Tag Archives: @gailtheactuary

How Economic Growth Fails

Another great piece from Gail Tverberg, particularly important when it comes to understanding the depressed commodity prices affecting the NZ economy and other export dependent nations globally:

Our economy is like a pump that works increasingly slowly over time, as diminishing returns and other adverse influences affect its operation. Eventually, it is likely to stop.

As nearly as I can tell, the way economic growth occurs (and stops taking place) is as summarized in Figure 3.


Figure 3. Overview of our economic predicament

As long as (a) energy and other resources are cheap, (2) debt is readily available, and (3) “overhead” in the form of payments for government services, business overhead, and interest payments on debt are low, the pump can continue working as normal. As various parts of the pump “gum up,” the economic growth pump slows down. It is likely to eventually stop, once it becomes too difficult to repay debt with interest with the meager level of economic growth achieved.

Commodity prices are also likely to drop too low. This happens because the wages of workers drop so low that they cannot afford to buy expensive products such as cars and new homes. Growing purchases of products such as these are a big part of what keep the economic pump operating.

Our Finite World

We all know generally how today’s economy works:

Figure 1 Figure 1

Our economy is a networked system. I have illustrated it as being similar to a child’s building toy. Ever-larger structures can be built by adding more businesses and consumers, and by using resources of various kinds to produce an increasing quantity of goods and services.

Figure 2. Dome constructed using Leonardo Sticks Figure 2. Dome constructed using Leonardo Sticks

There is no overall direction to the system, so the system is said to be “self-organizing.”

The economy operates within a finite world, so at some point, a problem of diminishing returns develops. In other words, it takes more and more effort (human labor and use of resources) to produce a given quantity of oil or food, or fresh water, or other desirable products. The problem of slowing economic growth is very closely related to the question: How can the limits we are reaching be expected to play…

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Tony Seba’s ‘exponential increase’ in technology will save us – a rebuttal (of sorts)

World renown techno-utopian idealist, and singularitarian, Tony Seba was recently brought to Southland by Venture Southland and Callaghan Innovation to talk to business leaders about the current rate of change in technology and how this is a highly disruptive force to be reckoned with… I didn’t attend the rather expensive seminar, however I do keep coming across links to his talks, etc.

I’ve reviewed a couple of his talks, and I feel I need to put some stuff into writing:

Firstly, what I’m NOT saying:

  1. I’m not saying he’s wrong about the impressive pace of technological change ongoing (although I do think there must be diminishing returns to increases in technological complexity somewhere in there…)
  2. I’m not denying that the idea of being able to continue to do more, but with less, is attractive. It’s just plain and simple NOT POSSIBLE. The future we face from this point forward is doing LESS with LESS (although it can be more fulfilling and finally free up that social / leisure time that technology originally promised us) as I’ve written about here: http://bit.ly/14oMDiO
  3. Having said that, the type of disruption that Tony envisages, IF we can keep our techno-industrial civilisation going in the face of declining net energy available, and through the upcoming GFC MK2 (which again is partially attributable to declining energy profit as a root cause http://bit.ly/1Ips07m) would certainly help with sustainability in any foreseeable future.

Secondly, the rebuttal, in the form of some thoughts and estimates on the potential for renewable electricity generation to replace liquid fossil hydrocarbons as a way to move us and our stuff around (based on what he presents here: https://youtu.be/dUEBDVGXeTE and here: https://youtu.be/lKTHr4diXoc ):

Tony Seba’s thesis that solar’s costs are decreasing exponentially is unfortunate, as he misses (ignores) several key constraints on solar (taking NZ as an example):

1.) Liquid fuel for transport’s declining ROI is leading to a disastrous situation brewing in oil supply, something that has been known for a very long time, and which the current depressed price per barrel is bringing about that bit quicker: http://on.wsj.com/1et7tmb

2.) Solar and EV’s is not liquid fuel for transport, and there are no electric mine trucks, HGV’s, etc as the battery tech is not good enough. You could say well we can at least electrify personal transport, and you’d be right, but we can’t do this for heavy goods vehicles, which comprise 40%ish of NZ’s fuel consumption (See page 25: http://bit.ly/1VIF5OP), and all of the inputs that industry across the globe relies on to produce all the tech that we use the electricity to power.

3.) I question given point 1, and its concomitant deleterious effects on the economy, whether we have sufficient potential profitability to be able to make a wholesale replacement of our vehicle fleet (even only 20% of it, if you subscribe to his arguments on reducing requirements for vehicles) going forwards, never mind the huge investment in infrastructure to power them. Solar requires a lot of material inputs and the input costs will expand rapidly as other limits affect overall industrial productivity and EROI of extraction activities. These blog posts from Gail Tverberg have lots of highly illuminating points in that direction: http://bit.ly/1uEfevy http://bit.ly/1qDeFgB http://bit.ly/1kS6L2o http://bit.ly/TOXvkL http://bit.ly/11nLEOw

4.) All hydro electricity generation in NZ is only 14.5 kWh/person/day (84.2 PJ/annum 2012 figures from IEA: http://www.iea.org/Sankey/index.html#?c=New Zealand&s=Balance) and in the same year our energy consumption for transport from fossil fuel was 32.6 kWh/person/day (189.6 PJ/annum), never mind that the hydro generation capacity is mostly spoken for for other uses.

5.) Can we make up the balance with solar? Our potential for solar energy generation (using the estimation methodology here: http://withouthotair.com/c6/page_38.shtml). NZ population 2012 was 4.4M (https://www.google.co.nz/search?q=nz+population+2012) and 1 petajoule = 277,777,778 kilowatt hours so our fossil fuel liquids consumption was:
189.6 [PJ/annum] /365 = 0.5194520548 [PJ/day]
277777778 [kWh/PJ] => 144292237.558356 [kWh/day]
4433000 population => 32.55 [kWh/person/day] for Transport energy use.
We can get around 8-9 kWh/p/day PV generation based on this estimate for NZ: http://hot-topic.co.nz/wp-content/uploads/2009/11/ScaddenEnergyNZ.pdf. Add another 15% of the 84.2PJ of hydro if Tiwai Point shuts down, which equates (using the same calculation as above) to another 2.17 [kWh/person/day]
So the potential energy deficit to be met from another very low carbon emission source is around 32.55-11 which is approx 21.55 kWh/person/day… 

6.) At best solar is a fossil fuel extender, and it’s potential in terms of being a fossil fuel replacement is routinely and systemically overestimated, as most methodologies don’t account for the energy required to replace it at the end of its useful life: http://bit.ly/TOUHnN

Here’s some food for thought from a more believable source: Nate Hagens on Energy

Edit: This also from Nafeez Ahmed:

As oil prices have slumped over the last few years due to both the shale gas and Saudi oil gluts, the decline in profitability has forced oil majors to slash investments and shut down costly operations.

US industry experts now forecast that these events are setting the world up for an oil price spike, which could begin in the next six months to two years. There can be little doubt that the US government is aware of the industry’s fears.

Robert Hirsh, a former senior energy programme advisor for government contractor Science Applications International Corporation, wrote a major report on peak oil for the US Department of Energy in 2005.

He predicts a likely global oil shock by 2017, accompanied by a stock market crash, inflation, and unemployment.

He also points out that the Pentagon recognises the risk.

As oil production decreases due to the cost-cutting contraction of industry operations, along with declines from aging fields, the International Energy Agency predicts an increase in demand growth by the end of this year.

As demand rises, the question is how quickly existing oil and gas wells can increase global output in the face of this rapidly diminishing spare capacity.

The answer is not very. Over the next two years, around 200 major international oil and gas projects have been scheduled for final investment approvals. But due to the price collapse – and with it the collapse in profitability – the vast majority of them face postponement, or cancellation.

According to Tim Dodson, executive vice president for exploration at Statoil ASA, the industry is “struggling big-time to replace their oil resources and reserves”.

This is part of a wider pattern over the last decade. Oil majors like Royal Dutch Shell, British Petroleum, ConocoPhillips, ExxonMobil and Chevron have all seen their production fall year-over-year by 3.25 percent. Oil and gas extracted last year has not been replaced by new reserves.

The business model of the shale gas industry is so shaky, according to legendary US hedge-fund manager James Chanos, that when prices do rebound as demand growth hits the limits of declining supply, the oil majors will still be in trouble.

The end of oil, the next crash

With insufficient oil available amidst a price rebound, markets will be massively incentivised to flee expensive fossil fuels, empowering cheaper, alternative energy forms.

Oil majors, still facing high production costs and huge debt obligations, will have to grapple with further borrowing to kick-start costly investments in new production projects. But in the corresponding climate of a new economic recession triggered partly by oil price spikes, how likely is this?

Like Hirsh, Charles Maxwell, a senior energy analyst at Weeden & Co., forecasts a price spike in the next few years. “That’s going to bite us big time. 2019 is going to be hell.”

Five years ago, Maxwell told Forbes that “around 2015, we will hit a near-plateau of production around the world, and we will hold it for maybe four or five years. On the other side of that plateau, production will begin slowly moving down. By 2020, we should be headed in a downward direction for oil output in the world each year instead of an upward direction, as we are today”.

That prediction in 2010 appears to be transpiring today.

“And at around 2015, we will be unable to produce the incremental barrel in the global system. So a tightness of supply will begin to be felt,” Maxwell warned Forbes. “Let’s say in 2013, we may produce 1 percent more oil than we did the year before and then if we have a demand growth of 1¼ percent in 2013, we’ll be very slightly tightening the system. The difference between supply and demand is not going to be very much at first. It would not normally cause a big rise in price. On the other hand, in 2014, that tightness begins to grow and it is now a trend. By 2015 perhaps we’re only able to produce 0.50 percent more with about 1.25 percent higher demand, so that we’re 0.75 percent short.”

The next global recession, though, is likely to begin as oil prices bottom out further, potentially forcing many oil companies to virtually shut down production, facing the prospect of further write-downs and bankruptcies that could make the 2008 sub-prime mortgage crisis look a like a walk in the park.”

– See more at: http://www.middleeasteye.net/columns/iran-deal-about-staving-coming-oil-shock-1366649799#sthash.yTne8Z31.HkuJwopG.dpuf

Further Reading:

  • “Peak oil turned out to be a more complex phenomenon than theorists originally anticipated. It has not been experienced as a precise ‘moment’ or ‘event’, but rather as a dynamic interplay between various forces that have provoked some adaptive adjustments (such as demand destruction or increased investments) in incremental and multidimensional ways. There may never be a ‘shock moment’ of peak oil’s arrival; instead, peak oil may continue to play out as a gradual, unplanned transition to a new set of energy and consumption patterns that are less oil dependent, giving rise to social, economic, and ecological impacts that no one can predict with any certainty. The evolving interrelationship of geological, geopolitical, economic, cultural, and technological variables has continued to surprise analysts – both the ‘cornucopians’, who claim there is nothing to worry about, and the ‘doomsayers’, who think collapse is imminent, as well as everyone in between. No doubt there will be more twists still to come in this energy tale.But what seems clear is that the consequences of peak oil are not going away. Whether the next twist arrives in the form of a new war or financial crisis, a new technology, a bursting shale bubble, or perhaps a radical cultural shift away from fossil fuels in response to climatic instability, intellectual integrity demands that analysts continue to revise viewpoints asfurther evidence continues to arrive. This issue is too important to be governed by ideology.”
    6 page academic paper on the economics of oil: The New Economics of Oil: Alexander, S. 2014 Melbourne Sustainability Issues paper No. 2, Melbourne Sustainable Society Institute http://bit.ly/1HXWhsj
  • In a new book (March 2014), former oil geologist and government adviser on renewable energy, Dr. Jeremy Leggett, identifies five “global systemic risks directly connected to energy” which, he says, together “threaten capital markets and hence the global economy” in a way that could trigger a global crash sometime between 2015 and 2020. http://bit.ly/1HXWQmb
  • The Energy Policy paper “Global oil risks in the early 21st century”, previously referenced in my submissions to Long Term Plans earlier in the year:
    The combination of increasingly difficult-to-extract conventional oil combined with depleting super-giant and giant oil fields, some of which have been producing for 7 decades, has led the International Energy Agency (IEA) to declare in late 2010 that the peak of conventional oil production occurred in 2006 (IEA, 2010). Conventional crude oil makes up the largest share of all liquids commonly counted as “oil” and refers to reservoirs that primarily allow oil to be recovered as a free-flowing dark to light-colored liquid (Speight, 2007). The peak of conventional oil production is an important turning point for the world energy system because many difficult questions remain unanswered. For instance: how long will conventional oil production stay on its current production plateau? Can unconventional oil production make up for the decline of conventional oil? What are the consequences to the world economy when overall oil production declines, as it eventually must? What are the steps businesses and governments can take now to prepare? In this paper we pay particular attention to oil for several reasons. First, most alternative energy sources are not replacements for oil. Many of these alternatives (wind, solar, geothermal, etc.) produce electricity— not liquid fuel. Consequently the world transportation fleet is at high risk of suffering from oil price shocks and oil shortages as conventional oil production declines. Though substitute liquid fuel production, like coal-to-liquids, will increase over the next two or three decades, it is not clear that it can completely make up for the decline of oil production. Second, oil contributes the largest share to the total primary energy supply, approximately 34%. Changes to its price and availability will have worldwide impact especially because alternative sources currently contribute so little to the world energy system (IEA, 2010).Oil is particularly important because of its unique role in the global energy system and the global economy. Oil supplies over 90% of the energy for world transportation (Sorrell et al., 2009). Its energy density and portability have allowed many other systems, from mineral extraction to deep-sea fishing (two sectors particularly dependent on diesel fuel but sectors by no means unique in their dependence on oil), to operate on a global scale. Oil is also the lynchpin of the remainder of the energy system. Without it, mining coal and uranium, drilling for natural gas and even manufacturing and distributing alternative energy systems like solar panels would be significantly more difficult and expensive. Thus, oil could be considered an “enabling” resource.

    Oil enables us to obtain all the other resources required to run our modern civilization.

    Peak oil is the result of a complex set of forces that includes geology, reservoir physics, economics, government policies and politics.”


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The view from further down the oil supply pyramid – de-growth probable – an interview with Gail Tverberg. Southland NZ implications.

An edited transcript of an interview on the Extraenvironmentalist Podcast, Episode #55. If you’d prefer to view the video interview that this excerpt is based on, you can watch it here: http://bit.ly/ZekRDz. After the transcript, some potential ideas as to how to put this into effect for Southland NZ are added.


Seth: Gail’s been in this peak oil scene for a long while, and she’s watched the whole scene play out. And being an actuary, she knows how to look at the numbers and see where the risks fall, and it’s very interesting her perspective that she comes from.

Gail: One kind of response is to kind of agree, but then put it out of your mind and say, “well, maybe it will happen to my grandchildren,” or something like that. Or maybe “she just doesn’t know what she’s talking about.” I think that the people who are closer to a situation, maybe the other actuaries for example, they look and they say, “Aha! I think she’s got something there.” Well, when I talk about the oil situation, I think I explain it a little bit differently than what a lot of people understand.

The way I see peak oil is different. The way I describe things is sort of in terms of a triangle of resources, and the way I see things is that we start at the top of that triangle, and the resources at the top of the triangle are the easy-to-extract, cheap oil. We started there a long time ago, and most of those are already extracted. Then we have to move down and we get to the little bit more expensive, little harder to extract oil, or maybe a little farther away, or maybe not quite as good a country that’s got a good political system.

diminishing returns on oil extraction - pyramid

Figure 18. Oil and Gas Resource Volume Versus Resource Quality. This graphic illustrates the relationship of in situ resource volumes to the distribution of conventional and unconventional accumulations, and the generally declining net energy and increasing difficulty of extraction as volumes increase lower in the pyramid.
Source: "Snake Oil: How Frackings False Promise of Plenty Imperils Our Future"  
Chapter 2, ‘Technology to the Rescue’ - Richard Heinberg. http://bit.ly/1iqIAJa

We keep going down the triangle, and there always looks like there’s lots more oil there, but what happens is the more oil that’s there, it’s harder to extract. It’s more expensive to extract and it disrupts the economy. It’s not the cheap oil that our economy started with when the economy was first set up. So it tends to lead to recession.This was never factored in.

People who are looking at the situation just look at the big triangle and say, “My! There’s lots and lots of oil down there.” Yeah, there is lots and lots of oil down there, and that oil may permanently stay in the ground because it’s so expensive to extract and it causes so many economic problems. When we do extract it, we really can’t afford to extract it.

Well, I think what happens is that the oil prices don’t necessarily go up all that high. In fact, I think what we’ve been seeing is exactly what happens. The price goes up a little, but what happens is that you start getting debt defaults. It goes up and you start seeing the situation like we had in Europe.

Europe is a little bit different than the United States because in the United States, we’ve got cheap natural gas which is kind of helping us along to kind of offset the high price of oil. But in Europe, they don’t. They’ve got high-priced natural gas besides high-priced oil, and they’re the ones that are going to be hit worst by the debt defaults. But I think that the way this all evolves is through debt defaults from the high price of oil, and we’re going to see Greece and maybe we’ll see Spain – I think we’re also going to see some kinds of situations in some of the oil-producing countries, for instance Egypt, the countries that find that they’re out of balance as well. And we’re going to see bad financial situations there too. It’s not just in Europe, but the way this all plays out as peak oil, what it looks like is financial collapse.

I think a big piece of the reason why the economies of Greece and some of these other countries are falling apart is because they are such big oil importers, such big users of – they’re so dependent on fossil fuels. I think Greece is actually coal that they’re using a lot of, but what happens is that as the prices increase, the tourists, for example, are not able to travel as much, so it cuts back on the tourist packages that they were selling. And so things don’t go as well. They lay people off of work, and you start seeing the recession that we see, and the taxes aren’t high enough to pay the benefits that they’ve promised the laid off workers, and you start seeing the pattern that we see today.

I think what we’re going to see coming ahead from what is being called peak oil, but I guess it’s really the high oil prices is we’re going to see more and more of what people will think of as financial collapse. And that’s going to be happening around the world. It probably will start in Europe, but it’s going to spread to the United States. It may very well spread to China. It is going to have an impact on places like even Africa too, because they are depending on us for some of the exports that we send them as well.

It’s hard to see a good solution to the problems that we’re coming to right now. I mean maybe there are few mitigating things, you know, that we can have our gardens and we can try to make things better, and not plan for a new bigger car and a new bigger house, and a new bigger all of these things, but I think a lot of it is a question of how long it takes for the whole situation to play out. We don’t have a whole lot of control over it. If it plays out over a long enough period, it may very well be that some of those mitigating things that we do will actually be a reasonably good help for some people…

Justin: So Gail was saying that a lot of what we actually do to respond to peak oil depends on how fast this plays out. We really are at the mercy of how quickly we’re depleting our oil reserves, but we’re also at the mercy of the geology and how quick the oil does deplete because we can do things like frack the land and pull out shale oil, and delay some of the absolute scarcity of oil, but like Gail was saying, if you look at the big picture, it is like a triangle. And as you get further down from the tip of the triangle, which is that easy-to-extract oil, as you get towards the middle, if you’re still inside it, you just look down and you see – wow, there’s so much oil remaining. And you see that everywhere now, with so many reports that are coming out saying that we just have basically a limitless oil reserves. But that oil is not the same as the stuff that was at the tip of the pyramid…


Editor’s note: The Extraenvironmentalist spoke with Gail Tverberg of ‘Our Finite World’ during the 2013 #degrowth conference in Montreal. The full podcast episode is available to listen to here: http://bit.ly/1qhWluX

Peter Brown on degrowth – 6m

Michael M’Gonigle on education – 17m

Josh Farley on money and alternatives to GDP  – 26m

David Suzuki on localism – 43m

Bill Rees on denial – 53m

Mary Evelyn Tucker on a new narrative – 1h06m

Janice Harvey on culture change  – 1h12m

Charlie Hall on energy return – 1h27m

Gail Tverberg on peak oil  – 1h43m

Juliet Schor on working less  – 1h5om

Joan Martinez-Alier on ecological economics – 2h6m

Erik Assadourian on degrowth – 2h15m

Gregor Macdonald on the IEA, claims about US oil production and Jeremy Grantham – 2h38m

Transcripts of the other interviews from this 2013 ‘degrowth’ episode are being released following on from the 2014 degrowth conference in Leipzig, to keep the buzz going, and stimulate further conversation. For a playlist of the video recordings from the live sessions from Degrowth Conference 2014, click here: bit.ly/degrowth2014_sessionsplaylist_ee.


This transcript was originally prepared for my blog, Southern Energy and Resilience. Regular readers will know that I try to put a Southland, NZ spin on things I post. Here’s a few thoughts on what this means for this region:

New Zealand is in many ways exceptional when considering Peak Oil. It has its own oil and gas supplies, which at the time of writing are producing enough liquid fuel to support around 70-75% of our current needs. However, our current proven reserves are subject to the same eventual declines that we’re seeing globally. Recent efforts to find further productive wells in risky deep sea locations are so far proving fruitless. Reliance on the same strategy as in the USA – massive expansion in fracking activities – is both a short term strategy only, and also dependent on huge capital expenditure which has to be debt financed.

Globally, this risk is growing of supply disruption, because of soaring costs of production, and a ceiling on the price the market can bear, beyond which the global economy goes into recession:

“The world’s leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, calling into question the long-term viability of large parts of the industry.


The US Energy Information Administration (EIA) said a review of 127 companies across the globe found that they had increased net debt by $106bn in the year to March, in order to cover the surging costs of machinery and exploration, while still paying generous dividends at the same time. They also sold off a net $73bn of assets.


This is a major departure from historical trends. Such a shortfall typically happens only in or just after recessions. For it to occur five years into an economic expansion points to a deep structural malaise.


The EIA said revenues from oil and gas sales have reached a plateau since 2011, stagnating at $568bn over the last year as oil hovers near $100 a barrel. Yet costs have continued to rise relentlessly. Companies have exhausted the low-hanging fruit and are being forced to explore fields in ever more difficult regions.


The EIA said the shortfall between cash earnings from operations and expenditure — mostly CAPEX and dividends — has widened from $18bn in 2010 to $110bn during the past three years. Companies appear to have been borrowing heavily both to keep dividends steady and to buy back their own shares, spending an average of $39bn on repurchases since 2011.”


Full article here: http://bit.ly/1pKCvre

And in recent months, sell prices have been trending down again, worsening the situation for the producers, due to major reductions in demand from Asia, amongst other reasons:

“So far this week, oil prices in New York and London continued the collapse that has been going on since mid-June. New York futures closed at $91.67, after hitting the lowest intra-day level since May 2013, and London closed at $98.18, the lowest close since April 2013. As has been the case for several months, the markets are seeing too much production and too little demand.  US crude output hit a 28-year high last month and Libya’s National Oil Company is saying that Libyan production is up to 800,000 b/d, despite the turmoil in the cities.

The EIA and OPEC have lowered their expectations for global demand growth in 2014 and Saudi Arabia announced that it had cut its production by 400,000 b/d in August due to a drop in exports to Asian markets.”


Full article here: http://bit.ly/1qpyoDL

Richard Heinberg:

Yeah, the big news right now is that the industry needs prices higher than the economy will allow, as you just outlined. So we are seeing the major oil companies cutting back on capital expenditure in upstream projects, which will undoubtedly have an impact a year or two down the line in terms of lower oil production. That is why I think that Campbell and Laherrère were right on in saying 2015, 2016 maybe, we will also start to see the rapid increase of production from the Bakken and the Eagle Ford here in the US start to flatten out. And probably within a year or two after that, we will see a commencement of a rapid decline.

So you know, on a net basis, taking all those things into account, I think we are probably pretty likely to see global oil production start to head south in the next year or two.

But this change in capital expenditure by the majors, that is a new story. You know, just a couple of years ago, they needed oil prices around $100 a barrel in order to justify upstream investments. That is no longer true. Now they need something like $120 a barrel but the economy cannot stand prices that high. So you know, if the price starts to go up a little bit, then demand just falls back. People start driving less. And so the economy is unable to deliver oil prices to the industry that the industry needs. This is—I think Gail Tverberg is saying this is the beginning of the end. I think she is right.


Full article here: http://bit.ly/1lYqfFg

 In NZ, we are geographically dispersed, and heavily dependent on oil supply in our economy. Furthermore, we produce none of the electronics, etc that will be unavailable if disruption in globalised supply chains occurs.

Risk of long term disruption from fuel shortages is growing yearly as our energy budget, or the net energy available to us as a species declines, and the situation we face may well be very different from the past, for a set of reasons Gail Tverberg outlined earlier this year:

The big problem in the past with civilizations that collapsed was that humans were using renewable resources faster than they could renew. Population continued to expand as well. The combination of rising population and depleting soil and forest resources led to diminishing returns, lower wages for many workers, and difficulty funding governments. A 500 year gap between civilizations took the population pressure off an area. Forests were able to regrow, and soil was able to renew (at least partly through regeneration of soil by erosion of base rock).


Today, we sill have the problems we had in the past, but we have some new ones as well:


  • We are depleting aquifers much more rapidly than they regenerate. In many cases, the water table is far below what can be reached with simple tools. It will take thousands of years for these aquifers to regenerate.
  • We are depleting minerals of all kinds, so that we now need “high tech” methods to extract the low ore concentrations. These minerals will be out of reach, without the use of electricity and fossil fuels. In fact, the vast majority of fossil fuel energy supplies will also be out of reach, without today’s high tech methods. Eventually this may change, with new fossil fuel formation and with earthquakes, but the timeframe is likely to be millions of years.
  • Most people today do not know how to live without fossil fuels and electricity. If fossil fusel and electricity disappeared, most of us would not know how to produce our own food, water, and other basic necessities.
  • Most of us could not just “pick up and do as we did before,” with respect to our current jobs, if the government and 95% of the population disappeared. Our jobs are often supported by global supply chains that would disappear, as well as direct use of fossil fuels and electricity.
  • The world is sufficiently networked that most of it is likely to be drawn into a world-wide collapse. In the past, areas that did not collapse continued to function. These areas could act as a back-up, if functions were lost.


In the past, the 500 year gap was enough to allow regeneration of forests and soil, once population pressures were reduced. If that were our only problem now, we could expect the same pattern again. Such a regeneration would allow a reasonably large group of people (say 500 million people) to get back to a non-fossil fuel based civilization in 500 years, with new governments, roads and other services.


In such a new civilization, we would likely have difficulty using much metals, because ores are now quite depleted. Even reprocessing of existing metals is likely to require more heat energy than is easily available from renewables sources.


We are now so dependent on fossil fuels and electricity that any collapse that does take place seems likely to be faster than prior collapses. If the electric grid goes down in an area, and cannot be repaired, most business functions will be lost – practically immediately. If oil supply is interrupted, it also will bring a halt to most business in an area, because workers can’t get to work and raw materials cannot be transported.


We are being told, “Renewables will save us,” but this is basically a lie. Wind and solar PV are just as much a part of our current fossil fuel system as any other source of electricity. They will only last as long as the weakest link–inverters that need replacing, batteries that need replacing, or the electric grid that needs fixing. We are being told that these are our salvation, because politicians need to have something to point to as a solution–not because they really will work.


For the full article: http://bit.ly/TOXvkL

How do we address these risks?

Firstly, we need to know as a nation what they are, and their relative importance. The Wise Response Appeal, here in New Zealand http://bit.ly/wiseresponse, is calling for a non-partisan appraisal of the global risk environment we’re operating in, and asks the question: “As demand for growth exceeds earth’s physical limits, causing unprecedented risks, what knowledge and changes do we need to secure New Zealand’s future wellbeing?”

I think that’s a really good starting point, and will hopefully point central government, and in time, local government, in the right direction if it is allowed to inform policy decisions.

However, in the meantime, and because we may not have that much time, I feel it’s imperative for local government, particularly the likes of our regional economic development body to consider putting some money into heading in the right direction, aside from central government directives. That direction acknowledges that; the oil won’t be with us forever, that it will be very difficult to ‘adapt’ at the point of crisis, and that ‘degrowth’ in economic activity is a reality we’re facing far sooner than the mainstream media will admit (with some notable exceptions: http://bit.ly/1pKHXZx http://bit.ly/1zhiyNW).

In Southland, we have some of the most productive farmland in New Zealand, and it’s possible that given our low population density and remoteness from nuclear facilities (try managing the waste at those locations successfully, without the high energy budget we currently are squandering…),  that we have the potential to be a place where humans can continue to thrive.

I’ve already posted some ideas regarding how we might enable this under the ‘how’ category http://bit.ly/1lzmhmD on the blog, and will continue to do so. In the meantime, I’d like to add that it would make sense for Venture Southland and the Regional / District Councils to consider the following observation when deciding how much resource to throw at preparation for this probable future:

” 3. A love/hate relationship with risk. It’s a paradoxical idea, but one way to build resilience, or antifragility, is to keep the vast majority of the business as safe as possible, but then take big risks – ones that may pay off 10-fold or more – with a smaller part of the business.

Think of the famous idea from Clayton Christensen of trying to disrupt or cannibalize your own business before someone else does. Imagine setting up a skunk works to identify major risks to the business stemming from resource constraints or climate change – and then lean into those risks and come up with products and services that avoid them and challenge the core business (for example, a car company investing in car sharing programs which consumers use to save money, but also reduce material and energy use dramatically).”

For the full article: http://bit.ly/1qOsSbF

We already have some independent economic analysis supporting this general direction in the form of the BERL report from 2012: http://bit.ly/1qpuVVU http://bit.ly/1qpwP8O  and Venture Southland continues to explore these possibilities: http://bit.ly/1qpv5N4, however, the content of the major development initiatives as outlined in the annual report http://bit.ly/1qpvsHd is mostly lacking in this type of thinking, despite my submission suggesting some potential avenues to explore http://bit.ly/1sTdmeB.


Nathan Surendran


Consultant – Schema Consulting Limited

e: nathan@schemaconsulting.co.nz

m: 021 209 6286  p: 03 221 7487

l: linkedin.com/in/nathansurendran


Filed under What, When, Why