Richard Heinberg delivers a clear and powerful message on the urgent need for the world to begin the transition to a sustainable future. He takes a big picture perspective on the interconnectedness of economics, energy, the environment, and society.

• Interview on The Keiser Report
• 300 Years of Fossil Fuels in 300 Seconds
• Who Killed Economic Growth
• The End of Growth
  (Chapter summaries; excerpts below)

We are, and will be, seeing a cavalcade of environmental and economic disasters, not obviously related to one another, that will stymie economic growth in more and more ways.

Each will be typically treated as a special case, a problem to be solved so that we can get “back to normal”.

In September 2008, the global financial system nearly collapsed. The reasons for this sudden, gripping crisis apparently had to do with housing bubbles, lack of proper regulation of the banking industry, and the over-use of bizarre financial products that almost nobody understood. However, the oil price spike had played a critical (if largely overlooked) role in initiating the economic meltdown.

The end of growth is a very big deal indeed. It means the end of an era, and of our current ways of organizing economies, politics, and daily life. Without growth, we will have to virtually reinvent human life on Earth.

Interview of Nate Higgins on ChrisMartenson.com

So I’m not necessarily calling for a stock-market crash in the next decade, but I am calling for within the decade we probably won’t have a stock market. That’s a scary thing to contemplate, but this entire system is based on more every year, and we’ve extended the system by a decade or more by little bells and whistles and allowing people to buy houses with no money down and the repeal of Glass-Steagall.

And since 2008, the crash in private and household credit has been made up by government stepping in and providing 11% of our GDP just from deficit spending. And that bullet has now been spent. So the whole thing starts to unravel once they’ve spent all the bullets they have. And I don’t know that it really matters, really; stocks go down 10% or 50% or 100%, we have to restructure the way that we think about society.

Competing for nominal, digital wealth is going to go away as the main cultural objective. 

This is a fascinating, in-depth discussion of our economic, environmental, and societal predicament. If you have the time, this really ties it all together. Until recently, Nate Higgins was lead editor of The Oil Drum, one of the most popular and highly-respected websites for the analysis and discussion and global energy supplies, and the future implications of the energy decline that we are facing. He holds a Master’s Degree in Finance from the University of Chicago and recently completed his PhD in Natural Resources at the University of Vermont. Previously, he was President of Sanctuary Asset Management and a Vice-President at the investment firm Solomon Brothers and Lehman Brothers.

Nate Higgins: Letter to the President (2008)

Additional Resources on Peak Oil

Post Carbon Institute
Founded in 2003, Post Carbon Institute is leading the transition to a more resilient, equitable, and sustainable world.

The Oil Drum
The Oil Drum seeks to facilitate civil, evidence-based discussions about energy and its impacts on the future of humanity, as well as serve as a leading online knowledge-base for energy-related topics.

“Humans have changed the way the world works.
Now they have to change the way they think about it, too.”

Human civilization evolved during a period of relatively stable climate over the last 10,000 years. With a rapidly developing and industrialized world, now at about 7 billion and headed for 9-10 billion, humans have become a significant driving force in changing the Earth. Here is an excerpt from the 5/28 cover story of The Economist magazine:

Humans have become a force of nature reshaping the planet on a geological scale—but at a far-faster-than-geological speed.

A single engineering project, the Syncrude mine in the Athabasca tar sands, involves moving 30 billion tonnes of earth—twice the amount of sediment that flows down all the rivers in the world in a year…

The carbon cycle (and the global warming debate) is part of this change. So too is the nitrogen cycle, which converts pure nitrogen from the air into useful chemicals, and which mankind has helped speed up by over 150%. They and a host of other previously natural processes have been interrupted, refashioned and, most of all, accelerated…

Scientists are increasingly using a new name for this new period. Rather than placing us still in the Holocene, a peculiarly stable era that began only around 10,000 years ago, the geologists say we are already living in the Anthropocene: the age of man.

The Economist article (Briefing) concludes that there is no turning back and perhaps we will be best off embracing the future.

The growing availability of solar or nuclear energy over the coming centuries could mark the greatest new energy resource since the second of those planetary oxidations, 600m years ago—a change in the same class as the greatest the Earth system has ever seen. Dr Lenton (who is also one of the creators of the planetary-boundaries concept) and Dr Watson suggest that energy might be used to change the hydrologic cycle with massive desalination equipment, or to speed up the carbon cycle by drawing down atmospheric carbon dioxide, or to drive new recycling systems devoted to tin and copper and the many other metals as vital to industrial life as carbon and nitrogen are to living tissue.

Better to embrace the Anthropocene’s potential as a revolution in the way the Earth system works, they argue, than to try to retreat onto a low-impact path that runs the risk of global immiseration.

A Brief History of Human Understanding of the World

The World is Flat

The Earth is the Center of the Universe

The Earth is a Planet (in a Solar system in a Galaxy in the Universe)

The Earth’s Future is in Our Hands

Just as the average person (and even the ruling elites) initially resisted the earlier paradigm shifts, many of us, from the urban poor in the slums of Mumbai to the wealthiest of hedge fund managers on Wall Street, are too caught up in economic survival and advancement to see or care about the bigger picture. I am afraid that, until a much larger share of us come to know the world in this new way, human civilization will be unable able to really transition to a sustainable future…not sure what that will take. We don’t have the luxury or time as in earlier eras.

Two interesting things to note form this graph. First, Saudi Arabia had been increasing oil production well before the outbreak of hostilities in Libya. Second, the recent increase in Saudi production has not nearly made up for the loss in Libyan production. If anything, the rate of increase has slowed.

This could mean one of two things. Saudi Arabia may be incapable of increasing production any faster or further, as some Wikileaks cables suggest. Another possibility, described in The Oil Drum article referenced at the top:

We can only speculate, but my guess is that, having watched how the west has helped to ease Mubarak and Ben-Ali out of power and is intervening in Libya to the same end, the Saudi regime is in no mood to care about our desire for more oil. Instead, they are very much in the mood to build as large a war chest as possible with which to appease their own population, strengthen their defense measures, etc.

OPEC, including Saudi Arabia, do have an incentive to not tip the world into another recession, since that causes demand and oil prices to plummet which is not in their self interest, so I am not sure about this theory. On the other hand, with revolutions spreading like wildfire in the Middle East, the Saudis have more immediate concerns. I suspect some combination of all of the above may be at play. If the Saudis either can’t or won’t make up for supply disruptions, we could be in big trouble.

• FRONTLINE: Sick Around the World – Five Capitalist Democracies
  (Great Britain, Japan, Germany, Taiwan, Switzerland) 
• FRONTLINE: Obama’s Deal (behind the scenes politics of health care reform)

Growth in U.S Health Care Spending

Although not adjusted for inflation, the % of GDP shown along the bottom is comparable over the years and is actually the most important perspective.

U.S. Health Care Costs vs. Other Developed Countries

Medicare and Medicaid Will Soon Overwhelm the Federal Budget

The Japan Crisis

Latest Update

With the recent disaster in Japanese Nuclear Power, it looks like it is game over for the whole industry. The world is still scrambling to recover from that 8.9 earthquake and the resulting tsunami that caused massive failures in coastal reactors; instead of focusing on failures in design, or location right at the coast, people focus on the fact that a nuclear power plant is to blame. Is it? In this time we think back to Chernobyl and Three-Mile Island. When we analyze what happened in Chernobyl we see major human errors coupled with faulty designs that lead to failures in coolant regulation. According to INSAG reports the graphite core that was used had unintended effects at low power levels, sometimes increasing rapidly in thermal production, and the control rods used were not efficient at cooling the decay heat. Three-Mile Island hits home because it happened in Pennsylvania, but again fault lands on the laps of the under-skilled foremen of the plant and some minor design flaws in the electrical equipment that monitored the reactors status; basically the indicator light turned on when the PORV was open, but because of an electrical failure the light did not work and workers assumed there was no problem and they did not realize that the water pumps that cooled the reactors had stopped working and that the PORV was stuck. Up to date surveys have suggested such a low increase in future cancer cases, and radiation sickness, in the surrounding towns, that they would be almost undetectable (between 8-100 millirem radiation dose which is less than the average radiation US citizens receive annually from background sources), although there are reports by anti-nuclear activists that point out the decrease in fertility in the surrounding wildlife, and an increase in infant mortality in places down-wind from the disaster. With evidence in the light we can see that with time and new advances in technology, and with proper training and regulation, we can achieve safe nuclear power, though there will always be a threat of natural forces a fact human kind has lived with since its birth. These two disasters are terrible, but then again any unexpected and publicized loss of life is terrible, but when compared to disasters that hang around the other energy industries that we rely on daily it irks me that the people are ready to give up on the energy source that will lead us into the future.

Fear mongers working for FOW News will tell you of unusual increases in Massachusetts coastal radiation, and some speculators in Californian coastal regions are warning citizens of possible exposure; resulting from Japans disaster. This is minor when compared to the wars we wage for oil and the workers killed in coal mining accidents across the globe (Since 1900 there have been over 500 US mining accidents http://www.usmra.com/saxsewell/historical.htm), not to mention the hefty environmental tolls that burning fossil fuels create. Nuclear is a clean sustainable energy, and with new technological advances, such as the wave reactors that run on last generation waste ( http://www.terrapower.com/Home.aspx), the pollution yielded is greatly decreasing. With advances in programming and equipment, and with the establishment of regulatory groups like the NRC, safety and regulation is more easily attainable and disasters can been foreseen and avoided in the future, but coal and oil will always pollute the earth even if we never spill into the gulf again, or if no more coal miners die.

France leads the world of CO2-free energy using 59 nuclear plants to generate 78% of Frances energy. The US leads the world in commercial production, but nuclear only supports about 20% of the energy needed, and all of the 104 US reactors were created before 1975, only one is currently being built.



This is not the time to cut spending on potential alternative energy sources, oil is running out (we are almost up to 4$ at the pumps) and coal will continue to devastate the landscape and the atmosphere, instead we must focus on further developments in the nuclear field, along with other sources such as solar and wind. Obama and the NRC support further advancing, but public support has dropped to below that of Three-Mile Island era support. With time and money the pollution problems can be fixed and we can live in a world where nuclear disaster is only in history books.

This presentation was given to the MILES group at MCC on 3/23/2011:
MILES-Keynote-Part-1 / MILES-Keynote-Part-2 (PowerPoint downloads)

Key Videos to Watch

The Financial Crisis

• CNBC: House of Cards
• FRONTLINE: Inside the Meltdown

The Budget and Deficit Crisis

• I.O.U.S.A. Original
• I.O.U.S.A. Solutions

The Environment and Climate Change

• Brief History of the Fossil Fuel Age
• Global Development Illustrated
• Arctic Sea Ice Melt (Video-Peter Sinclair)
• Climate Change and National Security (Video-Peter Sinclair)

Energy and Electric Cars

• Peak Oil (Journeyman.tv) [10 min]
• DISCOVERY: Addicted to Oil – Part 1 of 5 – Introduction
• NOVA: The Big Energy Gamble (California)
• Electric Cars and the Grid
• TED: Presentation by Shai Agassi

See more resources under the Energy and Environment tab above.

Renault Electric Car - The one called for by Shai Agassi

“So how would [we] run a whole country without oil?”

http://www.youtube.com/watch?v=FcoJt2KLC9k

Shai Agassi portrays the future of energy, transportation and the revolutions needed in the fields of business dealings and manufacturing in his speech at the TED 2010 (see link); simply he puts that we need to stop production of dirty energy, if not for the moral than for the economic disaster averting potential, and that business itself should always be conducted with ethics or humanity. For instance there would still be room for profit if BP spent more money cleaning up after, and preventing future, oil spills, but they would rather make more; honestly I cannot say that in the same position I would make the humanitarian attempt, money is alluring. Specifically Shai talks about switching to electric cars and trucks, because transportation alone accounts for twenty-five percent of human CO2 emissions. Since the industrial revolution, and the creation of fossil fuel burning energy soruces, human emissions have risen exponentially, which has lead to a great imbalance in what we send out and what we get back.

Shai has already found a few countries that are willing to support his large scale adaptation of electric cars, Israel offered the country as a candidate if Shai could find the capital and the car, Nissan was contracted to create several that fit this standard, Australia has three of its major cities linked by electric highways, Sydney, Melbourne and Brisbane are the three, and all over Europe we see incentive programs that place higher taxes on fossil fuel cars, and lower taxes on non-emissions vehicles. Ultimately Shai wants to see this spread to the U.S., San Francisco has already passed legislature supporting the use of electric cars, and there is a single electric highway on mainland Hawaii, and eventually he wants to see it spread to the whole world; for now he is focused on first and second world countries because third world countries, in his view, do not have the resources or need.

     

Battery changing stations already being built in Japan/Australia

If we want to avert another economic crisis like we saw in the early to late 2000’s, when billions of barrels of government invested oil dropped from 150 dollars per barrel to around 50 dollars, and then everything else fell apart, than we need to end our reliance on non-refundable sources of energy. It is also not just a matter of economics with Shai, rather it is a co-inhabitance between environmental welfare and the world of business; he wants to create a zero emissions world where profit is plentiful but citizen interests are not overlooked.

Shai stresses that we need to make cars that are as reliable and as convenient as the current luxury sedan would accommodate. He also informs us that hydrogen cars just do not produce enough clean particles efficiently, that as far as emissions are concerned Hybrids are barely effective, and that ethanol is not a prevalent enough source to switch to on a massive scale, and so that leaves us with the potential for electric. With his innovation of making the battery of the car the crude oil instead of the gas tank, it makes it a lot easier on our wallets and our time; Shai suggests that instead of buying a battery and charging it oneself or at a station, the battery would be the gas in that you would go to a station to have the depleted battery swapped with a previously charged one. As far as saving money goes, Shai estimated that the current price of an eMile would be 8c/mile, and that that price would only decrease due to the reasonable assumption that with time and technology, easier storage and smaller parts, than we will pay less money to store more energy more efficiently, as opposed to the ever rising gas-mile that will just keeping rising until there is no more left. The cars themselves, in Europe are cheaper than the traditional cars you see, partially because of the tax incentives. So save time, money, and the world that any future generations are planning on walking about.

So now all it takes is for the greedy oil barons to give up their industry and switch to that of clean energy, preferably electric, eventually reconstructed the landscape as we see it. It would be easy to convert the current gas station in to one that also loads batteries, and once we are all electric to just shut down the pumps for good. The law-makers and money-holders need to use their influence to sway legislature in the favor of electric cars, as in incentives similar to the Europeans and infrastructure; this links back to moral business dealings, in politics and markets both. So let us go out and reduce our footprints and increase our pockets.

Crude Oil prices

Global CO2 emissions in million metric tons

The effects of a prolonged spike in oil prices would spread throughout the global economy and serve as a catalyst for widespread inflation.

• Surging oil prices reduce the amount of disposable income that consumers have available to spend in the economy ultimately weakening aggregate demand (sometimes referred to as the “crowding out” effect)

While weaker aggregate demand is certainly not inflationary, upward pressure on prices will be the result of a number of factors.

• Workers could demand higher wages to offset the greater share of their income being dedicated to fuel expenses. Although high unemployment limits the probability of this occurring.
• Businesses facing a combination of increasing fuel and employment costs are likely to pass these costs on to consumers via higher prices.

Accompanying these steps is likely to be an increase in inflation expectations throughout the economy at which point these expectations could become self-fulfilling. Regardless of the specific contributing factors, history demonstrates clearly the relationship between the oil market and the US economy.

From FT Alphaville:

At this time, there is little doubt that a short-term oil crisis could be managed effectively but the prospect of a lengthy crisis puts the global economy in a precarious position. According to an IMF official:

The world economy can withstand the surge in oil prices sparked by unrest in the Middle East and North Africa so long as the increase proves short-lived, said the International Monetary Fund’s No. 2 official, echoing Deutsche Bank AG and Bank of America Merrill Lynch.

While an extended $10 advance in oil cuts 0.5 percentage point off U.S. growth over two years, the world’s biggest economy will expand 3.8 percent this year, almost a percentage point more than in 2010, according to Deutsche Bank.

“The global recovery now faces a serious threat from a sustained oil-price spike,” said David Hufton, London-based managing director at PVM Oil Associates Ltd.

About $10 of the recent increase in the oil price relates to tension in the Middle East and Africa, with the remainder a reflection of the strengthening global economy, said Julian Jessop, chief international economist at Capital Economics Ltd. in London.

“The old rule of thumb was that a $10 increase reduces global growth by half a percent, but if that still held then the world would now be in a deep recession,” said Jessop, a former U.K. Treasury official.

In response to these ongoing developments, officials from the Federal Reserve made several comments to shore up confidence in the ability of policymakers to address any challenges associated with tensions in the Middle East and North Africa.

(Reuters) The Federal Reserve would react to higher oil prices only if the increases spilled over into broader areas, officials of the U.S. central bank said on Friday, with one policy maker calling the risks “manageable.

The president of the Richmond Federal Reserve Bank, Jeffrey Lacker, took a calm view of the potential threats to the U.S. economy from the higher oil prices, though he said they could prove nettlesome if they jump much more or create an inflationary psychology.

“I think the oil price rises we’ve seen so far don’t pose a risk to the recovery,” he told reporters after a speech on regulation.

“Oil price changes could have the potential, if they were very large, for slowing the recovery, but we have a lot of experience and a lot of data on past instances, and I think it’s a manageable risk,” he said at a conference organized by the University of Chicago’s Booth School of Business.

Janet Yellen, the Fed’s vice chair, said U.S. central bank officials would react if inflation expectations or underlying inflation show persistent gains and began to be reflected in other prices.

“Any increase that would seem to be sustained in inflation expectations, or in core inflation, that looked like it were getting passed through and it was sustained, would … demand a response,” said Yellen, who is viewed as among the strongest proponents of aggressive measures to support the economic recovery.

From FT Blog Gavyn Davies:

In the election of 1980, Ronald Reagan popularized the MiseryIndex in his successful campaign against President Carter. Remember: “Are you better off than you were four years ago?” The misery index is simply the unemployment rate added to the inflation rate. When either is high, there is some level of distress in major sectors of the economy. Often, however, when (demand-pull) inflation is up, unemployment is down.

However, in the mid to late 70′s several “oil shocks” sent energy prices up and contributed to or occurred at the same time as slow growth and high unemployment. This “miserable” condition economic condition is known as stagflation (stagnate growth plus high inflation). Although core measures of inflation (excluding food and energy) are low, cost-push inflation is returning in the form of high commodity prices, particularly energy. Transportation and food prices are the most sensitive to energy prices. Energy prices are rising for two reasons. In the short-run, energy demand is up following the world-wide recovery from the recession. In the long-run, the rapid economic growth of China and India along with the arrival of peak oil production, spell nothing but higher energy costs. In other words, the return of stagflation.

Gasoline Prices

Food Prices

NOTE: Gas prices above start in the early 70′s and are in today’s prices, while the food price index below starts in and is indexed to 1980. However, since both are indexed to inflation, you can compare the 1980 to 2010 period.

While food prices are not yet back to the all-time high of 1980 as energy prices almost are (with the exception of the 2008 speculative bubble), just remember that it may take a while for high energy prices to push up other prices.

If peak oil really has arrived, energy costs will act as a dead-weight drag on the economy each time it recovers and demand returns.

Population growth, which is decades from peaking, will only put more pressure on resource limitations.

The money-supply inflation that the Fed and its QE (money printing) may be setting us up for will be left for another post. (Hint: because the velocity of money is down right now, this is not yet a problem.)

Unemployment fell to 9.0% from 9.4%, although the underlying population estimates were given annual revisions so the comparison from December to January may be difficult. The underlying data show a sharp drop in the unemployed and a small increase in the employed, the labor participation rate fell and those not in the labor force increased. Annual revision to underlying population estimates muddled the picture.

Establishment Survey (140,000 nonfarm payrolls)

The net increase in business payrolls increased by only 36,000. However, the week during which the survey was conducted was hampered by severe winter weather across the country, significantly lowering the number. The numbers and analysis below were done before the January data were in.

Jobs Deficit

• Net Job Gains/Losses since the start of The Great Recession (January 2008): 7.2 million
• Jobs that should have been added just to keep up with population growth: 36 months X 125K per month = 4.5 million
• Number of net new jobs needed to recover back to pre-recession levels: 11.7 million

Job Creation Needed

• Number of months needed to recover lost jobs if 200K are added every month: 11.7 / (.200 – .125) = 156 months (13 years)
• Number of months needed to recover lost jobs if 300K are added every month: 11.7 / (.300 – .125) = 67 months (5.5 years)

Daunting Prospects for Job Recovery

• Average number of jobs added per month during the 18 years prior to the the current recession: 135K
• Average number of jobs added per month during the best years of the tech boom: 250-325
• Average number of jobs added per month during the peak year of the housing boom: 208

Given the current housing/foreclosure mess, government deficits at all levels, and the longer term structural deficits of SS and Medicare, good luck to us all.