A letter to my family on peak oil and the global economy

Tim turned 16 the other day. By the time Tim is 30 the world will be producing only half the oil it is producing now and when he is 40 it will be producing less than a third.

Since I found out about peak oil in 2004 I have bothered you with my dire predictions. I know we got the timing wrong, and I know we have subsequently found shale oil and the global economy has continued on a business as usual path. You think I was wrong, do you?

Well here we are at 2017 and the article I have just read several times explains why the timing was wrong. We didn’t allow for fracking and we didn’t factor in the financing of oil. But now we are stuck. You tell me where the Nafeez Ahmed article falters. He quotes from an HSBC report and that is the sixth to biggest bank in the world. The HSBC article quotes from the International Energy Agency and from a Swedish University’s energy programme. Ahmed quotes further from a recent Cornell University paper which in turn quotes a paper from the Italy’s premier agency for government research.

I know very few of you will want to read the Ahmed paper. After all it is holiday season and we all have books to read, swimming to enjoy, bike rides and tramps to accomplish and screens to attend to.

So let me summarise this paper a little, adding an odd bit for explanatory reasons:

Conventional oil peaked in 2005. Unconventional oil (shale oil, deep sea oil) peaked in March 2015. Oil is the most dense energy form human beings have ever found and nothing has yet replaced it. Consequently it is closely correlated with economic growth and population growth. The current economic system requires constant economic growth. Oil has fuelled the growth in global wealth.

Ten years ago some of you replied, “Don’t worry, we will find something”. Oh yes we found fracking, and China went back to coal. But we also had already found debt instruments. If you don’t understand what these are you are in good company. Not even the heads of hedge funds or big banks know what strange derivatives (bets) are being invented by their traders sometimes. Ahmed says simply “the world is borrowing from the future to sustain our present consumption levels”. I know the shale oil companies were largely funded not from banks but from selling bonds. Ordinary people bought company bonds and got paid very high interest rates. The interest rates have risen so high that many shale companies are going broke paying them.

As oil exploration is yielding fewer and smaller fields and the oil is getting deeper and more expensive to extract, the oil companies abandon uneconomic fields. This happened around New Zealand and we attributed it largely to the actions of Greenpeace. But it was more than that. It costs them too much to extract it. Oil prices have recently climbed to just over $50 a barrel and companies need about $60 to break even. So they borrow. The trouble is this debt doesn’t produce real wealth.

Remember back in 2008 just before the Global Financial Crisis we had soaring oil prices? Oil went to $150 a barrel. Since nearly all goods are transported and the transport cost went up there was less money left for the rest of the economy. So we had a huge recession. So if oil prices are too high we get a recessionary effect that destabilises the global debt bubble. That debt is now higher than the pre-2008 crisis. If oil prices are too low we get too much debt which brings with it huge bank risks.

The economy can’t grow without oil. So we are stuck. The article says “the economy can quite literally never recover unless it transitions to a truly viable new energy source which can substitute for oil.”

Ahmed won’t of course have read my essay that I just submitted to the Next System Project essay competition where I propose an entirely new way of constructing a political economy so that we are not dependent on oil or on money as debt. (More of this later, I have just entered it into their international competition)

Ahmed says that because on 1 Jan 2018 there are new regulations coming into force in the finance industry, there will be a massive collapse shortly after that. He called it in 2008 and he is calling it now.

So while you are reading soothing headlines about how the economy is ‘in recovery’ or angsting over Donald Trump’s appointment of Exxon Mobil chief as Secretary of State or yet another climate change denier to a key position, think about your preparation for next year. The economy can't recover, given its present structure and its geophysical limitations. Where will you get your food? Cash? Petrol? Will your local authority be able to maintain a good supply of drinkable water or a sewerage system if they are in increasing debt? What about power?

Now there will be those who say this is wonderful for climate change. Yes it may be the only thing that makes our planet habitable. But it is an awful way for billions of us to learn. Actually the people who will be best off will be those who are already scraping a subsistence living. But that is another matter.

If only half the today’s global oil supply is available to Tim when he is 30, what is the future for your grandchildren? Or your old age? Can you devote an hour of your precious time to getting a handle on the reality of all this? We are so privileged in New Zealand and have had it so good for so long. I have missed out on a share price boom I know. Yes I got the timing wrong. Yes I have been a doomster. But please think for yourself now. You are educated, you probably have unlimited data for your computer, use it. Plan now for a massive, tightly interconnected, global financial collapse now. You might have a year.

Should New Zealand prepare immediately for oil shortages?

imgresLast night at our Transition Towns meeting we had a good speaker from the Otaki Clean Tech Centre on alternative liquid fuels. He spent the first part of his talk summarising the position with fossil fuels. What a reminder!  One thing he told us was that our New Zealand strategic oil reserves are held on a piece of paper in Japan. I am keen to confirm this and so have today written to the Minister of Energy and Resources, Hon Simon Bridges. Then I see on  my email today a link to a media statement from ASPO Australia. He says New Zealand should prepare immediately for oil shortages. ASPO's website is here. That led me to a link to a talk by Professor Susan Krumdieck. Well it is hard to find 32 minutes to watch a youtube video but I assure you this is worth it. She is talking to business people and makes the cases that is is a dumb investment investing in fossil fuels where there is such a low return on energy invested. Which leads me to thinking about what has happened over the last few years of a National Government, hell bent on building roads and deaf to the cries of the manufacturing and export industries about the high NZ dollar. The answer is always about how New Zealanders will feel the pain of a lower dollar in higher petrol prices. We continue to drive at 100km an hour, though in times of awareness that speed comes down to 80 km an hour. In the seventies oil shocks we had carless days and had to drive slower. But right now we have been lulled into a state of torpor, dreaming that this oil, which cost so much to produce and so many lives in oil wars to protect, will continue at this price forever without dirsuption. Are we sleepwalking to catastrophe?  

Official report on Oil Prices and Transport Sector Resilience suppressed by Brownlee and Joyce

Yes we have had an official Government report called Oil Prices and Transport Sector Resilience in Nov 2009. This unsigned report had to be ferreted out by the wonderful Thames-based Dennis Tegg, who blogs so responsibly on the topic of peak oil. http://oilshockhorrorprobe.blogspot.co.nz/2011/08/new-zealand-at-greater-risk-from-oil.html. Our unique vulnerability on many fronts is described in the report. Gerry Brownlee and Steven Joyce apparently don't believe an informed public is going to be useful for their oil friendly and lignite friendly agendas! The road transport lobby is no doubt also doing some effective lobbying to bend their ears.

There is another report, the one written by Clint Smith for the Parliamentary Library in Oct 2010. http://www.parliament.nz/en-NZ/ParlSupport/ResearchPapers/4/6/a/00PLEco10041-The-next-oil-shock.htm and to date is still on their website. It is excellent.

And of course there is a report commissioned by NZ Transport Authority from 2008 which was never given much airtime. It was 148 pages long.

And during January Australia suppressed its long and comprehensive report on peak oil too.

The Minister of Defence is also turning a deaf ear to military reports overseas and neglecting to commission a report for our country's security. Like the others he has his head firmly in the sand. When a US CNA Military Advisory Board Report on peak oil came out last year, calling for a 30 percent reduction in US oil use over ten years to reduce "grave national security risks",  I wrote to our Minister of Defence, Wayne Mapp, to find out whether he had seen it and asking under the Official Information Act for copies of all reports on oil, and the implications for security that he had received. He replied that he hadn't.

No wonder we have seen all this rush for deep sea oil exploration and lignite production in Southland. Tag Oil in early January spoke of the potential to build thousands of oil wells in the largely untouched region of New Zealand, and said that New Zealand could become the Texas of the South. This was repeated by MPs and Ministers. The dangerous and resource intensive practice of fracking continues. So widespread is the local concern, even the Christchurch City Council has asked for a moratorium on fracking.



If not me then who? A personal reflection

New Economics Party Membership Form If not me then who? I’ve been thinking about why this project started. What on earth would motivate a woman of 73 to start a new political party?  Shouldn’t I just be enjoying life at that age, playing bridge, knitting for my grandchildren and travelling. During the winter of 2011 I had had a Skype call from Richard Sanders, an ecological economist in Brisbane. He was worried. His concern was that things aren’t getting any better and that Transition Towns won’t solve everything. He said: “Even if your town becomes self sufficient in food and energy, what are you going to do when the raiders come over the hill?” We talked and together decided that until we are all free, no-one is free. Although in transition towns we have traditionally said to politicians: “A pox on all your houses, we will take leadership here locally to prepare for life here after peak oil”, I have realised that national policies and international policies are just as vital as constructive local action for resilience.

If one is sick we are all sick, if one is poor we are all poor

I was in a classical music concert in Waikanae on 20th August, a Sunday afternoon, and dreaming away happily. I had nearly completed a nine-week e-course on evolutionary spirituality and was contemplating my future from the point of view of my evolutionary impulse, defined in the course as ‘the part of me that wants to make the world better’. We had all been mulling over the vexed question of our life’s work in the world. Since the phone call from Richard Sanders I had been wondering whether I wanted to stay working for my local transition town group and local timebank or get into something national? For me it was time to move back into national issues. What would I do? A few projects came to mind. So on the way home from the concert it became clearer. When my husband left the car to buy some fish I sent the following text to Laurence Boomert:  “Sounds a weird question but I just sat in a concert thinking if I could vote in the coming election or not. I wondered about the possibility of a Collapse Party.”  Back came the text:  “Have written a draft manifesto and was thinking of standing for Wellington Central.”  So it was all on. During the next few weeks we brainstormed on names, started working seriously on a manifesto and floated the idea among friends and colleagues. Soon it came clear people would rather it was just a pressure group. The Green Party members wanted to help but couldn’t if we were to be a party. Tricky. So for a while we called it a Working Party on New Economics in case we dirtied our hands with politics.  Maybe the thought was "Politics is a dirty activity only for liars"?

If we want a world without babies we should just go on – business as usual

At one stage we thought if we wrote policy and drew attention to it, then parties could all help themselves and adopt it. But of course they won’t. How naïve! Then somehow, I can’t remember how or why, we switched right back, and jumped in. It was back to a political party and we ended up with quite a conventional name. So the idea of a political party had surfaced for months, but was quickly dismissed as stupid. Yes I had played leadership roles before, but a political party? That is different. And back came the answer from the course “If not me, then who?” Well I had written a book on new economics, or at least the money side of it, and I had once been a city councillor, I had been a professional campaigner (for ASH in the 1980s) and had stood for the Values Party in 1975 and dabbled in the Green Party and the Alliance from time to time, even stood for local bodies as a Green candidate twice. But there are all sorts of reasons why it shouldn’t be me. I have a husband of 86 and we don’t travel far from home. We have a big garden and home to care for. I had eczema very badly last year and could hardly walk for the splits on my feet. But it is under control now. I have had heart trouble. But I have just had two cataracts replaced and now I can see without glasses, so that no longer is an excuse. Those are my limitations. But something happened inside me and I just jumped in. I have written most of this website, with suggestions and short pieces from others, and it is just a draft to discuss at our first get together in Turangi, 14 April, 2012. Because we have so little time to solve these Very Big Problems I have shamelessly cut and pasted from all sorts of sources, so if you recognise something as yours please take it as a compliment. Thank you for your contribution. I have no aspirations right now to be in Parliament, but will do whatever I can to advance the policies in any way you want me to. Many of you will be able to contribute your specialist knowledge. Mine is only one glimpse of the truth. To create a new economy on a war-like footing needs a whole army of highly motivated pioneers. We need those with knowledge on banking, investment, new business models, cooperatives, credit unions, new models of ownership for a start. We need those who have worked in economic think tanks, those who have worked in Treasury, the Reserve Bank, or those who have traded in derivatives. We need those who know about climate change, those who campaign against free trade and those who know that income tax is an illogical tax. We need those who have no particular knowledge on economics but just want to help somehow. Is this you? One theory is that there are four general types of people required to be an effective group. We need conscientious people who just want to help, to be given clear instructions. We need directors who work out who will do what and organise it to be done. We need visionaries who can see the rocks ahead. We need carers, those whose role is to care for others in the party. If you are one of these people can you please ask yourself the question “If not me, then who?” Environmental campaigner Bill McKibben has written: “We definitely need art and music and disciplined, nonviolent but very real anger. Most, we need to tell the truth, resolutely and constantly. Fossil fuel is wrecking the one earth we’ve got. It’s not going to go away because we ask politely. If we want a world that works, we’re going to have to raise our voices.” So stop waiting for someone else to fix the economic system that is killing our planet. There is no one else. It is you and it is me. If you want to raise your voice, go to Get Involved on the menu now and jump in! There is nothing to be lost and Life to be gained. In fact if you want to help us get 500 members before April 2014, here is the membership form for you to download, fill in and post with your sub. Deirdre  

A Perfect Storm of Crises

A PERFECT STORM OF CRISES Resource Depletion: The world’s rapidly growing and modernising population is consuming the earth’s limited natural resources at an ever-increasing and unsustainable rate. Here are some major concerns: Peak Oil production

Peak oil production brings the end of economic growth

Energy is the resource that powers all human and economic activity and oil is the energy source we depend upon most. Global production of conventional crude oil peaked in 2005 and unconventional oil from oil shale, (and) tar sands and cropping is barely making up the shortfall while creating new problems for water, land, food systems, wildlife and the atmosphere. Peak Coal and Natural Gas

Coal fracking uses too much water

Coal and natural gas reserves are extensive, but as more accessible, higher quality sources are depleted, growing practices like mountaintop removal for “dirtier” coal and hydraulic rock fracturing (“fracking”) for shale oil and natural gas carry high capital and environmental costs which limit their future viability. Peak Everything Else Population pressure and modernisation is rapidly depleting many, if not most, of the resources we use to sustain civilisation. Fresh water, arable land, phosphorus for fertilizer, seafood stocks, lithium, gold, rare earth metals, rainforest products and other resources are close to, or already past, peak production. When the easiest and cheapest resource stocks are gone, the rest become more expensive and generally come at a higher environmental cost. Climate Change: Climate change is nonnegotiable and if we get it wrong this time there is no second chance. The critical threshold of the ratio of greenhouse gases in the atmosphere has been reached, and only drastic measure to reduce this ratio will avert a perilous future. Increasing high levels of carbon dioxide and other gases in the atmosphere have trapped more of the sun’s energy over the past century and have warmed the earth’s oceans, landmasses and atmosphere. The warmer atmosphere can hold more moisture and has more energy to drive mass air movements and power more frequent and violent tornados, hurricanes, floods, droughts, snowstorms, heat waves, dangerous hail and lightning storms, and record rainfalls.

Flooding in Bangkok 2011

We can expect: Increasing crop failures like those  in Russia due to extreme heat and drought; in Pakistan due to extreme flooding; and in Australia due to extreme heat, drought, and floods. Increasing death, destruction and economic devastation as more powerful tornadoes, floods and hurricanes afflict larger areas of the planet. 2.     More forest fires and wild fires as droughts become longer and more severe. 3.     Greater damage from pathogens and insects as naturally balanced ecosystems begin to break down.

Drought affecting crops in New Zealand

Economic Turmoil The global financial system is currently in a state of terminal breakdown. It's been on life support for the better part of half a decade, and the costs of keeping it on life support are spiralling out of control. While most agree that the global economy nearly collapsed in the spring of 2008, few acknowledge that nothing has fundamentally changed to prevent this from happening again. Recent bailouts of fragile European economies like Greece, Ireland and Portugal (like the bailouts of American financial institutions) increased the debt that first caused the defaults and likely set the stage for more economic chaos not far down the road. The IMF is warning of a dangerous new phase but as expected their prescription is “repair” when it should be “redesign”. We can expect: ·       High inflation or deflation, both harmful ·       Scarce capital or credit for job creation or infrastructure projects ·       Dramatic cuts in government services as debt liabilities grow and tax revenue shrinks. ·       Growing ranks of unemployed as families sink into poverty and unemployment ·       Possible or even inevitable global economic collapse. Also, the bewildering array of derivatives – exotic financial instruments that create money but not real wealth, – are now monetarily valued to far exceed the value of all real goods and services on the planet. As the hard physical limits to growth begin to appear in the forms noted above, the entire growth-dependent financial system may be headed for a very hard landing. Economists are part of the problem The remedies advocated by economists are at best suspect.. The New York Times Magazine headlined “How Did Economists Get It So Wrong?” while Business Week featured “Why Economics is Bankrupt” and “What Good Are Economists Anyway?” The Guardian talks of “Rescuing economics from its own crisis” and Atlantic Magazine headlines were “Will Economists Escape a Whipping?” “Why Economics Failed” and “Have economists gone mad?”

Infinite growth is not possible on a finite planet

The mechanistic approach to economics sees the rights of the individual as paramount and the sustainability problem as simply a matter of balancing competing economic, social and ecological considerations. On the other hand, a systems perspective suggests things are not quite this simple. Solutions where the government pumps money into the system, will not solve our economic woes. As United States has recently discovered it only increases the debt and extends the suffering. As Europe is about to discover, you can't solve a debt problem with more debt.

How come economists get it so wrong?

Because of increased trade, technological innovation and our ability to exploit the cheap, abundant energy of fossil fuels, New Zealand has had a prolonged period of economic growth with more production, more food, more people and more income. But energy is a prerequisite for all economic activity. At the core of many of our problems is our monetary and taxation system.  Any economic system must include an accurate accounting of its environmental and social effects. Our monetary and banking system runs on interest bearing debt. Without increasing debt it is hard to “grow the economy.” Economist Ken Boulding once said "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist". The worst thing that could have been done in 2008 was for the National Government to borrow money ($300m a week) from private banks at interest. It is only going to cause more debt., increasing a debt burden currently $102,000 for each man, woman and child. Unfortunately there is no magic solution that will turn back the clock to an era of abundant resources and easy growth. It doesn’t take a genius to understand there is something very wrong at the heart of the global economic system. We have a parasitic investment banking class sucking at the heart of main street business and at ordinary people.  The system’s dependence on exponential growth also causes environmental harm and unsustainable demand on natural resources. Globalisation and the harshest form of capitalism have eroded the bonds of community, created vast gaps of wealth between the richest and the poorest, and impoverished the natural environment.  In New Zealand twenty percent of our children live in homes of beneficiaries. Too many of our youth are unemployed and not being effectively educated or trained.. Maori suffer most from all this.