Beyond Economics

The End of Growth and Time for a New Era

Web Sites for Professor Kaulfuss

Energy & Environment Links

Climate Forum (updated)

MCC – Prof. Kaulfuss – Macroeconomics

Robert Kaulfuss – News & Feeds (under construction)

Robert Kaulfuss – Reference Links (under construction)

This is my legacy blog. I have about a dozen major posted articles since 2010. It has also served as a collection of links on various topics related to economics, technology, energy, and environmental sustainability. From 2018 forward, I will be using a more efficient system for maintaining class links, downloads, and general reference purposes (above).



HEALTH CARE: Human Right or Expensive Entitlement?

Coral Reef Ecology-2018-05 2.0

ECO 140-Sustainability-2018-05-v1.0


Healthcare is both a basic human right and it has also become an expensive entitlement. Therefore, how to deal with it is a great and extremely complicated conundrum for society. (Who knew?)

World GDP on Healthcare comparison 2010


When it comes to the ACA (Obamacare), neither Republicans nor Democrats can see straight when talking about how to fix it, or what to do about healthcare in general for that matter. Both are now citing cherry-picked numbers to support positions that are often at odds with their espoused philosophies.

First, Democrats don’t want to accept that Obamacare is slowly collapsing or at best not working very well. Among the issues: the young and healthy are not enrolling in sufficient numbers, insurers are pulling out of the exchanges in many states, and costs are going up (albeit less than they might have otherwise). Democrats will also not fully acknowledge how expensive healthcare has become for federal, state, and local governments, both for their pensioners and the general population. With the rising cost of care and aging population, financial distress on many levels is a certainty.

Federal Budget 2013

Second, Republicans should be defending the ACA, since it was based on the conservative principle of an individual insurance mandate originated by the Heritage Foundation. Instead, Republicans have been railing about the “government-imposed” mandate for seven years and are now, in light of the CBO projections for their plan, touting the freedom of choice that Americans will finally have not to be insured.

The Heritage Foundation, in a proposal published in 1989, also points out, quite importantly, that healthcare is fundamentally different from any other market. This is something that Republicans either don’t understand, or do and are pretending otherwise for political purposes. (For the key Heritage Foundation passages, go to the later part of this post.)

So why have Republicans been agitating their supporters for 7 years about the ACA? Besides the obvious opposition to anything associated with Obama, the deeper reason has to do with how the ACA subsidies that expand coverage for those with lower incomes are paid for through various types of higher taxes on corporations and the wealthy. Therefore, the Republican replacement plan eliminates many of these taxes in order to please their higher income donor base, unbeknownst to a large part of their political base of more rural, middle and lower income voters. Now that Republicans are in power, many of them seem to care less about the fiscal deficit implications of anything and will use this argument only when it suits them.


Democrats would have preferred at least a Public Option (a government-run health insurance agency that would compete with private health insurance companies), if not Single Payer (Medicare for all, but with private providers of health care), if not a full government-run national healthcare service (e.g. Great Britain, Canada, veteran care in U.S.). Democrats are pleased that coverage has expanded to more uninsured, including such provisions as no denial of coverage based on pre-existing conditions, children staying on their policies until age 26, etc.


Under the ACA, private provision of healthcare and insurance were, for the most part, maintained, along with competition for both in the exchanges. For insurance to remain private, it must be profitable. To be profitable, large risk pools are needed so that the young and the healthy can support the sick and the elderly. This works well for employer-based plans, but not in the individual market. Until Obamacare, conservatives were really bothered by free-riders on the healthcare system, i.e. the poor and uninsured who would use hospital emergency rooms for care, where they could not be turned away. This was thought to be irresponsible and had the effect of raising everyone else’s insurance costs. Enter the insurance mandate, that idea that originated by Heritage and put into practice by Mitt Romney and the Democratic legislature in Massachusetts.


When Obama took office, he decided to do health care first in order to get on with other things and rammed it through without Republican support, which they weren’t going to give anyway. The Republicans are now doing the same thing. They are rushing through “Repeal and Replace” to get on with their agenda of tax reform (much needed actually) and deregulation (simplification and streamlining is needed, but not slash and burn). The end result is that neither Obamacare nor Trumpcare/Ryancare will be bipartisan or likely to work in the long run. Meanwhile, rebuilding our infrastructure, which everyone agrees needs to be done, will be delayed.


So how does universal healthcare get paid for? Most other developed countries manage do it with 7-10% of their GDP devoted to healthcare, compared to about 17% for the U.S. They don’t all do it with socialized systems or waiting lines either.

This is the subject of another post, but there are several essentials. First, everyone needs to be covered in order to spread the risk. Second, there needs to be greater emphasis and incentives for preventive care. Third, there needs to be an honest conversation about end of life care, which may account for a third or more of total lifetime health care expense. Almost everyone I know says that they do not want extraordinary measures taken, but then that seems to be exactly what happens within families when that time arrives.

Another honest conversation that needs to be had is, if health care is a basic human right, where do we draw the line for what society can or should pay for? For example, does everyone really have the right to multiple organ transplants? When the brain can be augmented by digital implants or the mind of an elderly person can be transferred to an android body, will it be fair or right that only the wealthy can afford immortality?


Finally, the key passage (unedited from their 1989 proposal). Remember, this is a very conservative think tank.

Mandate all households to obtain adequate insurance. Many states now require passengers in automobiles to wear seat belts for their own protection. Many others require anybody driving a car to have liability insurance. But neither the federal government nor any state requires all households to protect themselves from the potentially catastrophic costs of a serious accident or illness. Under the Heritage plan, there would be such a requirement.

This mandate is based on two important principles. First, that health care protection is a responsibility of individuals, not businesses. Thus to the extent that anybody should be required to provide coverage to a family, the household mandate assumes that it is the family that carries the first responsibility. Second, it assumes that there is an implicit contract between households and society, based on the notion that health insurance is not like other forms of insurance protection. If a young man wrecks his Porsche and has not had the foresight to obtain insurance, we may commiserate but society feels no obligation to repair his car. But health care is different. If a man is struck down by a heart attack in the street, Americans will care for him whether or not he has insurance. If we find that he has spent his money on other things rather than insurance, we may be angry but we will not deny him services – even if that means more prudent citizens end up paying the tab.

A mandate on individuals recognizes this implicit contract. Society does feel a moral obligation to insure that its citizens do not suffer from the unavailability of health care. But on the other hand, each household has the obligation, to the extent it is able, to avoid placing demands on society by protecting itself.

Provide help to those who cannot afford protection. A mandate on households certainly would force those with adequate means to obtain insurance protection, which would end the problem of middle-class “free riders” on society’s sense of obligation. But of course there are many lower-income households who could not reasonably afford to meet that obligation and yet are not eligible for current direct assistance programs such as Medicaid.

To an extent, the problems of affordability among these families would be dealt with through the system of tax credits outlined above. The Heritage plan also sees these tax credits as refundable – that is, a check would be sent to the family if the total credit exceeded the tax liability. In t his way, families would receive direct assistance through the tax code to enable them to fulfill the obligation to obtain insurance. Nevertheless, there are certain families for whom even this assistance is not sufficient. Families with a very long history of health problems, for instance, may find insurance prohibitively expensive, even with generous tax benefits. In these cases, the Heritage plan envisions an expansion of subsidized risk pools operated through the states. Many states have these plans, in which high-risk individuals are pooled together, and then insurers are invited to compete to cover the pool with rates subsidized by the government.

The Price of Oil and Beyond


Sunset on the Age of Oil

The American Dream of suburbia and the post-WWII global economy were built on cheap oil. Although the price of oil is down by over 40-50% from the $100 level of recent years, they are still higher than during the formative post-war period or even that of the 90s ($10-$30).

Oil and gas are now in a lose/lose situation. When prices are high for a sustained period, it will spur production (supply) but put a drag on world economic growth (demand), leading to a surplus and then a price collapse. When prices are low for a sustained period, while not helpful for alternatives, oil and gas companies will suffer more and production will eventually be cut back while demand rises, leading prices to go back up. Over time, technology improvements in extraction and production will be more than offset by rapid depletion rates. The low-hanging fruit has been picked.

Meanwhile, the economics of solar and wind will continually improve and are now close to competitive, even without subsidies.

Nominal and Inflation Adjusted (Real) Price of Crude Oil, EIA, BLS, EIA, BLS

A Brief History of Oil Prices

Convential Oil

When oil was easy

  • The industrial economy of the 20th century is built on cheap and easy oil
  • The birth of OPEC and its actions in the mid to late seventies cause a spike in the price of oil, leading to inflation, down-sizing of cars, and talk of alternative energy
  • OPEC realizes that they would be better off in the long run with a growing world economy addicted to cheap oil
  • At the start of the 21st Century, globalization has really kicked in, China is growing at 10+% and the price of oil starts a steady march upward as rapidly rising demand leads the depleting supply of conventional oil
  • Rising oil prices and a U.S. housing and credit crisis infects the world economy, crashing economic demand and oil prices
  • As the economy recovers, economic demand and high oil prices return
  • Saudi Arabia, as the swing producer in OPEC, stabilizes prices at around $100/barrel by increasing or decreasing production as needed
  • On the Supply Side, with consistently high oil prices at or above $80-100/barrel, unconventional sources are developed and come online (deep water, American shale from fracking, Canadian tar sands, and soon, Arctic)
  • On the Demand Side, with consistently high oil prices, world economic growth is slowed and there are incentives to economize with higher gas mileage cars and other energy efficiencies (demand destruction)
  • The result: with supply up and demand down (slowed), oil prices weaken and then crash, fueled by speculation on the down side.
  • This time, Saudi Arabia decides not to intervene in hopes of putting unconventional sources, primarily U.S. shale, out of business by driving prices below the cost of production (also hurting Iran and Russia as a bonus).
  • Venezuela’s economy is virtually destroyed as the country had become too dependent on oil export revenues and failed to maintain their oil industry infrastructure under Chavez.
  • Saudi Arabia’s plan is not entirely successful. Shale production does back off some at lower prices, but much production continues as producers need the cash flow.
  • After losing market share long enough, OPEC, led by Saudi Arabia, finally agrees in November 2016 to make some production cuts in order to bring oil prices up from the $40s to the $50s.
  • For now, US sale production is operating somewhat as a swing producer, able to shut down and start up drilling relatively quickly in response to prices.
  • For the time being, it appears that prices will stabilize in the $50-60 range.
  • When oil prices were lower and US gasoline hovered just above $2.00/gallon, Americans returned to buying larger SUVs and pick-up trucks. With prices now settling slightly higher at closer to $2.50/gallon, we shall see if this enthusiasm continues.


Why Oil Prices May Be Volatile

“The best cure for low prices is low prices. The best cure for high prices is high prices.”

Here is the key to it all:


  • On the supply side, low oil prices will disincentivize further development of North American shale (from fracking) and then deep water and tar sands
  • On the demand side, low oil prices are already sending Americans back to pick-up trucks and SUVs and providing a stimulus to the economy
  • Eventually (6 months to 2 years), supply will be down, demand will be up, and prices will rise again
  • When prices rise again, production (supply) will increase but economic growth (demand) will slow and the vicious cycle will repeat
  • Meanwhile, economic and geopolitical wildcards could come into play at any time for better or worse
  • Financial speculation can drive prices up and down quickly and excessively but fundamentals will eventually prevail to some extent since oil storage can serve as a buffer but is not unlimited

Why Unconventional Oil is So Costly

Much of the low-hanging fruit (cheap oil) has been picked.

Deep Water

1 mile down to the sea floor, 2 miles further down to the oil seam. When something goes wrong… relief_well_diagram

Fracking for Shale Oil and Gas

See my full post on fracking for more on the environmental and economic costs. Fracking -Diagram-2

Canadian Tar Sands

Imagine the energy, water, and expense of steaming oil out of this. Tar-Sands-1

Think these unconventional sources will continue to be produced with low oil prices? Think again. Low oil prices will wreck havoc on the debt-laden unconventional oil producers and oil service providers. This could be the next financial crisis and is already leading to whispers that there may be a need for bailouts.

For Further Exploration

Still Waiting for the Growth that May Never Come


The well-off are back to partying and politicians are arguing over the bar tab

The U.S. and world economy almost went down the drain in 2008-09, but thanks in part to extraordinary measures by the U.S. Federal Reserve and central bankers around the world, economic collapse was avoided. Although the lights are back on, the rate of economic growth remains below the escape velocity rate needed to move forward. While corporate profits are up and the stock market is at record highs, many on the lower decks are still cleaning up the mess if they are even back on the boat. Perhaps it is time to rethink economics as we know it. (More later.)

In the meantime, let’s look at some key indicators.



During the credit and housing bubble of the 2000s, people wanted to believe that rising home prices (values) were real and behaved as if they would continue indefinitely. It is obvious from the chart that home prices could not keep increasing at an exponential rate and that this was a bubble. The collapse in housing prices has stabilized at about trend level, yet some areas are starting to show signs of above-trend growth and certainly everyone who owns a home would love to see the values at the peak of the bubble and then go up from there. But how good would that be? The question is:

How and when do you get out of a bubble? What will be the next one?



This graph (above) shows the the net nonfarm payroll jobs added each month from the federal government’s Establishment Survey of businesses. While we have substantially recovered since the depths of the Great Recession, keep in mind that:

  • Job growth at current rates is barely enough to keep up with population growth from births > deaths and immigration (125-150k/month)
  • Job losses from the recession need to be made up in order to return to a prerecession “normal”
  • Job looses during the depths of the recession were even greater than it might first appear since the 125-150k jobs not added to keep up with population growth were also lost in addition to the actual losses

Comments and graphs from August’s employment report at Calculated Risk can be found here and here.

Economic Growth

Q2 growth of 4.2% (annual rate) is encouraging but may be a bounce back from the Q1 drop which has largely been attributed to weather. 3% is considered to be the “normal” or trend economic growth rate for the U.S. After a recession, there needs to be a rebound above trend to make up for lost growth and bring back lost jobs. The recovery that we have had has required extraordinary fiscal and monetary stimulus (see next chart).

What if the new normal without support is only 1-2%?

The Stock Market and the Fed

Stock Market vs Fed Balance Sheet

Mish – Global Economic Analysis (2013)

The Fed Balance Sheet (monetary base) is now just over $4 trillion as the Fed winds down QE (printing more money) by the  end of the year. In addition the Fed Funds interest rate (the rate that underlies all other rates) has been at near zero since 2008. It suggests that there is something fundamentally wrong.

Without these extraordinary steps, where would the stock market and economic growth be?

Federal Deficits and Debt

The first chart illustrates the demographic challenge posed by the baby boomers’ retirement, which they have neither saved nor taxed themselves enough to pay for.

Population by age

The second chart illustrates the resulting financial challenge.

From Concord Coalition based on CBO prjections

Peter G. Peterson Foundation –

Federal debt results from federal spending exceeding federal revenues (taxes) over the long run. The largest components of federal spending are defense, Medicare, and Social Security. The latter two will grow substantially as the baby boomers retire. Federal debt has two components:

  1. Debt held by the public: money the government borrows on the open market from domestic or foreign investors
  2. Intra-governmental debt: money the government owes itself, as in the Social Security and Medicare trust funds

This chart (above) shows only the public debt. The Social Security and Medicare trust funds are empty and will also need to be paid back by taxpayers. As the debt grows, so too will the interest. Interest rates are now at history lows due to Fed policy (see previous section on the Stock Market and the Fed). Currently the deficit situation is slightly better. As more and more baby boomers retire, spending (and debt, absent increased taxes) will rise. As the Fed winds down and reverses QE (money printing), interest rates will rise. Higher interest rates on more debt will compound and become completely unsustainable.

Another Key: Energy (Oil) Prices


The economic growth of the 50s and 60s and the American dream of suburbia may have depended, in large part, on low energy prices, especially oil. High oil prices in the 70s and resulting high inflation were the result of disruptions in the Middle East and OPEC embargoes. This time is different:

  • OPEC realized that they would be better off in the long if the world became addicted to oil
  • However, beyond the Middle East, the “low-hanging fruit” of cheap and easy oil is used up
  • Oil prices only fell in 2008-09 as a result of the economic crisis
  • OPEC has actually been helping to stabilize oil prices from going up (to avoid another world recession) and from going down (because they need the revenues)
  • In addition, the oil we must now get from the Arctic, deep-sea, Tar Sands, and fracking requires oil to be $90-100 to be profitably worthwhile (3-4 times more costly than the economy is designed for)

Capitalism and a growing world population (that wants at least an American middle-class lifestyle) needs more growth than is now possible at today’s energy prices. This may not end well.

There is Also Climate Change


Much more in a future post.

Is There Hope for a Sustainable Future?


While politicians rearrange deck chairs on the titanic economy of the past, some entrepreneurial visionaries are laying the foundation for a new era. Will green shoots like this develop fast enough to save us from the economic distress of a shrinking economic pie or climate chaos?

The Not So Promised Land of Fracking


The movie Promised Land depicts the dilemma faced by rural farms and towns by the fracking boom. While the makers of the film do reveal their biases in terms of the potential environmental and economic exploitation of poor, rural America, they attempt to provide a balance of perspectives that include some surprising twists with the conclusion left up in the air. Although we don’t actually see fracking or the results of it in the film, here is what a fracked landscape looks like.


The oil, gas, and financial industries would have us believe that the shale gas and oil boom will provide the US with domestic, clean, affordable energy for a hundred years, creating millions of jobs and stimulating the economic growth that we so desperately need. The reality may be quite different.

Here is How Hydraulic Fracturing (Fracking) Works

Fracking -Diagram-2

The diagram above shows only one well for the purpose of simplicity. Frack sites are typically 1-3 miles apart and each pad at each site may contain 4-12 wells or more. The diagram below is another representation of the pattern of horizontal drills that are needed for tapping into gas trapped in shale, as contrasted with conventional gas drilling where a single well taps into a single large reservoir.

The remainder of this post will cover some of the larger economic and environmental  issues with more technical references provided at the end.

The Economics Fail:
Low Prices and High Depletion Rates

“We are all losing our shirts today… We’re making no money. It’s all in the red.” Despite its commercials, this is what ExxonMobil CEO Rex Tillerson said in July, 2012 to the Council on Foreign Relations.

Low prices are great for consumers and the chemical industry but terrible for the natural gas industry and its shareholders. They did not get into the business of producing shale gas in order to sell it for $2-3/MMBtu (about 1000 cubic feet). The industry needs to get about $4-6 to break even and $6-8 to really profit from the complicated and expensive process of fracking. What happened is that the supply grew much faster than the demand and prices crashed. In addition, they are finding that the depletion rates fall off sharply after the first year so that they need to keep leasing more land and drilling furiously (increasing supply) in order to grow the forward hedging of production rates they must report to investors.

NG-Coal-PricesThe industry is between a rock and a hard place (no fracking pun intended). What is the industry doing to get the price up? 1) Waging a PR campaign to convince the country that shale gas is the answer to our energy and economic problems. 2) Shifting from shale gas to shale oil development (oil can get the world price because it is portable and exportable). 3)  Applying for permits for liquid natural gas (LNG) conversion facilities at our ports so that it can be exported (taking advantage of the world price that is $10-14. For shale gas fracking to work economically for the industry, it won’t be such a great deal for consumers (switching from oil to natural gas) and energy utilities (switching from coal to natural gas).

TradersThere is likely to be considerable volatility in energy markets over the coming decades, as supply and demand struggle for balance and prices lurch from one extreme to another. Currently low gas prices have already dealt a serious setback to fledgling solar and wind industries that were just getting close to economic viability. The coal industry has been seriously upset as well (probably a good thing). Price volatility is not good for anyone except futures traders.

Next, let’s break down the myths that the industry is promoting to build short and long-term demand (and get prices up) in their pitch to have shale gas be the answer to our energy dreams:

Myth #1: Natural Gas Production is Environmentally Safe

Frack-Fire-2The industry claims that fracking has been done safely for many decades. While fracking was first done around 1947, the combination of technologies and processes that have resulted in the current shale gas boom have only been in play since about 2007. In addition to the development of several key methods, there are some who say that the fracking boom really did not get under way until the passage of what has come to be known as the Halliburton (Cheney) Loophole to the Clean Water Act. It exempted energy producers from identifying the chemicals used in the fracking process out of proprietary concerns.

EncanaA presentation by Anthony Ingraffea, a former industry insider and currently a professor of Civil and Environmental Engineering at Cornell University, explains why the fracking process is extremely complicated and how the chances of something going wrong become very likely when human error and industry pressure for profits come together in the plans to develop tens of thousands of wells per year in out of site rural areas all over the country.

TruckSiteThe industry claims that they are highly regulated by the states and that this is preferred because the states know best and we shouldn’t have “one size fits all” federal regulations. Just the opposite is true. This is a complicated national issue that crosses state lines and many states are woefully under-prepared  and under-staffed to regulate the industry. In addition, state regulators are much easier to influence and corrupt.

There are many other sites that focus on the environmental problems with fracking so I won’t spend any more time here and now turn to other issues.

Myth #2: Natural Gas is Cleaner than Coal (by 50%)

example-of-gas-flaringIt is said that natural gas is the cleanest of the fossil fuels and that, if we use it to replace coal for electricity production and to replace oil for transportation and heating, this will help to reduce CO2 emissions in the fight against global warming climate change. While it may be true that the actual burning of natural gas produces 50% less carbon emissions than the energy equivalent burning of coal, we need to look at the overall life cycle production of producing unconventional shale gas by the process of hydraulic fracturing (fracking). Anthony Ingraffea, a former industry insider and currently a professor of Civil and Environmental Engineering at Cornell University, has done a study (somewhat controversial) suggesting, as others have, that shale gas production might not be that much better, if not worse, than coal in terms of total greenhouse gas emissions. This stems from the energy intensity of producing shale gas along with the methane that is either flared off or leaked out along the way. Although much shorter lived than CO2, methane is estimated at 20-100 times more powerful as a greenhouse gas. One could argue that, even if natural gas is the cleanest of the fossil fuels, additional energy resource development should be in the direction of alternatives.

Myth #3: The Shale Gas and Oil Boom Will Create Millions of Jobs

Frack-Pumps-WorkersEven the president said something to this effect in his 2012 convention speech. Again, if you listen closely you will notice that the claim is that millions of jobs will be supported (vs. created). So I guess we get to count the waitress who serves at least one person who works for the industry and construction worker who repairs the damaged road from the fracking truck traffic. Interesting, that we could count that when the taxpayer is probably paying for the road repair and thus subsidizing the industry. From a macroeconomic perspective, oil and gas production is very capital intensive. Financial resources invested in alternative energy deployment might well create three or more  times the number of jobs and leave us with something much more sustainable in the process.


Myth #4: The Shale Gas and Oil Boom Will Lead to U.S. Energy Independence

U.S. energy independence would supposedly offer a number of benefits from both a security and economic standpoint from less reliance on sometimes hostile foreign sources of energy. There is also the implication that energy costs would be lower.

First, if you listen closely, it’s really “North American” not American energy independence, since our neighbors in Canada (with Tar Sands) and Mexico are being counted for oil. Second, since there is one world price for oil, it almost doesn’t matter where it comes from. While it is true that Middle Eastern sources have been hostile to us in the past, including the embargo of the 70s, they need to sell to us and the world as much as we need to buy from them. They need the continued revenues to keep their restive populations happy. They also learned in the 70s that their long-term interests were in keeping the rest of the world hooked on oil rather than making spiteful cut-offs that might lead us to find alternatives. OPEC and primarily Saudi Arabia have in fact been a stabilizing force of late in keeping the price of oil relatively stable at around $100/barrel for oil.

US_Oil_ProductionConsumption.69210701_stdAmerica does have great energy resources in terms of the total supply of oil (limited), coal (among the largest in the world), and natural gas (now potentially abundant with shale gas). When it comes to liquid fuels, however, we use about 19 mbpd (million barrels per day) of oil. Conventional production of oil is about 6-8 mbpd with shale (tight) oil that could be produced from fracking, possibly adding another 2-3 mbpd. This adds up to 10-11 mbpd which is about equal to what Saudi Arabia is producing, thus the recent claim that the U.S. may become the world’s largest oil producer. All of this is a long way off, has a number of caveats, and is still far from oil independence.

aerialFrackingAssuming we could ramp up production, leaving rural landscapes looking like this and leaving other environmental consequences aside, we could theoretically convert our transportation system and infrastructure to run on natural gas. Such an infrastructure transformation would be very expensive and one wonders who would pay for it.

There is one more important economic element to consider. The industry is moving to build liquefied natural gas (LNG) conversion facilities at our ports in order to export LNG. Exporting sounds like a good thing until you realize that it would mean lower supply and higher prices domestically. The reason for exporting is to take advantage of much higher world prices. Until natural gas can be converted to liquid form, it can’t be exported.

Incidentally, when you hear about the U.S. becoming an oil exporter, listen again. It is not crude oil (which we still import 40-50% of); it is actually refined oil products (other than gasoline) that the industry is exporting to take advantage of world prices and excess refinery capacity in some areas.

The Bottom Line

Let us enjoy inexpensive natural gas prices for now (which I am). Low prices will not work for the oil and gas industry. None of this will work for the environment. Nothing good will come from fracking in the long run. I’ll leave you with this rather sad image.



The Future of Economics and Society as We Know It

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.

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

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 Web Site

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.

The Internet as a Monkey Trap

The Monkey Trap

Google, Blogs, Facebook, Twitter, email, text messaging, gaming, virtual worlds…what is your banana? What so captures your attention that you can’t let go?

I saw a cartoon of a monkey trap (not this one) over 25 years ago in an article entitled Computers as Poison. The idea has stuck with me ever since. Today, I came across this explanation which describes the attention capture phenomenon quite well.

SEEKING: How the brain hard-wires us to love Google, Twitter, and texting. And why that’s dangerous. Slate (8/12/09)

You can’t stop doing it. Sometimes it feels as if the basic drives for food, sex, and sleep have been overridden by a new need for endless nuggets of electronic information. We are so insatiably curious that we gather data even if it gets us in trouble….

Ever find yourself sitting down at the computer just for a second to find out what other movie you saw that actress in, only to look up and realize the search has led to an hour of Googling?

We actually resemble nothing so much as those legendary lab rats that endlessly pressed a lever to give themselves a little electrical jolt to the brain…Thank dopamine…

But our brains are designed to more easily be stimulated than satisfied. “The brain seems to be more stingy with mechanisms for pleasure than for desire,” Berridge has said. This makes evolutionary sense. Creatures that lack motivation, that find it easy to slip into oblivious rapture, are likely to lead short (if happy) lives. So nature imbued us with an unquenchable drive to discover, to explore…

For more on how to balance seeking and satisfaction for optimal experience, I recommend this book:
Finding Flow: The Psychology of Engagement with Everyday Life
The basic thesis of the book is that we are most fulfilled when engaged in activites that challenge us at the optimal level, neither too much nor too little. The author goes on to describe how some people are able to “find flow” in almost any type of activity, even the seemingly mundane.

There can be a sense flow in losing oneself on the Internet, but the first article suggests that there is something about the nature of the Internet that makes it too easy to cross the line into unhealthy addictive behavior.

ANTHROPOCENE: A New Era of Human Civilization on Earth

From The Economist cover story of May 28, 2011:

“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.

Google vs. Facebook: Is this the right question?

While I do have a Facebook page and a few dozen “friends”, I don’t find it compelling enough to check in with more than a few times per week and have been wondering if I am missing the boat. Google, on the other hand, I can’t live without. For an information junkie, it’s nirvana. More importantly, how can you compare Facebook and its assorted little games and applets, as addictive as they are for many, to Google, which, in addition to Search and Android, has also created Maps, Earth, and now Books, among other things.

My bias, then, is to see Google continue to thrive and Facebook to become a passing fad. This article, and especially the comments that followed, recently caught my attention.

Facebook Will Thwart Google, Says Ex Googler

Does Google have any chance at all of competing with arch-rival Facebook? Not really, former Google bigwig Paul Buchheit says. Buchheit tells us his old company will probably find it easier to land on the moon…If Google can’t mount a viable challenge to Facebook, it will make the social network look all the more unstoppable to competitors and frustrated users alike.

Why doesn’t social mesh with where Google is strong, i.e. in basic engineering skills?

— Google’s strength is in building large scale computer systems like BigTable [definition], and they reflexively try to apply that to all problems (if all you have is a hammer…)
— Facebook is also very good at what they do (unlike MySpace)
— The network effects in social are very substantial

Would it be erroneous to detect a bit of pessimism on your part about some of Google’s big initiatives? Do you still think Google is innovating, on balance?

I’m actually rather optimistic about Google overall. The inevitable doom of ChromeOS is due in part to the huge success of Android. As for social, I expect that Google will find greater success with their self-driving car and moon landing initiatives.

As is often the case, I sometimes find  more incite in the comments section. Here are some of the choice excerpts:

…I’ll be damned if I’m going to use a e-mail address ever. Facebook isn’t taken seriously by professional adults, it’s taken for what it is: a tool to ‘socially network’, which in and of itself is still viewed as a bit of a joke. That being said, the kids using FB now will be the professional adults in a few decades, so stay tuned to this sexxxxy battle!

…I’m far more likely to click on a Google ad than a Facebook ad, and that will never change. Facebook ads tend to be stupid and inaccurate. I’ve yet to see them offer anything remotely in the vein of my interests when they have a LIST of my damn interests.

…I predict a massive switch to a new platform as the young adult/hipster crowd gets sick of friends requests from parents and bosses.

…with the advent of Facebook’s success, we have come full circle. People now log into a closed environment to start their day and access interesting points on the web…All of this potential on the web and people still want to hand over proprietary control for internet content to someone else.

…Facebook seems unbeatable right now, but there could easily emerge another Google on the horizon to take it down. (This ‘Google’ will probably not be the Google, much to the Google’s chagrin.)”

…If we’ve seen anything in social networking, it’s that services either begin with or develop biases toward the user bases that they serve. Right now, Facebook’s user base is very broad–which means that it doesn’t target any single demographic in a particularly exclusive way. This makes them, I think, quite vulnerable to more targeted services that can convince users they’re doing more cutting-edge things with social networking. To combat this, Facebook has chosen the “bloat” route. They’re trying to get into micro-blogging, e-mail, mobile apps, etc. To me, this reeks of a Yahoo!-style trajectory, typical of classic Silicon Valley business ventures.

…Landing on the moon may, or may not, be easier than beating Facebook at social networking, but landing on the moon is also far more interesting than Facebook.

“A Game-Changer” for the U.S. Auto Industry

One of every three Motor Trend magazine covers over the last year featured a Mustang. The last two issues showcased the Volt. The staff of Motor Trend are mostly muscle car guys but they were gaga over the Volt. Has the transition to the era of the electric car finally arrived? The Volt is technically classified as an extended-range EV (electric vehicle) in that it has a small gas engine to provide range beyond 35-50 miles, but it will be the first car that Americans will plug in.

“This is a fully developed vehicle with seamlessly integrated systems and software, a real car that provides a unique driving experience. And commuters may never need to buy gas!”

As one of the consultant judges on this year’s COTY panel, Chris brought the deep insight and professional skepticism you’d expect of someone who’s spent his entire working life making cars. But our 2011 Car of the Year, Chevrolet’s ground-breaking Volt, has blown him away. Like all of us on the staff at Motor Trend, Chris is an enthusiast, a man who’ll keep a thundering high-performance V-8 in his garage no matter how high gas prices go.

“I expected a science fair experiment. But this is a moonshot.”

In the 61-year history of the Car of the Year award, there have been few contenders as hyped — or as controversial — as the Chevrolet Volt. The Volt started life an Old GM project, then arrived fully formed as a symbol of New GM, carrying all the emotional and political baggage of that profound and painful transition. As a result, a lot of the sound and fury that has surrounded the Volt’s launchhas tended to obscure a simple truth: This automobile is a game-changer.

Motor Trend: Car of the Year (feature story)

How the Volt Works (more technical)

Motor Trend vs. Rush Limbaugh
Why the right-wing can’t stand the Volt

For a truly revolutionary approach to our automotive future, see Shai Agassi’s TED presentation. More to come about this in a future post.

“I expected a science fair experiment. But this is a moonshot.”Read more: