Global financial system implosion begins

[ayatollah]

so when you said this you actually meant something different then?
so in actual fact you're now accepting that the oil didn't provide the economic stimulus at all, as is obvious due to the fact that the oil was there all the way through the preceding depression, it took other factors to provide the economic stimulus just as it took other factors to create the depression in the first place.

This in a nutshell is the problem with your entire line of argument over the last few years on this, you've assigned primary importance to oil, and virtually no importance to all the other myriad of factors that influence the global economic situation.

Oil is but one of many factors, and is certainly not the primary factor in it. Even in energy terms oil only accounts for something like 30% of global energy provision, and there is no current shortage of the other 70% (though we need to drastically reduce our consumption of other fossil fuels for climate change reasons), but it's complete bollocks to assign primary importance to oil for our current economic malaise - this is caused almost entirely by other economic and political factors, and even the oil price spike's part in this was around 90% caused by speculation and 10% by actual normal supply and demand issues.

Put simply, we're in this mess because of the inevitable failure of neoliberal economics as a system, and the fact that our political classes have largely abandoned keynsian economics in favor of the economic ideologies espoused by Hayek, which they've run riot with and have now set us on a course that can only ever lead to crippling impacts on the economies of Western Europe as their austerity policies kill the economy and tax receipts faster than they can reduce government spending. This is a vicious downward economic spiral with no end other than economic obliteration - until the policies are reversed, and people like you who continually attempt to assign the blame for this to Peak Oil are providing them with a get out clause, of something else other than their policies that could be to blame for this mess.

The sole reason we're now in the mess we're in in this country instead of being 3 years into an economic recovery is because the coalition government cancelled the vast majority of the keynsian style government stimulus packages that the previous government had put in place - cancelling school building, road building, energy saving, renewable energy support etc etc. all of which they're now trying to put back in place to provide that stimulus again, but are finding that it actually takes years to get those projects back to the point where they can actually start providing jobs and the economic stimulus that's needed. This is economic mismanagement of epic proportions.... the one thing I will say in favour of your position on this is that in the 80's Thatcher did a similar thing, but the economy then was propped up by North Sea oil and gas so she got away with it to a greater extent, whereas now the reverse is true, and the true idiocy of these policies is now being seen.

Please have a think about your position on this and stop providing cover for the disastrous economic policies we're enduring - I too was a bit guilty in the past of assigning more blame for the economic crash than was due to the oil price spike in 2007/8, but once I investigated the situation a bit more it was obvious that the facts didn't fit that hypothesis. The oil price spike obviously didn't help matters, but firstly it was mainly a result of speculation in the markets to an extent that was banned until the late 90s, so was also a direct result of neoliberal economic policies, and secondly most of the problems that caused the crash were unrelated to, and largely preceded this oil price spike.

Yep, you've definitively nailed the entire issue , free spirit. A very neat demolition of Falcon's entire oil-obsessed ,monocausal, reductionist, theory in just a few paragraphs . Falcon will never assign blame for the current world systemic economic and social crisis to the specific nature and operating dynamics of Capitalism. Something to do with his own Neo Malthusian ideological framework perhaps ? Blame the "entire world population" for "bingeing on the world's oil resources until it's running out" - whilst ignoring the harsh reality that most of the world's population were always excluded from any "bingeing" ! And, crucially, that the richest 1% or so who did most of the resource squandering are still doing it bigtime, and are also the same tiny social class who actually brought about the current financial/economic crisis ---- and as a social class stand in the way of it every being equitably solved.

 

[Falcon]

so when you said this you actually meant something different then?
so in actual fact you're now accepting that the oil didn't provide the economic stimulus at all,

Yup. I clarified my point. It's fairly common amongst those of us who's thoughts didn't coagulate around our 18th birthday.

Please have a think about your position on this and stop providing cover for the disastrous economic policies we're enduring - I too was a bit guilty in the past of assigning more blame for the economic crash than was due to the oil price spike in 2007/8, but once I investigated the situation a bit more it was obvious that the facts didn't fit that hypothesis. The oil price spike obviously didn't help matters, but firstly it was mainly a result of speculation in the markets to an extent that was banned until the late 90s, so was also a direct result of neoliberal economic policies, and secondly most of the problems that caused the crash were unrelated to, and largely preceded this oil price spike.

We disagree. I sense no particular need to argue with you any further on the matter. Events are unfolding exactly as biophysical economics predicts they will. That observation provides all the refutation I require.

 

[junglevip]

Yup. I clarified my point. It's fairly common amongst those of us who's thoughts didn't coagulate around our 18th birthday.



We disagree. I sense no particular need to argue with you any further on the matter - events are unfolding exactly as biophysical economics predicts they will.

The End.

 

[Falcon]

Yep, you've definitively nailed the entire issue , free spirit. A very neat demolition of Falcon's entire oil-obsessed ,monocausal, reductionist, theory in just a few paragraphs . Falcon will never assign blame for the current world systemic economic and social crisis to the specific nature and operating dynamics of Capitalism. Something to do with his own Neo Malthusian ideological framework perhaps ? Blame the "entire world population" for "bingeing on the world's oil resources until it's running out" - whilst ignoring the harsh reality that most of the world's population were always excluded from any "bingeing" ! And, crucially, that the richest 1% or so who did most of the resource squandering are still doing it bigtime, and are also the same tiny social class who actually brought about the current financial/economic crisis ---- and as a social class stand in the way of it every being equitably solved.

Hilarious post. I specifically assign blame to the specific nature and operating dynamics of Capitalism. Fossil energy depletion is a fact. There were many alternative political systems we could have adopted to accommodate that fact. But we didn't and, under Capitalism, we have overshot the carrying capacity of our resource base. There is no political construct now that can redeem that physical reality.

But you need me to be a Capitalist in order to coerce me into your ideological framework, because your aim is to promote your ideological framework, not to discuss the subject.

Meanwhile. "If you are a neo Malthusian, then you assert the primary role of physical limits. Falcon asserts the primary role of physical limits. Therefore Falcon is a neo-Malthusian". Arguments of the form "If P then Q. Q. Therefore P" are a form of fallacy of reasoning known as affirming the consequent, and you just committed it. And you did it because you don't have any other argument to deploy.

And from this towering intellectual position, you assert that the other chap "nailed the entire issue".

You'll forgive some for not having a lot of confidence in your judgement here.

But thank you for showing how utterly compromised you are by your struggle both to coerce this subject into your pet ideological framework, and to assert spuriously that I am somehow arguing from the perspective of its antithesis, when in fact I am interested in neither.

 

[Falcon]

Oil is but one of many factors, and is certainly not the primary factor in it. Even in energy terms oil only accounts for something like 30% of global energy provision, and there is no current shortage of the other 70% (though we need to drastically reduce our consumption of other fossil fuels for climate change reasons),

My argument asserts the primacy of hydrocarbon based energy, not just oil.

Oil and gas account for 60% of primary energy demand. Their contribution to the industrial agriculture system is large and unsubsitutable. Oil accounts - unsubstitutably - for 90% of global transportation energy by fuel type (the fundamental process which underpins the global industrial agricultural and manufacturing systems.) [Source: IEA World Energy Outlook 2008].

Oil, gas and coal account for 80%. Your use of the word "shortage" betrays no awareness of the NET energy of remaining reserves - they are physically abundant, but energetically collapsing, and I suspect you are not aware of the distinction. Meanwhile, since they cannot be substituted, they cannot be drastically reduced without also drastically reducing the system's output. There is another word for drastically reducing the output of the global economy - "collapse". You make my argument for me.

Your naive treatment of the fundamental concepts upon which your argument pivots are your argument's perennial achilles heel.

 

[free spirit]

My argument asserts the primacy of hydrocarbon based energy, not just oil.

another clarification / change of your position then?

The vast majority of your posts on this subject have focused entirely on oil production and entirely missed any mention at all of coal, gas or any other energy forms, and you've not clarified or changed this when I've previously called you on this. If you've now adapted your position to focus on energy rather than oil, then that's certainly a welcome improvement in your position.

ps I find it quite amusing that you can post these 3 posts on the same page of a thread. Hoisted by your own petard?

WWII didn't provide the stimulus. One trillion barrels of free energy (the quantity of now exhausted conventional hydrocarbon that then lay ahead of us in the period following the war) provided the stimulus.

Your fail to distinguish between "stimulus" and "means to satisfy stimulus".

They were providing the means to fulfil economic stimulus. They were not of themselves a stimulus.

 

[Falcon]

another clarification / change of your position then?

What would you have done if you had been unclear? Are you asserting that your arguments emerge from your fingers fully formed and perfect? Or are you attempting the sophistry on which entire arguments spanning hundreds of pages rise and fall on the least mis-statement?

The vast majority of your posts on this subject have focused entirely on oil production and entirely missed any mention at all of coal, gas or any other energy forms, and you've not clarified or changed this when I've previously called you on this. If you've now adapted your position to focus on energy rather than oil, then that's certainly an improvement in your position.

As a matter of observable fact, a significant proportion of my posts on this subject concern the mechanisms underpinning the connection between the matter/energy and financial systems, and the operations of the financial system. Another grouping concern the basic operations of thermodynamics, and the consequences of those operations. Others address the emergent properties of complex systems. Yet more address the operation of the global industrial manufacturing and agriculture systems and their dependence on hydrocarbon, and others explore, through the principles of industrial metabolism and full-lifecycle energy accounting, the dependence of so-called renewable technologies on the global industrial manufacturing system - and therefore hydrocarbon.

Your statement is one that would have to be true for you not to have made an error of summation of my position, yet is observably false.

Meanwhile - an improvement in what sense that illuminates whatever argument you are deploying here?

 

[free spirit]

As a matter of observable fact, a significant proportion concern the mechanisms underpinning the connection between the matter/energy and financial systems, and the operations of the financial system. Another grouping concern the the basic operations of thermodynamics. Others address the emergent properties of complex systems. Yet more address the operation of the global industrial manufacturing and agriculture systems and their dependence on hydrocarbon, and others explore the dependence of so-called renewable technologies on the global industrial manufacturing system - and therefore hydrocarbon.

Your statement is one that would have to be true for you not to have made an error of summation of my position, yet is observably false.

That would of course depend on what I meant by 'this subject' would it not?

you've mentioned oil 54 times on this thread vs 7 mentions of coal, 8 of gas, and 26 of hydrocarbons, and hardly any of the mentions of coal and gas have anything to do with the subject I was referring to anyway, and many of the hydrocarbon posts refer either to liquid hydrocarbons, or a form of hydrocarbon that's measured in barrels, which would be oil.

So the matters of observable fact would seem to support my statement.

If you have changed you position to recognise that energy not oil is the important metric here, then fair enough, but you've only done so after I pointed this out to you a while back, and you've not acknowledged that change of position since until this point, unless I've missed it.

btw, if you were referring to all hydrocarbons in this post, and not just oil, then it's just plain wrong as opposed to being an outside possibility of being right as was the case when I thought you were referring to oil alone. What exactly were you referring to in this post?

Ok. And you've worked out what 7% per annum conventional hydrocarbon depletion rate (that's about 40 million barrels a day in 10 years)

 

[free spirit]

Meanwhile - an improvement in what sense that illuminates whatever argument you are deploying here?

no, an improvement in your position from being based on an entirely false premise to being one that's at least using the right metric as a starting point.

would you not say that this is an improvement in your position?

 

[Falcon]

That would of course depend on what I meant by 'this subject' would it not?

I mean "this subject" in precisely the sense I meant when I started the thread with "this subject" as its title. In what sense do you think you mean it?

My point was, is, and shall remain that the global financial system is undergoing implosion, brought about by its critical dependence on an expanding energy supply which is now contracting, of which the dominant component - because of its density, fungibility, EROEI, transmutability, transportability, and unsubstitutability - is oil.

You are engaging in sophistry, and tying yourself in knots in the process, in a fruitless attempt to decouple the implosion from energy - presumably in the hope that you can assert the possibility of some political process in transcending physics.

 

[free spirit]

For anyone who's interested, the reason all of this is significant is that even assuming the worst of the peak oil hypothesis is right, and we're already on the downward curve for oil, gas and coal are at very very different points on their production curve, and the production of both is still increasing.

Gas - World marketed production climbed 2.8% to reach a new record level of 3299 bcm in 2011.
Coal - Total world coal production reached a record level of 7,678Mt in 2011, increasing by 6.6% over 2010. The average annual growth rate of coal since 1999 was 4.4%

http://www.cedigaz.org/surveys/NGW2012-SUMMARY.pdf
http://www.worldcoal.org/resources/coal-statistics/

So even if the biophysical economics theory falcon is now apparently espousing were to be entirely right, then it would be ridiculous to assert that the current global economic situation is caused by a lack of energy as Falcon appears to be in this post.

Events are unfolding exactly as biophysical economics predicts they will. That observation provides all the refutation I require.

The basic facts of the matter are that following a brief blip in 2008 that it's now clear was actually caused by the global downturn, and not the cause of it, global energy production is continuing to rise and can't therefore be given as being the cause of the global economic downturn, or in any way restricting the global economic recovery.


http://www.iea.org/publications/freepublications/publication/kwes.pdf


This is partly important because in the past, falcon has made repeated claims about the severity of the immediate threat from the reduced energy supply, even claiming that this means there's not sufficient energy available to invest the energy needed to power the transition to a much lower carbon, lower energy intensity economy. This is clearly bollocks.

There are other very good and urgent reasons why we should be doing everything possible to restrict our consumption of coal, oil and gas, specifically their impact on the climate, but that's an entirely different point to the one I'd just like to nail right now.

 

[free spirit]

I mean "this subject" in precisely the sense I meant when I started the thread with "this subject" as its title. In what sense do you think you mean it?

I meant it in terms of the subject immediately under discussion at the point I used it, rather than the entire subject area covered by this thread, which is a fairly broad topic.

My point was, is, and shall remain that the global financial system is undergoing implosion, brought about by its critical dependence on an expanding energy supply which is now contracting

funny you should post that precise sentence at the exact same time as I was refuting it.

The global energy supply is not contracting, so every other point you might make that's based on this false premise is obviously also false.

 

[free spirit]

btw

Oil, gas and coal account for 80%. Your use of the word "shortage" betrays no awareness of the NET energy of remaining reserves - they are physically abundant, but energetically collapsing, and I suspect you are not aware of the distinction.

yes I understand this.

If you can supply a graph showing the net energy available to the rest of the global economy after the energy costs of extraction/transport etc that backs up your position, then that might make for a more interesting discussion, and would at least also mean that you'd got some serious data to back up your position. Can you do that?

I have actually looked for that sort of data before myself, but not found it. I assume from the way you go on about this stuff that you must have that sort of data to support it, but I don't remember ever seeing you link to anything that would fit that description.

 

[elbows]

The basic facts of the matter are that following a brief blip in 2008 that it's now clear was actually caused by the global downturn, and not the cause of it, global energy production is continuing to rise and can't therefore be given as being the cause of the global economic downturn, or in any way restricting the global economic recovery.

As usual I disagree withe the way falcon attempts to describe the present situation, but you've gone too far the other way in my opinion.

For a start it was clear at the time what role the economic crisis was playing in energy demand & resulting supply, not something that only became clear much later. And I'm not sure even the likes of falcon tried to use such numbers to demonstrate a rapid decline in available supply, focus was quite correctly on the demand side during that period.

And it is not possible to make statements that the energy situation is in no way restricting the global economic recovery. Reasons for this include the price of certain forms of energy, and the moderating effect that modest supply increase rates have when nations are tempted to make giddy medium and long term growth projections. At a bare minimum these things have an impact on sentiment, which counts when it comes to economic matters, growth god worship etc.

Having said that, falcons statement about energy supply now being in a state of contraction is a very unsafe position to take at this particular point in time. I see only two ways that such a claim can have any credibility right now, as opposed to some future point we havent reached yet. The first is to make the claim only for a particular region or a particular energy type. The second is to exclude from the energy supply figures all the energy that is being used to maintain, invest in, etc all energy-related stuff, and to claim that the increase in the total sum of this exceeds the increase in energy supply that has occurred in the same period. I know of no studies and data that can safely and properly make that claim at this moment in time, and unless such stuff can be produced I see no way of bridging the gap that exists between Falcons claims and the few others of us who post in these sorts of threads. This is not to deny the range of factors that make various energy supply sources going forwards less attractive in terms of net energy gains than the easy and abundant fossil fuels the world was used to in the past, or the extreme challenge of having them offsetting depletion from traditional sources, but overstating these at the wrong moment is dishonest and misleading. General awareness & hyperbole about this stuff is no substitute for reliable data, especially for those who do not want to suffer a decline in credibility during years of unconventional oil & gas production increases.

Anyway as it relates to the global financial situation I believe a vital trick is being missed if we look only at the global totals. The economic story is about many imbalances, and some of these are regional imbalances. And the consequences, reaction and future estimates have some very interesting regional variations in them, and it might be sensible to look at this as how the correction to regional imbalances is going to happen. There are many aspects of this but I've run out of steam for now so I'll just give one example: those who wish to continue with a very simple, gloomy narrative about either the economy or energy should probably restrict their most dramatic of proclamations to europe for now, and possibly for years to come depending on exactly how the changing oil & gas picture in the US turns out over the rest of this decade.

 

[junglevip]

Meanwhile in Argentina:

 

[free spirit]

As usual I disagree withe the way falcon attempts to describe the present situation, but you've gone too far the other way in my opinion.

Anyway as it relates to the global financial situation I believe a vital trick is being missed if we look only at the global totals. The economic story is about many imbalances, and some of these are regional imbalances. And the consequences, reaction and future estimates have some very interesting regional variations in them, and it might be sensible to look at this as how the correction to regional imbalances is going to happen. There are many aspects of this but I've run out of steam for now so I'll just give one example: those who wish to continue with a very simple, gloomy narrative about either the economy or energy should probably restrict their most dramatic of proclamations to europe for now, and possibly for years to come depending on exactly how the changing oil & gas picture in the US turns out over the rest of this decade.

I'm trying to nail Falcon on one specific point that he's repeatedly made over the last 4-5 years, about the contraction of the global oil supply / energy supply, and his assertion that this is the cause of the global economic meltdown we're experiencing.

There are many other interesting points and nuances that are worth exploring, but not until this specific point has been clearly accepted as being refuted, as it's really the core point of everything else Falcon asserts.

The situation for the UK in particular is far different to the global outlook, but can we just nail the global situation first please? As Falcon always wriggles out of this by changing tack in the discussion to eg the imperative of dealing with global warming, which are all valid points, but then he time and again will return to the discussion making the (as far as I can tell) false claims about the contraction of the global energy supply and it's being the cause of the economic downturn.

This narrative of falcons is one that's gained significant currency in environmental circles, particularly among transition towns types (quite possibly partly as a result of falcons activities in promoting that viewpoint). It's a dangerously wrong narrative IMO, particularly from a climate change perspective, as it obscures the fact that coal will increasingly be used to fill the global energy gap if oil and / or gas output actually does start reducing or even just leveling off, with negative climate change consequences. He's also made statements previously about this global reduction in oil/energy availability being so dramatic and immediate that it negates any possibility of the energy being available to invest in the transition to a low carbon, low energy intensity, significantly renewables based economy.

Basically this hypothesis of his is central to his entire world view, so I'd just like to nail it before moving on to other aspects of the situation if you don't mind.

 

[free spirit]

For a start it was clear at the time what role the economic crisis was playing in energy demand & resulting supply, not something that only became clear much later. And I'm not sure even the likes of falcon tried to use such numbers to demonstrate a rapid decline in available supply, focus was quite correctly on the demand side during that period.

I will take this one though.

There were all manor of people leaping on the 2007/8 oil price spike as having been caused by the peak oil point having been reached, and that this spike in the oil price was also a significant factor in the global economic crash - I was among those who initially at least thought it a possibility, and I'm fairly sure you were too.

As it turned out, more detailed analysis proved that the rocketing price was a result of speculators flooding into the market and creating a massive speculative bubble, which itself was caused by those same speculators exiting the US property bubbles and the other related financial instruments they'd devised to take advantage of / fuel it, and looking for the next big bubble to inflate, which turned out to be Oil and food.

I'm still of the view that we are somewhere around the peak oil point, that high energy prices resulting from this are having a significant drag effect on the world economy, and that they did contribute to some small but significant extent to the 2008 collapse, but this is a hell of a long way from Falcons position on it.

 

[elbows]

Oh well now you are talking about the oil price rather than demand. I do not wish to oversimplify the price stuff either, mostly because I am very interested in its rise from around $30 to around $90, not just the abrupt spike at the end. Decline in the strength of the dollar needs to be taken into account when looking at this too, as does the increased gap between brent and WTI prices.

And I certainly dont think Gordon Brown made interesting noises about oil supply, had a conference etc, in that timeframe simply because of speculators affecting the price.

Even if we believe that Iraq oil production, alternative american oil etc are going to significantly ease the supply-demand pressures for some years to come, things got tight years before this stuff kicked in, and some demand destruction was the way the system dealt with that. I therefore cannot go as far as you have recently in removing oil from the narrative of those years & the economic crisis. That does not mean I share falcons narrative, and I have wasted considerable time in the past picking at his hyperbole and misuse of science. I do not believe there are sufficient people contributing to these threads at the moment to warrant an investment of much more time, especially as his stance is rather unlikely to shift and he recently demonstrated on a benefits thread how that stuff probably meshes with some of his other beliefs.

 

[free spirit]

Oh well now you are talking about the oil price rather than demand.

2 sides of the same coin.

I therefore cannot go as far as you have recently in removing oil from the narrative of those years & the economic crisis.

I'm still of the view that we are somewhere around the peak oil point, that high energy prices resulting from this are having a significant drag effect on the world economy, and that they did contribute to some small but significant extent to the 2008 collapse, but this is a hell of a long way from Falcons position on it.

I've not removed it, merely attempted to put it's part in the situation into proper perspective and counter Falcons unsupported hyperbole.

I've also been doing the same thing re biofuels and the 2008 food price spike. Both situations were around 90% attributable to speculators piling into the markets as the sought safe havens and fast profits as they exited the mortage backed security / banking and related sectors.

Both situations can be laid largely at the door of the regulators who removed the regulations prohibiting such speculation in these markets in the late 90s, and those who miss assign the blame for them are letting the true culprits off the hook, and in doing so, guaranteeing that no action will be taken to reign in the casino banking system that actually caused the issues, which really pisses me off tbh.

Some of the earlier rising oil prices you refer to undoubtedly did also feed into the problems in the US housing / mortgage markets as it reduced the incomes of those who were already over extended financially on their mortages, but it was the banking system and the idiotic way that they repackaged these mortages with all other mortgages to then sell on as AAA rated securities, that turned out to be nothing of the sort and took a relatively small problem and amplified it many times over throughout the entire global banking system that was the real cause of the problem. A bit like the situation with food / oil prices, yes there was a small underlying problem, but it's the deregulated casino banking system that managed to turn a small problem into a global crisis.

It's certainly not true that the availability of oil, or energy in itself intrinsically must inevitably have resulted in a global economic contraction at that point - certainly not of anything like the magnitude of the crash that happened, nor that it must inevitably result in continued economic contraction, we're just not in anything like that sort of restricted energy environment yet.

 

[elbows]

How did you come up with 90%?

 

[free spirit]

How did you come up with 90%?

reports I've read that put the percentages at around 85-90% of the spikes being attributable to speculation IIRC.

I'm not sure I'd be able to find the reports now mind, I was kind of hoping you'd already read them and wouldn't want me to try to find them to back up the number. Both reports were linked to from urban and discussed on here somewhere though I think, though maybe it was elsewhere on the web as you'd probably have seen them if it was on here.

 

[elbows]

They may have been here for all I know, I dont have a perfect memory. In any case I simply do not believe it is possible to determine a percentage like that, there are too many factors at work. And the speculation itself is not just a silly game people play that is entirely detached from reality or a consequence of people needing somewhere else to 'stick their money'. Oil price is affected by concerns ranging from security issues such as war or revolution in certain countries, to more general concerns about supply meeting demand. And since demand took a nosedive when the financial crisis hit, how am I supposed to separate that from any correction due to speculators being reigned in?

I could look at how much the price dropped once the economic poop hit the fan, but would also have to look at how much it has gradually risen again despite weak growth. Thats a story that certainly isnt done justice by throwing 90% figures around.

In any case I'm not sure quite how much it matters when it comes to oil, since we have since seen that the various managers of the world now also worry when the price goes too low, since they are aware of the sort of price & investment required to at least attempt to maintain production in future. The end of the era of cheap oil is not hotly disputed these days as best I can tell, and thats nothing to do with speculators. Although recent progress with things like US production are causing those with a position/agenda that requires optimism to make noises about relatively abundant oil again, many of the giddy predictions are now expressed in terms of the US returning to being an oil exporter one day, rather than predicting that cheap & easy oil will somehow return.

I reject your suggestion that there was a 'small underlying problem', and in my opinion you've done a disservice to your valid points by seeking to blow it up to this extent. Regardless, we will not all reach a consensus on whether the tail was wagging the dog or the other way around, and the realities have moved on since then anyway. Demand has ben altered by the financial crisis and the supply picture for the short-medium term has also changed, but to an extent not yet possible to properly judge, especially given the volatility of various things and the degree of uncertainty that exists in regards various production predictions.

My comments relate to oil rather than food or other commodities, since I am less knowledgable about that other stuff.

 

[free spirit]

In any case I simply do not believe it is possible to determine a percentage like that, there are too many factors at work. And the speculation itself is not just a silly game people play that is entirely detached from reality or a consequence of people needing somewhere else to 'stick their money'.

At a simplistic level if can be worked out by looking at what proportion of the increase in demand vs supply in the period of the spike was financial speculation based vs the proportion that was due to actual demand vs supply for the product itself by the end users / producers of that product.

Bear in mind here that I'm talking solely about the spike, not the background trend.

IIRC the report I'm referring to that I now can't find, also correlated those price spikes with previous situations of similar supply and demand pinch points before such unfettered speculation was permitted in those commodities to show what the true level of price increase would have been expected to be from supply and demand pressures alone.

And no the speculation isn't entirely detached from reality, which is why the figure I gave was 85-90% not 100%. What they do is to specifically seek out commodities with existing supply vs demand price pressures and then artificially amplify them by piling into the market with vast amounts of additional capital that artificially increases the differential between supply and demand and forces prices to sky rocket instead of just going up a bit. It's also no coincidence that this happened both in food and oil at the same time as there was a massive capital flight from the collapsing US property bubble.

The end of the era of cheap oil is not hotly disputed these days as best I can tell, and thats nothing to do with speculators.

Wtf makes you think I'm in anyway disputing that either?

To clarify, I am in no way disputing that the era of cheap oil is almost certainly over, and oil prices are going to continue to rise inexorably with or without the impact of speculators.

 

[elbows]

IIRC the report I'm referring to that I now can't find, also correlated those price spikes with previous situations of similar supply and demand pinch points before such unfettered speculation was permitted in those commodities to show what the true level of price increase would have been expected to be from supply and demand pressures alone.

And no the speculation isn't entirely detached from reality, which is why the figure I gave was 85-90% not 100%. What they do is to take existing price pressures and then artificially amplify them by piling into the market with vast amounts of additional capital that artificially increases the differential between supply and demand and forces prices to sky rocket instead of just going up a bit.

Well my point involves the fact that the oil price is seldom ever just about the supply & demand balance at a particular moment in time. Its also about assumptions and future expectations. Given that the finite nature of fossil fuels tend not to be properly taken account of when pricing the oil during times of abundant supply, and the idea that the oil market was in some denial about the emerging supply realities over the first part of this century, you might see why I am unwilling to write off the bulk of the sudden spike as simply being down to the kind of speculation you are talking about. What if a fair chunk of it was due to the reality cheque bouncing? An ugly correction that was as excessive as the 'good times' were complacent and understated when it came to energy price? Because I certainly wouldnt expect the mood music coming from the likes of Gordon Brown at the time, and the realisation that the era of cheap oil might really be over, to be expressed by a simple steady increase in price over time. I would expect volatility, as every concern, real or imagined, is amplified due to loss of faith and optimism. Magnified by the unwinding of the bullshit, artificial lows of the past now paid for by compensatory highs. And I dont see why this cannot be the trigger for wider economic woe, ie the collapse of other rather unsteady houses of cards that perhaps could only maintain their illusions when constructed on an cheap energy foundation that seemed to be free of major earthquakes? This is why I find it unlikely that I will ever be able to conclude with certainty that the economic crisis was mostly to do with these other systemic faults, and not very much about energy.

Wtf makes you think I'm in anyway disputing that either?

To clarify, I am in no way disputing that the era of cheap oil is almost certainly over, and oil prices are going to continue to rise inexorably with or without the impact of speculators.

Not everything I say in my posts is because I think you've recently expressed the opposite opinion. Its obvious that I use too many words when I start talking about this subject, and those particular sentiments were part of my attempt to round out where I stand on this stuff as a whole. But as per what I said above, I consider that the implications of the end of cheap oil played into the financial crisis, cannot be cleanly separated from it or precisely quantified in terms of how much they were to blame, not by coming up with a speculators responsibility percent or by any other means I can think of.

Perhaps by looking forwards rather than backwards I can make a similar point. One of the barriers to recovery and a resumption of god growth worship is energy supply. This isnt trivial to do since there is a more complex picture to try to follow than there was in the past, due to a divergence between the way things are going in different parts of the world. To give the most obvious example Europe compared to the USA, both in terms of supply and demand/recovery. And again it may be hard to separate energy factors from others such as currency, debt & stimulus issues. So perhaps commentary on this as the years fly by will prove as contentious as attempts have been to look at the start of the financial crisis and decide how much to attribute it to energy issues, but it wont stop me trying.

Given some of the ways I have tried to express this stuff, there may also be some hints in these posts as to why I can see intriguing parallels between eras of cheap energy, eras of cheap debt and cheap lies, and the correction to these once reality bit. Why is it that our levels of debt were suddenly considered unsustainable? That sustainability word again, a common bond between these themes, and this is no mere coincidence as far as Im concerned.

 

[free spirit]

The total value of the speculative investments in commodity indexes has increased an estimated tenfold in five years, from an estimated $15 billion in 2003, to around $200 billion by mid-2008.

[source = senate report]
just to put a little background context into this, which is basically what I was referring to when I talked about an influx of speculative capital into the commodities markets that directly led to / greatly exacerbated the price spikes in those markets.

And it's not about the size of those speculative investment funds vs the total commodity market value, it's about the size of those funds vs the margin between supply and demand in those commodities.

In grain futures terms this led to something like a 350-400% increase in the volume of certain grain futures trades being made between 2002-2007.

In terms of oil, these figures are relevant IMO

Annual oil trading volumes (expressed on a notional underlying basis) have therefore gone from approximately 1.51 times total annual
global consumption to approximately 8.45 times in 15 years.

so around 89% of all oil trades were speculation based vs 11% actually being involved directly in the supply and purchase of the oil itself, compared to around 33% vs 67% in the early 90s, with the majority of that increase taking place in the years immediately running up to the 2008 price spike.

Anyway, I'm not trying to defend the 90% figure as being entirely accurate, I'm working from memory here, and i doubt it's possible to be particularly accurate about it anyway, hence the word 'about' that I used preceding the figure. That probably is a top end figure, but I'm confident that without that massively increased level of speculation in the market at that point, that the price spikes would have been far lower than they were - almost certainly no more than half of what they were, there's just nothing in the supply and demand situation for either commodity at that point that directly justified such a massive price spike, and it can't be coincidental that this occured at a point where $185 billion of speculative finance had piled into the commodities market, and the volume of speculative trades had soared in the same period.

 

[Falcon]

So even if the biophysical economics theory falcon is now apparently espousing were to be entirely right, then it would be ridiculous to assert that the current global economic situation is caused by a lack of energy as Falcon appears to be in this post.

In a nutshell: I assert that the global financial system's implosion is beginning. Moreover, I am asserting a specific cause of that implosion - the interaction between the financial system's dependency on physical growth to sustain its compounding debt mechanism, and the arrival at physical and economic limits which now prevent continued growth. Since the compounding debt mechanism does not permit equilibrium, and since growth cannot be sustained, the system must contract. Introducing the observation that the global financial and economic systems are emergent properties of a formally complex system, I make the further claim that, as a phase transition of a complex system exhibiting large positive feedback mechanisms, such contraction will be discontinuous - an 'implosion'.

There are therefore several arguments here: the growth dependency of the financial system; the requirement for correlation between the financial and the matter/energy systems; the existence and nature of physical and economic limits; the complex behaviour of the financial system under the effect of limitation. I have made all of them on these forums in various places, the forum provides tools that make them readily accessible, and I do not propose rehearsing them here.

However, it ought to be clear to those same interested people that your reduction of my argument to it being caused by "a lack of energy" is a self serving and gross straw man argument.

In your attack of your straw man version of my argument, you assert statistics showing apparent growth in physical energy volumes. Yet you trip up there too, failing to note

(1) the net energy trend, and the fact that EROEI at the margin has collapsed from 100:1 to less than 5:1 (the ratio necessary to sustain economic activity). Declining volumes of that all important category - conventional liquid hydrocarbon - have been offset since 2006 in only two significant forms: liquidising poor people's lunches to generate a product which consumes more energy in manufacture (in the form of agricultural energy inputs) than it yields on combustion, funded by tax incentives which are in turn funded by - you guessed it - synthesised debt a.k.a "printed money"; and a bizarre menagerie of fluids, such as refinery precursor dispersed in solvent a.k.a "tar sand oil", collectively referred to as "unconventional oil" and having the common properties of being unobtainable, unaffordable, small in mobilisable volume and near-threshold and declining EROEI.

(2) the net price trend, the fact that the oil price is now exceeds the price ($90) at which economic growth is extinguished, and the fact that the gas price is reverting to a point which makes the recent investments in fractured gas facilities insolvent and its consumption unaffordable in recessional economies.

(3) the global unfunded debt trend. As a contributor to the latter, you cite sub-economic gas volumes - provided most recently by capital-intensive, low yield fracturing methods - without noting that they are sustained only by a rising synthetic debt based Ponzi scheme in which the synthetic debt is secured on the supposed volumes the debt is claimed to mobilise estimated from fraudulent decline rates.

The observation that physical energy volumes are now being mobilised under such conditions is not refutation of the claim that the financial system is imploding - it's *proof*, and you don't even realise it.

The economic and financial meaning of physical volumes are meaningless without these data, yet you claim that:

"The basic facts of the matter are that following a brief blip in 2008 that it's now clear was actually caused by the global downturn, and not the cause of it, global energy production is continuing to rise"

- an eyewateringly facile analysis.

Finally, your argument commits suicide by noting:

"There are other very good and urgent reasons why we should be doing everything possible to restrict our consumption of coal, oil and gas, specifically their impact on the climate, but that's an entirely different point".

The "very good and urgent reason" you allude to is the extinction of our species. The necessary synthetic debt based capital investments to take us beyond the critical climate change threshold, principally in the very coal generation capacity you crow about in apparent refutation of my argument, have already been entrained (IEA 2008). Were we to repudiate that debt, scrap that capacity, and price hydrocarbon today at the point necessary to limit emissions below that threshold, the financial system and the economic system dependent on the energy would immediately collapse (most stock markets, for example, revert to junk status when carbon is properly priced - see "Carbon Bubble"). If we don't, then that same event will also collapse our financial system.

It's not an entirely different point. It is a point which is fundamental to my argument - that we have arrived at a point of hard physical limit, and that hard limit is inducing the collapse of our financial system - and leaves you with none.

 

[teqniq]

This has as much to do with the parlous state of affairs as any energy crisis:

Bank rate-fixing scandals reveal the rotten heart of capitalism

 

[Falcon]

I have actually looked for that sort of data before myself, but not found it. I assume from the way you go on about this stuff that you must have that sort of data to support it, but I don't remember ever seeing you link to anything that would fit that description.

It's an emerging and, at the moment, fairly academic (in the positive sense) subject. The reason I engage in debate in forums such as these is to bring its principles to a wider audience.

Try:

Cleveland, Cutler J., Robert Costanza, and CAS A S Hall. 1984. “Energy and the US Economy: a Biophysical Perspective.” Science 225 (4665): 890–897.

Ayres, Robert U. 1998. “Eco-Thermodynamics: Economics and the Second Law.” Ecological Economics 26 (2) (August): 189–209. doi:10.1016/S0921-8009(97)00101-8.

Ayres, Robert U, J.C.J.M. Van Den Bergh, and J.M. Gowdy. 1998. “Viewpoint: Weak Versus Strong Sustainability.”

Cleveland, Cutler J., Robert K. Kaufmann, and David Stern. 2000. “Aggregation and the Role of Energy in the Economy.” Ecological Economics 32 (2): 301–317. doi:doi: 10.1016/S0921-8009(99)00113-5.

Hall, CAS A S, D Lindenberger, R Kümmel, T Kroeger, and W Eichhorn. 2001. “The Need to Reintegrate the Natural Sciences with Economics.” BioScience 51 (8): 663–673.

Cleveland, Cutler J. 2003. “Biophysical Constraints to Economic Growth.” In-Chief. Encyclopedia of Life Support Systems.

Hall, CAS A S, and KA Klitgaard. 2006. “The Need for a New, Biophysical-Based Paradigm in Economics for the Second Half of the Age of Oil.” International Journal of Transdisciplinary Research 1 (1): 4–22.
Hall, CAS A S, and John W Day. 2009. “Revisiting the Limits to Growth After Peak Oil.” American Scientist 97 (3).

Hall, CAS A S, S Balogh, and DJR Murphy. 2009. “What Is the Minimum EROI That a Sustainable Society Must Have?.” Energies 2 (1): 25–47.

de Almeida, Pedro, and Pedro D. Silva. 2009. “The Peak of Oil Production—Timings and Market Recognition.” Energy Policy 37 (4): 1267–1276. doi:doi: 10.1016/j.enpol.2008.11.016.

Haberl, Helmut, Marina Fischer-Kowalski, Fridolin Krausmann, J Martinez-Alier, and V Winiwarter. 2009. “A Socio-Metabolic Transition Towards Sustainability? Challenges for Another Great Transformation.” Sustainable Development 9999 (9999). doi:10.1002/sd.410.

Sorrell, Steve, Jamie Speirs, Roger W Bentley, Adam Brandt, and Richard Miller. 2010. “Global Oil Depletion: a Review of the Evidence.” Energy Policy 38 (9) (May 20): 5290–5295. doi:doi: 10.1016/j.enpol.2010.04.046.

 

[free spirit]

It's an emerging and, at the moment, fairly academic (in the positive sense) subject. The reason I engage in debate in forums such as these is to bring its principles to a wider audience.

so to answer my quetion - you are unable to quote any actual figures to support your POV on this.

I didn't ask for a list of academic articles on EROI, I've been there and done that. I'm specifically asking if you have any actual real world figures on net energy that show it to be in decline, which would be the only possible way that your position could be supported by the facts on the ground.

Do you have those figures?

If not then you must logically be acting on little more than an educated guess about this, in which case you'd do well to actually make this clear in your posts instead of claiming such things as facts.

 

[free spirit]

(1) the net energy trend, and the fact that EROEI at the margin has collapsed from 100:1 to less than 5:1 (the ratio necessary to sustain economic activity). Declining volumes of that all important category - conventional liquid hydrocarbon - have been offset since 2006 in only two significant forms: liquidising poor people's lunches to generate a product which consumes more energy in manufacture (in the form of agricultural energy inputs) than it yields on combustion, funded by tax incentives which are in turn funded by - you guessed it - synthesised debt a.k.a "printed money"; and a bizarre menagerie of fluids, such as refinery precursor dispersed in solvent a.k.a "tar sand oil", collectively referred to as "unconventional oil" and having the common properties of being unobtainable, unaffordable, small in mobilisable volume and near-threshold and declining EROEI.

No, actually I covered that here, where I provided you with the opportunity to prove your point by supplying some actual figures instead of unsupported rhetoric. The fact you've failed to supply any figures to support your position on this speaks volumes.

If you can supply a graph showing the net energy available to the rest of the global economy after the energy costs of extraction/transport etc that backs up your position, then that might make for a more interesting discussion, and would at least also mean that you'd got some serious data to back up your position. Can you do that?

(2) the net price trend, the fact that the oil price is now exceeds the price ($90) at which economic growth is extinguished, and the fact that the gas price is reverting to a point which makes the recent investments in fractured gas facilities insolvent and its consumption unaffordable in recessional economies.

You really do like mixing up your facts with hyopthesis don't you. It's not a fact at all that economic growth is extinguished at $90 a barrel of oil, this may well be a hypothesis you adhere to, but it's not even remotely approaching a fact. Personally I give that sort of statement the same level of credence as I gave to those arguing that a minimum wage would extinguish economic growth, ie very little.

(3) the global unfunded debt trend. As a contributor to the latter, you cite sub-economic gas volumes - provided most recently by capital-intensive, low yield fracturing methods - without noting that they are sustained only by a rising synthetic debt based Ponzi scheme in which the synthetic debt is secured on the supposed volumes the debt is claimed to mobilise estimated from fraudulent decline rates.

so you say (and it may or may not prove to be the case), but the point I was making was merely that you were factually wrong to assert that energy production was contracting when it's actually rising. I gave you the get out clause to provide the figures for net energy if this was what you had actually meant to refer to, but you've failed to supply any such figures, just pointed to a largely irrelevant list of generic articles on the subject.

The observation that physical energy volumes are now being mobilised under such conditions is not refutation of the claim that the financial system is imploding - it's *proof*, and you don't even realise it.

post up figures to support your position or stfu. You're sounding more and more like a 911 troofer every time you post unsupported crap like this, yet you also make great claims to being an academic authority on the subject as well. If you are then please start acting like it and support your position with some sodding data for a change.

The "very good and urgent reason" you allude to is the extinction of our species. The necessary synthetic debt based capital investments to take us beyond the critical climate change threshold, principally in the very coal generation capacity you crow about in apparent refutation of my argument, have already been entrained (IEA 2008). Were we to repudiate that debt, scrap that capacity, and price hydrocarbon today at the point necessary to limit emissions below that threshold, the financial system and the economic system dependent on the energy would immediately collapse (most stock markets, for example, revert to junk status when carbon is properly priced - see "Carbon Bubble"). If we don't, then that same event will also collapse our financial system.

It's not an entirely different point. It is a point which is fundamental to my argument - that we have arrived at a point of hard physical limit, and that hard limit is inducing the collapse of our financial system - and leaves you with none.

1 - I need no lectures from a long time oil industry lacky like you on climate change.

2 - You always do this, you make one claim about actual energy availability declining due to peak oil, then when you're supplied with figures that show this not to be the case you attempt to side step it by referring to the imperative of climate change that means that the oil, coal, gas must be left in the ground... but you do this without first acknowledging that your original point was wrong. This is a dishonest method of debating IMO, which is why I specifically wanted to stick to the original point until you've accepted you were wrong on it, or supplied figures that support your position. Once you do this, then and only then is it worthwhile having a discussion about the limits that should be imposed by climate change measures - it's a very worthwhile conversation to have, but I won't have it with someone who's using it to distract from the fact that the main basis of their line of argument is actually unsupported by any evidence.

so, do you have any figures to support your argument or not?