployment is low. Inflation is almost nonexistent and gas is cheap. Yet, many Americans feel deeply uneasy about their future prospects. Uncertainty is the catchword of the moment. This uncertainty is contributing to growing pessimism and anger – discontent that is no doubt a factor in the unsettled state of the 2016 Presidential race.

If times are good, why do so many Americans believe that it is the worst of times? Have we become a nation of neurotics or is something real going on?

In a 2013 article at Oil-Price.net, prior to the beginning of the 2014 collapse in oil price, I proposed that turbulence in the oil markets was on the way. In a subsequent essay in early 2015, I suggested that this instability in the oil markets would lead to a period of turmoil in the stock market in the coming year or so.

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An Output Freeze Is Still The Big Red-Herring For Oil | Zero Hedge

An Output Freeze Is Still The Big Red-Herring For Oil

Submitted by Charles Kennedy via OilPrice.com,

The way things are shaping up on the oil price panic barometer, 17 April is now a D-Day of sorts for the industry. It’s the day both OPEC and non-OPEC countries will (reportedly) sit down together in Doha, Qatar, to work towards an output freeze deal.

OPEC President Qatar will host the meeting as a follow-up to a late February meeting that was attended by Qatar, Saudi Arabia, Russia and Venezuela—when the initial idea of an output freeze to January levels was bandied about, and that the idea is being “increasingly supported” by Saudi Arabia and Russia.

“It is worth noting that the earlier Doha meeting of February 16 has changed the sentiment of the oil market and put a floor under the oil price. This has triggered a broad and intensive dialogue between all oil producers out of the conviction that current oil prices are not sustainable,” according to a Qatari Energy Ministry statement.

But now that prices have somewhat rebounded to the $40 level—up 30 percent or so since last month when the output freeze was first brought up—what is everyone expecting from Doha?

While the meeting scored a bit of a coup by winning a Saudi commitment to attend, there has been some undermining of things by Russian Energy Minister Alexandar Novak, who said yesterday that the meeting would only “probably” be held in April.

The official line is that the supporters of the freeze are looking for commitments from more producers, both within OPEC and outside of OPEC. But those who have committed so far are doing so contingent on others committing as well.

Venezuela—the hardest hit—is fully committed. Qatar has been lobbying for the freeze from the onset. Kuwait is committed. But Iraq, which represents the strongest supply growth among OPEC countries—is not keen on the idea, and Iran, fresh off sanctions, has said it would commit only after it reached a production level of 4 million barrels per day. That’s not going to be April.

The biggest coup for the Doha meeting is that Saudi Arabia has said it will attend.

Despite everything that could go wrong at Doha, oil prices are maintaining the new “high” on hopes of an output freeze, even if only at January levels.

"There is continuing jaw-boning about production cuts from OPEC members, and inventories are now coming in at the lower end, rather than the higher end of expectations,” CMC Markets chief analyst Michael Hewson told Reuters.

But plenty still view a potential output freeze as a red-herring.

"Any such deal would still not be a game changer. It would really just maintain the excess supply that is now in place," Thomas Pugh of Capital Economics said in a note, as carried by zeenews.

In an interview with Bloomberg, Saxo Bank commodity strategy head Ole Sloth Hansen put it succinctly: “Having seen the positive impact of verbal intervention since the low point was reached in January, it is now up to OPEC and non-OPEC members not to destroy the recovery, which as this stage, remains fragile, given current fundamentals.”

But now that prices have rebounded a bit, Doha has perhaps become less important. What that means is that it’s more about what they say than what they actually do in Doha.

*  *  *

And now we get this...

• *SOME OPEC MEMBERS WON'T ATTEND DOHA MEET: EL-BADRI (Saudis?)
• *ABOUT 15-16 COUNTRIES WILL ATTEND DOHA MEETING: EL-BADRI
• *OIL STOCKPILE OVERHANG WILL DISAPPEAR IN TIME: EL-BADRI (40 or 50 years?)

Tomgram: Michael Klare, A Take-No-Prisoners World of Oil | TomDispatch

Michael Klare, A Take-No-Prisoners World of Oil

It’s evident that we’re still on a planet where oil rules. The question increasingly is: What exactly does it rule over? After all, every barrel of oil that’s burned contributes to a fast-approaching future in which the weather grows hotter and more extreme, droughts andwildfires spread, sea levels rise precipitously, ice continues to melt away in the globe's coldest reaches, and... well, you know that story well enough by now. In the meantime, Planet Earth has a glut of oil on hand and that, it turns out, doesn’t mean -- not for the major oil companies nor even for the major oil states -- that the good times are getting ready to roll.

Of all the powers struggling with that oil glut and the plunging energy prices that have gone with it, none may be more worth watching than Saudi Arabia. While exporting its own extremists and its extreme brand of Islam from Afghanistan to Syria, and lending a decades-long hand to the destabilization of the Greater Middle East, that kingdom has itself been a paragon of stability. Nothing, however, lasts forever, and so keeping an eye on the Saudis is a must. That’s especially so since the latest version of the royal family has also made what might be called the American mistake (with the backing of the Obama administration, no less) and for the first time plunged the Saudi military directly into a typically unwinnable if brutal war in neighboring Yemen. Combine the destabilizing and blowback effects of wars that won’t end, including the Syrian one, and of oil prices that refuse to rise significantly and, despite the kingdom’s copious money reserves, you have a formula for potential domestic unrest. Already the royals are cutting their domestic subsidies to their own population, pulling billions of dollars in aid out of Lebanon, and exploring a possible $10 billion bank loan.

As TomDispatch’s invaluable energy expert Michael Klare suggests today, when oil prices began plummeting in 2015, the Saudis launched an “oil war of attrition,” imagining that others would be devastated by it (as OPEC partners Nigeria and Venezuela already have been) but that the royals themselves would emerge triumphant.  Should the unimaginable happen, however, and should the kingdom itself begin to come unglued in a Greater Middle East that is increasingly the definition of chaos -- watch out. Tom

Energy Wars of Attrition 
The Irony of Oil Abundance 
By Michael T. Klare

Three and a half years ago, the International Energy Agency (IEA) triggered headlines around the world by predicting that the United States would overtake Saudi Arabia to become the world’s leading oil producer by 2020 and, together with Canada, would become a net exporter of oil around 2030. Overnight, a new strain of American energy triumphalism appeared and experts began speaking of “Saudi America,” a reinvigorated U.S.A. animated by copious streams of oil and natural gas, much of it obtained through the then-pioneering technique of hydro-fracking. “This is a real energy revolution,” the Wall Street Journal crowed in an editorial heralding the IEA pronouncement.

The most immediate effect of this “revolution,” its boosters proclaimed, would be to banish any likelihood of a “peak” in world oil production and subsequent petroleum scarcity.  The peak oil theorists, who flourished in the early years of the twenty-first century, warned that global output was likely to reach its maximum attainable level in the near future, possibly as early as 2012, and then commence an irreversible decline as the major reserves of energy were tapped dry. The proponents of this outlook did not, however, foresee the coming of hydro-fracking and the exploitation of previously inaccessible reserves of oil and natural gas in underground shale formations.

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ClubOrlov: Harm/Benefit Analysis

Harm/Benefit Analysis: 


According to Kaczynski, we need to reject organization-dependent technologies that tie us into the technosphere, and cultivate organization...

Oil Production Vital Statistics February 2016 | Energy Matters

Oil Production Vital Statistics February 2016

High Oil Price Volatility signals that the market has not yet decided the future direction of the oil price. Global production was marginally lower in January, but outside of the USA, oil production remains robust with rises registered in most producing areas. Production in Iran has begun to rise with 80,000 bpd added in January. US and global rig counts are in steep decline while drilling in the Middle East remains close to all time highs.

The following totals compare Jan 2016 with December 2015:

• World Total Liquids down 230,000 bpd
• USA down 170,000 bpd
• North America down 180,000 bpd (includes USA)
• OPEC up 270,000 bpd
• Saudi Arabia up 70,000 bpd
• Iran up 80,000 bpd
• Russia + FSU up 10,000 bpd
• Europe up 30,000 bpd (YOY)
• Asia down 30,000 bpd

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Oil Didn't Wreck Venezuela's Economy... Socialism Did | Zero Hedge

Oil Didn't Wreck Venezuela's Economy... Socialism Did

Authored by Pascal-Emmanuel Gobry, originally posted at The Week,

Venezuela's economy is collapsing. The country has topped Bloomberg's "Economic Misery Index," which takes into account several economic measures, for two years. Runaway inflation and high unemployment are plaguing the country.

The country's government is taking emergency measures, including increasing the price of gas (which is still among the cheapest in the world) and devaluing the currency to tackle runaway inflation.

If you read much of the commentary, people blame the country's economic woes on the low oil price. It is true that Venezuela's economy is highly sensitive to the oil price, because it is a significant part of the economy. The oil and gas sector accounts for around 25 percent of the country's entire gross domestic product. Venezuela's oil also has high sulfur content, which makes it more expensive to refine, and makes Venezuela's economy more sensitive to oil price drops.

But while the oil price drop may have been a proximate cause, and an aggravating factor, Venezuela's economic woes predate the current oil price drop by many years, and were going on even while the oil price was high, under President Hugo Chavez. The culprit is clear and obvious: The problem is Venezuela's authoritarian socialism.

The country has had food shortages for many years, because many foodstuffs are price-controlled. If there's one thing all economists agree on, it's that price controls lead to rationing. And yet, the government insists shortages are due to greedy hoarders.President Nicolás Maduro has recently taken over a supermarket chain, arguing that it was hoarding. The currency crisis also means that food imports are prohibitively expensive, and capital and exchange controls mean there is often no way to produce the money to buy things even when they are available. Venezuela shows us a sight familiar to those who experienced Soviet Communism — long lines to buy food — in an oil-rich country.

Under Chavez, Venezuela nationalized a swathe of industries, including oil projects, and instituted a 50 percent windfall tax on oil profits, driving away oil companies. Sometimes the government just seized them. The government nationalized agriculture projects and major agricultural companies. It has also nationalized several banks and shut down others. It also took over the cement sector and the country's biggest telecommunications company, as well as utility companies.

Transparency International ranks Venezuela in the top 20 of the world's most corrupt countries. According to a Gallup poll, 75 percent of Venezuelans believe corruption is rampant at every level of the government. If you were a business owner in a country where the government is seizing companies left and right, you might believe a bribe is the only way to keep your living. Caracas is the murder capital of the world.

President Maduro recently arrested the mayor of Caracas, a virulent opponent of the regime, on charges of fomenting a coup d'état. TV channels and other media hostile to the regime are frequently harassed, or even shut down. None of these things are due to low oil prices. Instead, they are due to misguided government policies.

And, for conservatives, it's a useful reminder. Socialism is what produces bread lines in an oil-rich country. In developed countries, economic debates often focus on narrow questions, such as raising the minimum wage, where it's possible for reasonable people to disagree. This leads to an impression that the relative merits of free enterprise and big government policies can be in the eye of the beholder.

To a certain extent this is true. Or, at any rate, different economic policies affect individual countries differently. Make no mistake: A free enterprise system requires an important role for government. But while unleashed capitalism can have unseemly side effects, no policy produces the kind of sheer economic devastation that authoritarian socialism does. Sadly, Venezuela gives us yet another example.

UAE Offers India Free Oil To Ease Storage Woes | Zero Hedge

UAE Offers India Free Oil To Ease Storage Woes

Submitted by Charles Kennedy via OilPrice.com,

In an oil sector first, the oil-rich United Arab Emirates (UAE) has offered free oil to India in return for a storage deal at India’s planned underground facility as the supply glut worsens and some analysts predict that ‘’peak storage” could sending prices crashing further.

The UAE’s Abu Dhabi National Oil Company (ADNOC) has agreed to store crude oil in India's maiden strategic storage facility, sweetening the deal by saying India could take two-thirds of the oil for free.

It’s a great deal for India, which is almost fully reliant on imports to meet its crude oil needs.

India has lured Abu Dhabi in with the building of a massive underground storage facility system that will be able to take on 5.33 million tons of crude as a bulwark against global price shocks and supply disruptions.

ADNOC is eyeing half the storage capacity at one of the new underground facilities, Mangalore, which has a 1.5-million-ton capacity on its own. Abu Dhabi plans to stock 0.75 million tons, or 6 million barrels of oil, here, and 0.5 million tons will belong to India.

The deal is reflective of a wider, global storage panic and talk of what could happen when we reach ‘’peak storage’’. A number of analysts have suggested that oil prices might crash to $20, or even $10 a barrel, if storage tanks become full.

Storage is now at the highest level in at least a decade.

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Cassandra's Legacy: The collapse of the Western Roman Empire: was it c...

Cassandra's Legacy: The collapse of the Western Roman Empire: was it c...: Image from the recent paper by Buentgen et al., published on "Nature Geoscience" on February 8, 2016 . The red curves are t...

A Market Collapse Is On The Horizon | OilPrice.com

A Market Collapse Is On The Horizon

By Gail Tverberg
Posted on Sat, 13 February 2016

What is ahead for 2016? Most people don’t realize how tightly the following are linked:

1. Growth in debt
2. Growth in the economy
3. Growth in cheap-to-extract energy supplies
4. Inflation in the cost of producing commodities
5. Growth in asset prices, such as the price of shares of stock and of farmland
6. Growth in wages of non-elite workers
7. Population growth

It looks to me as though this linkage is about to cause a very substantial disruption to the economy, as oil limits, as well as other energy limits, cause a rapid shift from the benevolent version of the economic supercycle to the portion of the economic supercycle reflecting contraction. Many people have talked about Peak Oil, the Limits to Growth, and the Debt Supercycle without realizing that the underlying problem is really the same–the fact the we are reaching the limits of a finite world.

There are actually a number of different kinds of limits to a finite world, all leading toward the rising cost of commodity production. I will discuss these in more detail later. In the past, the contraction phase of the supercycle seems to have been caused primarily by too high a population relative to resources. This time, depleting fossil fuels–particularly oil–plays a major role. Other limits contributing to the end of the current debt supercycle include rising pollution and depletion of resources other than fossil fuels.

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The Archdruid Report: Renewables: The Next Fracking?

The Archdruid Report: Renewables: The Next Fracking?: I'd meant this week’s Archdruid Report post to return to Retrotopia, my quirky narrative exploration of ways in which going backward ...

The Physics of Energy and the Economy | Our Finite World

The Physics of Energy and the Economy

I approach the subject of the physics of energy and the economy with some trepidation. An economy seems to be a dissipative system, but what does this really mean? There are not many people who understand dissipative systems, and very few who understand how an economy operates. The combination leads to an awfully lot of false beliefs about the energy needs of an economy.

The primary issue at hand is that, as a dissipative system, every economy has its own energy needs, just as every forest has its own energy needs (in terms of sunlight) and every plant and animal has its own energy needs, in one form or another. A hurricane is another dissipative system. It needs the energy it gets from warm ocean water. If it moves across land, it will soon weaken and die.

There is a fairly narrow range of acceptable energy levels–an animal without enough food weakens and is more likely to be eaten by a predator or to succumb to a disease. A plant without enough sunlight is likely to weaken and die.

In fact, the effects of not having enough energy flows may spread more widely than the individual plant or animal that weakens and dies. If the reason a plant dies is because the plant is part of a forest that over time has grown so dense that the plants in the understory cannot get enough light, then there may be a bigger problem. The dying plant material may accumulate to the point of encouraging forest fires. Such a forest fire may burn a fairly wide area of the forest. Thus, the indirect result may be to put to an end a portion of the forest ecosystem itself.

How should we expect an economy to behave over time? The pattern of energy dissipated over the life cycle of a dissipative system will vary, depending on the particular system. In the examples I gave, the pattern seems to somewhat follow what Ugo Bardi calls a Seneca Cliff.

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Cheap Gas... Big Problems - EPautos

Cheap Gas... Big Problems



Some happy news: Gas is officially cheaper than it’s ever been.as prices lead



In my area – southwest Virginia – it is about $1.59 per gallon as of Feb. 7. Of this, about 60 cents (18.4 cents federal, 36 cents state)  is taxes, so the actual gas costs about $1 right now. Back in 1967, the low water mark for cheap gas, it cost about 30 cents … in 1967 money.



That 30 cents – in 2016 money (inflation-adjusted) is $2.13.  In other words, gas currently costs us about half what it cost back in ’67, almost 50 years ago.



It is the one necessity of life that – for now – costs less now than it used to.



But, it’s weird – like a 70 degree January afternoon up here in the hills of the Blue Ridge (we’ve had that, too).



Makes you wonder.



Is it a bad omen of not-so-happy things to come? Like the out-rushing tide, just before a tsunami arrives?



Yes, I think it is.gas prices in '67



I know for a fact the car industry is having a quiet meltdown. They – the car companies, all of them – have sunk multiple Trump sums into the future, as they perceived it, of the electric car and also the hybrid car. And of the economy car. But what is the motivation for the purchase of such when the cost of a gallon of gas is – literally – less than the cost of an equivalent measure of bottled water?



Go to any 7-11 and see for yourself. How much are they charging for a quart bottle of “filtered” (and Mad Men-marketed) tap water?



Which is a way to measure the cost of buying a hybrid, or an electric car or an economy car.



Why do so?



Why not treat yourself to size, power – fun! – instead?



Expecting people – most of them –  to purchase “sensible” cars when gas is nearly free is akin to expecting them to down a plate of boiled Kale when a plate of cheese fries beckons.54.5 MPG CAFE



Meanwhile, CAFE regs – the federal mandates requiring each car company’s fleet to achieve a certain average MPG – are set to uptick to almost 55 (54.5) MPG by 2025 (see here) which is not only not far from now it is very close to now in terms of product planning.



This is the car business term for the development process of tomorrow’s cars. They are typically working about five years out from now, meaning that the cars they expect to have in showrooms come 2020 are being designed and tested and generally being made ready for their not-too-distant launch right now. And they are thinking – hard – about 2025.



They stuff they are selling at the moment may be “new” – but it’s already old.



The car companies must bet on what the market will be like tomorrow rather than how it is today. And if they bet wrong… .



You can perhaps see the problem.



Ford (just one example) bet long on its new line of micro-sized but heavily turbocharged “EcoBoost” engines, banking (they hoped) that the 3-4 MPG advantage these engines offered over a comparably powerful (but larger and thirstier) engine would balance out the much higher cost of the engines themselves. Which it might, if a gallon of gas cost $4 or even $3.



But not $1.



Whoops.Obama CAFE



GM was smart (or lucky) enough to stick with its conventional (and simpler, cheaper to make and to sell) big V8s sans turbos in trucks and such. But was dumb enough to “invest” in shit statue-carving craziness such as the $37,000 Bolt electric car (more on that here).



Which could only make sense if gas cost $8 a gallon.



The root cause of it all is the LSD-like distortion of natural market signals by our friend Uncle. He issued the most recent fuel-efficiency fatwa back in 2012 – when gas prices were high (because Uncle) and seemed destined to remain so – and even become more so.



But what now, brown cow?   



The market discovered lots of oil. Which is why gasoline is very cheap now.



Obama crowed that his 54.5 MPG fatwa would result in savings to the consumer “comparable to lowering the price of gas by $1 per gallon.”



Well, the market just did that for him. Without him.



In spite of him.



Meanwhile, the costs imposed by the 54.5 MPG fatwa will most definitely be imposed on the American consumer – in the form of more expensive “fuel saving” technologies – as well as loser technologies like the electric car and (arguably) the hybrid car.wrecked Smartcar



A not-happy-with-me (for writing publicly about the Bolt’s absurdity as a transportation device) GM engineer noted – correctly – that they (GM) committed all that capital and all those engineering resources to the Bolt idiocy not because of public demand for such but because of government’s demands for such.



Exactly.



And the government’s demands grow more cognitively dissonant, more out of tune with reality, the lower gas prices go.



A train wreck is about to happen … a big one.

North Dakota's Economy Has Been "Completely Devastated" By Oil's Collapse | Zero Hedge

North Dakota's Economy Has Been "Completely Devastated" By Oil's Collapse

Yesterday, on the way to documenting the malaise China’s hard landing has inflicted on Minnesota’s mining country, we discussed the dramatic impact falling crude prices have had on the American and Canadian oil patches.

Take Texas, for instance, where a year of crude carnage has wreaked havoc upon what, until last year anyway, was the engine driving the “robust” US labor market.  As we showed in November, layoffs in Lone Star land far outrun job losses in any other state. In Houston (which was already staring down a worsening pension crisis), vacant office space is “piling up.” As WSJ wrote last week, “the amount of sublease space on the market in the Houston area hit 7.6 million square feet, or the size of more than two Empire State Buildings.”

“The unemployment rate in Texas rose sharply to 9.2% in 1986, an all-time high for the state,” Goldman wrote recently, recalling a previous period of low oil prices in a note entitled “How Bad Can Texas Get?”

“Real house prices fell 30% peak to trough, and the number of bankruptcy filings (including both business and non-business filings) more than doubled from 1984 to 1986,” the bank added.

North of the border, things are even worse. As regular readers are no doubt aware, Alberta is a veritable nightmare as suicide rates rise, the number of jobless multiplies, food bank usage soars, and property crime in Calgary spikes.

“Lower for longer” has been a disaster for many state and local governments in the US, as revenue projections devised before oil’s historic plunge prove increasingly optimistic.

Cont.....