Showing posts with label EROEI. Show all posts
Showing posts with label EROEI. Show all posts

Tuesday, 29 September 2020

Collapse, you say? Part 2: Inputs and Outputs

Waves breaking along the Lake Huron shore—and this on a relatively quiet day.

The title of this series of posts comes from the typical reaction you get when suggesting that our civiiization might be collapsing, "Collapse you say, surely not!" In my last post I said that I am convinced it is already happening or at least will happen at some point soon. Then I went on to explain what I mean by collapse—the process by which a civilization declines in its ability to provide the necessities of life to its members, the end result being that people are forced to fend for themselves or perish.

It seems to me that this is in fact happening today—that for all but a tiny minority at the "top", things are getting continually worse. The how and why of this process is the subject of this post and the ones that follow it.

The means of production and distribution that provide us with the necessities of life in modern industrial civilization require certain inputs and produce certain outputs. Today I want to the look at the problems posed in acquiring those inputs and disposing of those outputs.

I would guess that it's clear that by inputs I mean the energy and materials required to make the things we need. But what I mean by outputs may be less clear. I am not referring to the goods that are produced from the inputs, but the waste products produced in the process and the garbage that is left over when we are done using those goods.

But why should these inputs and outputs constitute problems?

Conventional thinking has our civilization in a box, separate from our planet and its ecosphere. The inputs (energy and materials) our civilization uses come from sources that are seen as essentially infinite and the outputs (waste heat and waste materials) are discharged into sinks that are also seen as being essentially infinite in size. Given all that, no reason is seen for progress—economic growth in this context—not continuing for the foreseeable future. This way of looking at things typifies some of the blind spots of modern thinking on economics and business.

Figure 1

Figure 1 illustrates what I am talking about. As long as there were relatively few people on our planet, and they weren't consuming excessively, it's easy to see how we might have looked at things this way. But now that we are well on our way to filling up the planet—or more likely well beyond that point—this is no longer valid. And sure, many people are aware that this is a very unrealistic picture, but the people who are running things, even those who verbally acknowledge the realities, continue to act as if there are no limits built into the system. In a future post we'll look at why this is so, but for now it suffices to say that it truly is the case.

Figure 2

Figure 2 is a different diagram, which provides a more realistic depiction of things as they exist today.

First of all, our civilization exists on a finite planet, entirely within that planet's ecosphere, with no real separation from it (note the dashed border). Our inputs are taken from that finite source and our wastes are discharged back into that same finite space, used as a sink for waste heat and all our material wastes. This has some truly nasty consequences.

Inputs and outputs come in two forms: energy and materials. Energy flows from more concentrated to less concentrated forms, and regardless of where it comes from, is eventually radiated away from the planet as waste heat. Because of this, at any one level, we only get to use energy once. Materials stay around and can be reused, but generally change from more organized forms to less organized, (and less useful) forms as time passes.

For the planet itself, on the relatively short timescales we are considering, the only significant inputs and outputs are in the form of energy—sunlight in and waste heat out. This means that the planet isn't a closed system and incoming energy can be used to arrange matter into more complex forms, converting the energy used to a less concentrated form in the process. That's the good news—the rest of the news is bad.

Outputs

Let's look at outputs first, since that will make it easier to understand some of the problems with inputs. As I said, the outputs I am talking about are the wastes from processes within our society, and the garbage left over when we are done with the products of those processes. We simply throw these things away, but the trouble is that there is no such place as "away". The sinks into which we dispose of wastes are part of the very same environment where we get our inputs from, so this is much like shitting in our own nest. And in a great many cases it is not necessary at all. Many of these end products could, with relatively little effort, be fed back into the processes, and not treated as "wastes" at all.

That we haven't "circularized" our use of materials is a really bad sign. Why we continue to do this is inherent to the internal workings of our civilization and I'll go into the details of that in a future post. For now it is sufficient to understand that as long as that civilization exists in its present form, it's outputs will continue to be a problem.

There are a great many different types of pollution, but for our purposes today I'll concentrate on two particular type of waste—carbon dioxide and methane.

Carbon dioxide (CO2) is produced in the burning of fossil fuels and biomass, and in the processes we use to make things like steel and concrete, essential building materials of our civilization. CO2 is a major contributor to the greenhouse effect and consequently climate change, and is also the cause of ocean acidification.

Methane (natural gas, CH4) has been touted as a replacement for coal and oil since it gives off less (but not zero) CO2 when burned. But it is an even more potent greenhouse gas than CO2. Between the wellhead and where it is used a great deal of methane leaks into the atmosphere—probably enough to overshadow any reduction in CO2 released by burning natural gas instead of other fossil fuels. Methane is also produced during the decay of organic matter and by the digestive systems of many animals. Warming due to climate change is releasing methane currently trapped in permafrost and in methane clathrate hydrates at the bottom of the Arctic Ocean, further intensifying the warming process.

Ocean acidification the lesser known evil twin of climate change, occurs when CO2 is dissolved in water. An estimated 30–40% of the carbon dioxide from human activity released into the atmosphere dissolves into oceans, rivers and lakes. Some of it reacts with the water to form carbonic acid. Some of the resulting carbonic acid molecules dissociate into a bicarbonate ion and a hydrogen ion, thus increasing ocean acidity (H+ ion concentration).

Increasing acidity is thought to have a range of potentially harmful consequences for marine organisms such as depressing metabolic rates and immune responses in some organisms and causing coral bleaching. A net decrease in the amount of carbonate ions available may make it more difficult for marine calcifying organisms, such as coral and some plankton, to form biogenic calcium carbonate, and such structures become vulnerable to dissolution. Ongoing acidification of the oceans may threaten food chains linked with the oceans.

(Thanks to Wikipedia for the last two paragraphs.)

These are food chains that we sit at the top of, with many people, especially in poorer nations, relying heavily on seafood for protein.

Climate change has been in the news a lot lately, with a wide range of people expressing concern about its negative effects on our future. If, despite this, you are still a doubter or denier, you're in the wrong place on the internet, and need not bother leaving any comments. In my experience, if you scratch a climate change denier, you will find beneath the surface a rich person who is worried about losing their privilege.

So, climate change is real and it is driven by increases in greenhouse gases (CO2 and CH4 among others) in the atmosphere which cause the planet to retain more of the sun's heat. It has also been called "global warming", since it causes the overall average temperature of the planet to going up. The high latitudes in particular are already experiencing temperature increases. Eventually this is going to cause enough melting of glaciers to make for a significant increase in sea level.

In the meantime, climate change is also causing more frequent and heavier storms, which combined with even small increases in sea level, are causing a lot of damage along the oceans' shores. Such storms are also causing more frequent and serious flooding of many rivers.

Climate change is also intensifying droughts in many other areas, and in some of those areas this is leading to wild fires.

How does all this tie into collapse?

Storm surges, high winds, river flooding and wild fires are doing a great deal of damage to human settlements, at a time when our economy is struggling and the added cost of rebuilding can scarcely be afforded. Especially since we tend to rebuild in the same areas, leaving rebuilt settlements just as exposed as they were before.

The effects of climate change on agriculture are even more serious. In the ten or so millennia since we started practicing agriculture the climate on this planet has been particularly friendly to that endeavour. Farmers have been able to count on reliable temperatures and rainfall. This is now starting to change and as the rate of that change picks up over the coming decades, it is going to be very challenging to adapt to. This at a time when we are struggling to keep up to the demands of a growing and ever more affluent population for food and when there is little left in the way of wilderness to expand our farms into.

Even if climate change was the only problem we faced, it is serious enough to place the continued survival of our species into question. We are facing, to quote Jem Bendell, "inevitable collapse, probable catastrophe and possible extinction."

The threat of climate change is serious enough that most people who worry about such things at all are concentrating on it alone. Unfortunately, they are largely ignoring looming problems with the inputs required by our civilization.

Inputs

The problem with inputs is "resource depletion". We live on a finite planet and we can really access only a small part of it—the lower part of the atmosphere, the oceans and a few thousand feet at the top of the crust. Within that volume, there are finite supplies of the resources that we rely on.

Several problems result from the way we access and use those resources.

We generally access the lowest hanging fruit first. This means that the most convenient, easily accessible and highest quality resources get used up first. That makes sense as far as it goes, but it means as time goes by we are forced to use less easily accessible and lower quality resources. This takes more energy and more complex equipment, and is more costly.

Many of the resources we rely on are non-renewable—there is a finite amount of them on this planet, and "they" aren't making any more. Further, we use them in very wasteful ways. It is important to be aware here that, even at best, there is always some irreducible waste in our use of any resource, but currently we tend to make things, use them once and throw them "away". This means that depletion of many resources is happening thousands of times more quickly than it really needs to, and as I said in the section on outputs, that waste is accumulating in the environment.

Some of the resources we use are renewable, but the processes by which they are renewed work at a limited rate. We are using many of these so called renewable resources at greater than their replacement rate, and so they too are becoming depleted.

Conventional economists will tell you that when a resource starts to get rare, its price goes up, encouraging the development of substitutes. This is true to some limited extent, but many of the most critical resources simply have no viable substitutes. Not unless we are willing to make significant and unwelcome changes to the way we live.

At this point, we should look at some specific resources and the unique problems each of them presents.

Energy, Fossil fuels

Despite what conventional economists would tell you, energy (not money) is actually the keystone resource for our economy. Nothing happens inside our civilization without energy as an input and degraded energy (waste heat) as an output. Money functions as a medium of exchange, a unit of account and a store of value, all of which is very useful, but energy is what makes the economy function and grow. About 80% of that energy currently comes from fossil fuels (primarily coal, oil and natural gas). The remaining 20% comes from sources that we can only access using equipment that is both made using fossil fuels and powered by them.

So, our civilization is utterly dependent on having a cheap and abundant supply of fossil fuels. "Peak Oil" enthusiasts have been saying for decades now that we'll soon run out of oil and things will come to a grinding halt. In fact, though, there are still large quantities of hydrocarbons to be found in the earth's crust, so you might ask, "What's the problem?"

Well, there are two problems with continuing to burn fossil fuels.

One is the consequences for the climate of burning hydrocarbons and releasing ever larger amounts of carbon dioxide into the atmosphere. This is a very serious problem, for which we are having trouble finding and implementing any sort of solution.

The other problem, I'll be calling it "the surplus energy problem", is in many ways more complex and more serious.

Because we use various forms of technology to access energy, many people think that technology makes energy, and with improved technology we can always make more energy. Or, in this case, access the difficult to access hydrocarbons that currently remain in the ground. But in fact, the opposite is true—technology uses energy and won't work without it.

The energy that remains after we've powered the processes used to acquire that energy is referred to as "surplus energy." For instance, the technology used to drill oil wells and pump crude oil out of the ground uses energy. Back in the day, it used to take the energy equivalent of about one barrel of oil to get 100 barrels of oil out of the ground, leaving a surplus energy equivalent to 99 barrels of oil. This is usually expressed as "Energy Returned on Energy Invested" (EROEI), in this case 100/1, giving an EROEI of 100. Another way of looking at this is to talk about the Energy Cost of Energy (ECoE). In this case that would be 1/100, or 1%. Note that both these numbers are just bare numbers without units, and most significantly without a dollar sign in front of them. The "money cost" of energy is another thing entirely and since it is influenced by speculation on future supply and by fluctuations in demand (as we have seen in 2020 during the pandemic) it is not a reliable indicator of the actual cost of energy in energy terms, or the future availability of energy.

Conventional oil discoveries have not been keeping up with depletion for some time and our use of conventional oil actually peaked in the last few years. So we have been forced to switch to lower quality and more difficult to access sources. Conventional oil today has an EROEI ranging from 10 to 30. Tight oil and gas (from fracking), heavy oil and the "dilbit" (diluted bitumen) made from tar sands all have EROEIs less than 5, or ECoEs of 20% or greater.

"So what?" you might say. As long as the net amount of energy available is sufficient to power our civilization, what's the problem? Well, it's not just the amount of energy available from any particular source that really counts, but the EROEI. Or more precisely the weighted average of the EROEIs of all the various energy sources an economy uses. That number needs to be around 15 or more to keep that economy growing.

When the average EROEI goes below 15, growth slows and eventually stops and it becomes difficult to raise enough capital to even maintain existing infrastructure. Why our civilization needs to grow is a topic for another day, but it certainly does. This is what most people are missing about energy. Yes, a country can use debt to finance access to low EROEI energy resources in order to keep the economy going. But only for a while, until its economy contracts to the point where things begin to fall apart. This is certainly the case in the US. Fracking has made sufficient energy available, at what seems like a reasonable dollar price, but the real economy is mysteriously contracting, and debt is continually growing. Both economists and politicians, while putting on a brave face, are hard pressed to do anything about it, because they don't understand the surplus energy problem.

As we saw in the section on "Outputs", there are pressing reasons not to continue burning fossil fuels. But even if that were not the case, it would not be possible to continue running a growth based industrial civilization on the low EROEI fossil energy sources now available to us. For this reason alone, collapse seems like a sure thing to me, and I would say it has been underway since oil production in the continental U.S. peaked in the early 1970s.

But, you may say, what about renewable energy sources? Like non-conventional fossil fuels there are large amounts of energy available from sources like hydro, biomass, wind, solar and so forth. A great many people today believe that renewables can replace fossil fuels and solve both our surplus energy and climate change problems. In fact it has become very unpopular to challenge that idea, but I am afraid I must do just that.

This post ened up at over 6000 words long, enough to try the patience of even my most loyal readers. So I have split it in two at this point, leaving the second half for my next post, which will pick up from here and cover renewable energy sources, ecosystem services and fossil water.


Links to the rest of this series of posts, Collapse, you say?

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Wednesday, 17 July 2019

Responding to Collapse, Part 10: the future of the power grid

Sunset over Lake Huron

In this series of posts I've been advising my readers that moving to a small town remote from large population centres, in an area that can supply the basic necessities of water, food and firewood, is a prudent way of coping with the ongoing collapse of BAU (Business as Usual). With the caveat that some advance preparation will be needed to ensure successful use of those resources.

In the next few posts in this series, we'll look at some of the details of how BAU will collapse and how you can prepare to weather that collapse. In the immediate future infrastructure breakdowns will get more frequent and longer until finally it's no longer practical to rely on BAU for the necessities of life. It seems to me that supplies of electrical power, diesel fuel and money will be at the heart of many of the troubles that lie ahead, so I'll concentrate on those areas.

And while I'll mainly be talking about infrastructure breakdowns we should remember that interruptions of service can occur for a couple of other reasons.

The first has to do with the way our economy is organized and how we choose to provide vital services such as power, water, sewers, housing, food, communications, transportation, education, health care and so forth.

Today most of the world's nations are capitalistic, with a distinct neo-liberal flavour. Under such conditions, companies are operated to make a profit and other goals, such as the public good, are strictly secondary. So when a "for profit" company finds its business becoming less profitable they must find ways to increase their charges or to supply less for the same fees or to quit supplying customers in less profitable areas altogether. And if they don't do those things they will either be bought out by companies that will, or they'll suffer bankruptcy. If there doesn't appear to be much chance that another company could make a good profit in the same business then it will never be reestablished. And if the public was relying on that company to provide vital services, then we are just out of luck.

Of course there are other ways of organizing an economy, and in particular other ways of setting up companies to provide infrastructure services. But the argument is often made that for profit companies operating in a free market are more efficient. I would question if there has ever been any such thing as a free market, and whether it would function as predicted in any case. Efficiency in this case is defined as the amount of return on share holders' investments, and has nothing to do with providing a high quality and reliable service to your customers.

But perhaps we should set all that aside in order to focus on the really critical thing, which is the difference between the way such companies work in growing economies versus contracting economies. In a growing economy it is relatively easy to make a profit and do so while supplying a service for the public good. But when the economy begins to contract that becomes more and more difficult for "for profit" companies.

Governments can set up non-profit organizations whose primary goal is to provide services for the public good and they are likely to last longer in a contracting economy. In my experience, contrary to typical capitalist propaganda, they can also be quite efficient. But as the economy contracts so will tax revenues and eventually governments will have to cut back on the services they provide. With good planning though, they can do this in a controlled manner with lots of advanced warning, and give people time to adapt to the situation.

As the economy gets even weaker, co-operatives organized by the people who need the services hold considerable promise. I'll have more to say about this over the next few posts.

The second thing is that if you rely on BAU to make a living, you will find that your own economic circumstances are declining. When you can no longer afford the services you have come to rely on, you'll have find ways to provide them for yourself, and in the process learn how to get by with less, like it or not.

I can consume along with the best of them, and there are certainly all kinds of things that it would be useful to have as we try to become more self reliant. But don't worry too much if you can't afford some of the shiny toys I'll be mentioning in future posts. As well trained consumers we may feel that buying things must be the solution to the problems that face us, but it isn't. Actually, there is no solution to the fix the world is in at the moment, and the best we can do is adapt to the changing conditions. Part of that is learning to get by while consuming less. This is hard for me and I'll bet it's hard for you too. That's why I talked first about preparing by become part of your new community (in posts 7 and 8 of this series), rather that the less important preparations that involve accumulating "stuff".

Back 2012, when I started this blog, the authorities recommended that you be prepared to weather emergencies lasting for as long as three days (72 hours). They were basically saying, "don't rely on us to be there immediately—it may take as long as 72 hours before help arrives." In the meantime, this has been changed to two weeks in some areas. Is emergency response capability declining, or are they expecting more lengthy and severe emergencies? I suspect both. Of course serious "preppers" are laughing at this—they'd recommend that you have supplies on hand for a year or two. I don't disagree, but you have to start somewhere. And as collapse deepens those longer intervals to prepare for will come to seem more reasonable.


Power Outages

Power outages will probably be the most frequent infrastructure failure you'll have to cope with. Short outages have relatively minor impacts, but because electricity is at the heart of so much that goes on in modern civilization, as outages stretch out they start to effect more and more things.

Eventually, it seems very likely that the power grid in many, if not most, areas will cease to function. I encounter two different responses to this idea. Many people cannot conceive that their 24 hour a day, essentially infinite supply of power could every come to an end. Others are fixated on the idea of a sudden and hard crash which will bring the whole of industrial civilization to an end, including the power grid.

I'm somewhere in between, holding what I think is a more detailed and nuanced opinion. Most of the rest of this post is going to be spent talking about how the slow decline of the power grid will go, leaving the responses I would recommend for the next post.

Power outages can be as simple as a utility pole getting knocked over during a traffic accident, to as complex as the grid failures that happened in northeastern North America in 1965 and 2003. And to take it even further, EMPs (electromagnetic pulses) from nuclear weapons or coronal mass ejections (solar flares) can do huge damage to electrical girds which may be very hard to recover from. But I think some of the most common and serious problems with the grid will come from three specific areas:

  • The first is equipment failure due to age and/or lack of maintenance, aggravated by overloads such as air conditioning load during summer heat waves. As the economy continues to contract power companies are going to find themselves short of capital and less able to invest in their own systems, leaving those systems more susceptible to failure. /li>
  • The second will be damage due to storms that are growing more frequent and more intense due to climate change—things like high winds, tornados and ice storms in particular. Lengthy outages will happen when there are widespread weather related problems combined with shortages of spare parts and limited manpower to install them. Those latter two problems will come mainly from cash strapped utilities trying to save money.
  • The third is sabotage. The grid is very exposed to a saboteur who knows what he is doing, and because of its geographically diffuse nature, very hard to secure. As collapse intensifies, there will be increased civil unrest—more angry people looking for easy targets that symbolize the establishment. The grid is certainly one such target.

Of course, these concerns apply to the grid as it exists today, using conventional generation. It seems there is going to be a serious attempt to switch from fossil fuels to renewable energy, primarily solar and wind. Those who are pushing for a "Green New Deal" are telling people that we can use wind and solar to replace fossil fuels, and that in the process more jobs will be created and we'll actually end up more prosperous. This is a very unrealistic dream and just off the top of my head I can think of four serious problems with it:

  1. What solar and wind produce is electricity. But electricity supplies only 18 to 20% of our current energy use. Most of the rest comes directly from coal, oil and natural gas, and those fuels are used in ways that will be difficult, if not outright impossible, to replace with electricity.

    The main issue is that a battery is not nearly as effective a way to store energy as a tank of diesel fuel. And there are definite physical limitations on how much better batteries can get— we can probably improve them by a factor of two, but that's about it. Despite what we keep hearing in the news, it simply isn't practical to use batteries to power airplanes or long distance heavy transport by road, rail or sea. The quantity of batteries needed, and the size and weight of those batteries, is the problem.

    There are many industrial processes that use coal or natural gas for heat. Replacing those fuels with electricity may be theoretically possible but we haven't, for the most part, even started to develop ways to do so, much less begun to implement them.

  2. Phasing out fossil fuels would require using renewables to supply much larger quantities of electricity than we are currently using. But there are fundamental problems with using renewables to produce even part of the comparatively small amount of electricity we use now.

    One aspect of running a power grid that the general public is largely unaware of is that generation must be matched exactly to the load. Since load is something the grid operator cannot control to any great extent, generation that is "dispatchable"—that can be turned on and off on demand and ramped up and down as required—is very important. Conventional generation is dispatchable to varying degrees but renewable energy sources such as solar and wind are intermittent and for the most part not under the control of the grid operator—the very opposite of dispatchable. As such, renewables only exacerbate the problems of running a grid, especially given the lack of feasible large scale storage technologies. Yes, I know there are a number of storage technologies available but none of them are economical to use on the scale that would be required for use in a power grid with intermittent renewable energy sources like solar and wind.

    The concept of a "smart grid" which gives greater control of both generation and load offers hope of addressing these problems to some minor degree, but only at the price of adding complexity to the system. And adding complexity never increases reliability.

  3. The immediate reason for switching away from fossil fuels is to reduce the amount of CO2 being released into the atmosphere in order to combat climate change. But no one seems to be thinking of the carbon footprint of switching away from carbon. The switchover to renewables would be a massive undertaking powered mainly by fossil fuels, and the amount of CO2 being released would greatly increase during that effort.

    Much of this construction effort would also require large quantities of steel and concrete. Making steel and concrete involves the release of CO2, regardless of where the energy comes from—it's inherent to the chemistry of the processes involved.

    So it is by no means obvious that we can get off fossil fuels and onto renewables without creating an even worse climate crisis that the one we are currently facing.

  4. Renewables have a very low EROEI (energy returned on energy invested). A high EROEI is essential to the functioning of a modern industrial economy--money is just accounting, energy is really what makes the economy go. Any country which adds a large quantity of renewables to its energy mix will lower its overall average EROEI, making it more difficult to support a growing economy and a high tech industrial society. So even if we could somehow manage to switch over entirely to renewables, we'd have trouble sustaining a high enough level of technology to maintain and repair solar and wind generation facilities. And replacing them when they wear out would be a real stretch. Switching to renewables is something we might be able to do once, but then we'd be in big trouble.

All this is of course based on not having to change our lifestyles, not having to accept a lower level of prosperity and consumption. Indeed one frequently hears people talking about increasing economic growth in order to bring the poor parts of the world up to our level of consumption. It is clear to me that this is not going to happen and that what we really need to do is reduce our levels of consumption down to what can be supported without fossil fuels, using local, sustainable, low tech renewables. It is also clear to me that we will not do this voluntarily, that the majority of our efforts will go into maintaining business as usual regardless of the consequences.

Give all these factors time to work and it will become difficult to continue running the power grid as a whole. Some parts of the gird will simply quit working. Others that have proved unreliable, which place the grid as a whole at risk, will eventually have to be excluded from the grid. These islands will grow until the grid as we know it falls apart.

There will be a few areas where generating equipment will continue to function for a long time and will be able to supply local load. Again, the matching generation and load will be a problem since most such generation comes in large chunks and is a long way from large amounts of load. The most hopeful situations are small hydro (water) powered generators, which can be run at less than full capacity and adjust quickly to match varying loads.

Anyway, it seems clear that we can indeed expect more frequent and longer power outages. But what are the effects of these outages, and what can we do to mitigate them?


The effects of power outages

When the power goes out, you lose the lights, heat, cooling, cooking equipment, refrigeration and so forth in your own home. Even most oil, gas and wood heating systems rely on electricity for control, ignition and circulating fans. Then there are all the services that comes to you from outside your home, that you rely on to just work, but which need electricity to do that.

In general, the most critical services run off batteries which are kept fully charged as long as the power is on. When the power goes out, these services keep right on running as if nothing had happened, at least until the batteries are discharged. The batteries for the controls in power stations are rated for eight hours. The batteries in cell phone towers are rated for two to four hours.

Everything I'm finding on the internet says that the central switching stations for land line telephone service should keep working even during long power outages, which implies both batteries and backup generators. I have some doubts about this, and I'll be keeping an eye out for more detailed information.

Many slightly less critical services have generators that start automatically with only a brief interruption when the power goes out and run as long as there is fuel (usually diesel fuel) in the tank. If arrangements have been made to refill that tank, then this can go on for quite a long time.

Even less critical services than these can have a portable generator hooked up to them if need be. This would include facilities operating on battery power, if the power is off so long that the batteries need to be recharged.

Most service stations don't have backup power so you likely won't be able to get fuel (gasoline, diesel, propane) while the power is off. During long outages the many supply chains that are powered by gasoline and/or diesel fuel will be in trouble.

Natural gas pipelines have to be pressurized to keep to gas flowing through them. Some of the pumps used to do this are powered by natural gas, some by electricity. And I suspect that at least some of the controls for the gas powered pumps are electrical. So your natural gas supply, at least in some areas, will be compromised during electrical outages.

The pumps in municipal water and sewage systems need electrical power too. Some may have backup generators, but not all. If you live on a farm or in a very small town, your toilet is likely gravity feed into a septic system and weeping bed, and will work as long as you have water to flush them. Or perhaps you have already set up a composting toilet which requires no power at all. Your water supply is probably from you own well, with a pump driven by an electric motor that uses 240V AC (if you are in North America). Even if you have a generator, you may need an electrician to help you hook it up to that motor.

Refrigeration of food in grocery stores and pharmaceuticals in pharmacies and hospitals will be jeopardized. Fortunately our local hospital does have a backup generator.

Radio and TV can be important sources of information during emergencies. But you will likely find that only a very few of your local stations are set up to keep broadcasting during power outages.

It would also be great if internet service could continue during power outages. I understand it some areas it does, but we get our internet through the local cable TV company, and even short outages to their facilities knock out our internet connection and our cable TV service, even if the power is still on at our place. Your situation may be different—I hope so.

Oddly, or so it seems to me, most traffic lights aren't backed up in any way and stop working when the power is off.

ATMs won't be working, nor the systems that allows us to pay for things by credit and debit cards. Even if you do have cash in hand, you may find many retail outlets are unable to sell you anything when their cash registers and product code scanners aren't working. Many of them may just lock their doors for the duration of the outage.

Not all of them, though—I was quite impressed during a recent outage when I saw the guy behind the counter at a nearby convenience store beavering away with a cash box, battery operated calculator and a notebook to record sales in. It can be done, but one hopes the prices are marked clearly on items rather than encoded in UPCs. This is an example of an individual (or maybe his manager) taking the situation in hand and keeping things working rather than sitting back and letting them fall apart.

No doubt I am missing many of the potential effects of long power outages, but I think this gives you the flavour of what you'll be facing. Next time I'll talk about how you can mitigate the effects of power outages, both short and long, and what your community can do to cope when it finally finds itself permanently isolated from the grid.


Links to the rest of this series of posts, Preparing for (Responding to) Collapse:

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Thursday, 14 June 2018

Autobiographical Notes, Part 4: My Peak Oil Journey

For some time now I been intending to do a post about "My Peak Oil Journey", describing how my understanding of Peak Oil has evolved over the years. I think it will fit nicely at this point in my series of autobiographical notes.

Throughout the history of this blog I've focused on three of the challenges we face: Climate Change, Peak Oil, and Economic Contraction.

I first became aware of climate change in the late 80s and had no trouble accepting its reality. I expected that nuclear fusion or possibly renewable power sources, especially solar, would take over from fossil fuels and solve the problem with ease. But things have not worked out quite so well.

Sometime in 2000 or 2001 I first heard of Peak Oil. Again, my initial reaction was that improved technology would solve the problem. But I was drawn back to the topic repeatedly and by the time I retired from Hydro One, I was convinced that this is not a problem we are going to solve. I retired with a very nice pension, but also a keen awareness that this pension was contingent on the continuing growth of the economy. And even that early on, my reading about Peak Oil made it pretty clear that continued economic growth was far from a sure thing.

My current understanding of the economy took much longer to come together, and is intimately intertwined with my understanding of Peak Oil.

In the early 2000s many people, myself included, had quite a naive understanding of how Peak Oil might play out. I think many of us thought of oil fields as big underground tanks, originally full of oil. In this view we'd be able to keep pumping oil out of the ground until one day it suddenly ran dry. We also thought that the demand for oil was quite inelastic and running out would cause a very serious disaster, quite possibly the collapse of industrial civilization.

There was a lot of speculation about the amount of oil that was actually left, and good reason to suspect that official estimates of oil reserves were artificially inflated. Both the privately owned oil companies and the OPEC countries had (and still have) much to gain from claiming that their reserves are larger than they are in reality. Some of the agencies estimating future oil use numbers based them solely on predicted demand, without considering the realities of the supply side at all.

Gradually, this way of thinking came around to a more realistic picture of porous rock formations saturated with oil and gas and capped with layers of impermeable rock. Drill through the cap rock and the oil (and gas) would start running out. With this more accurate picture came many inconvenient details which gradually, as events played out over the years, became more obvious.

The rate at which oil comes out of the ground is determined by the geology of each particular well, and is at a maximum when the well is new and declines as the well ages until eventually it is no longer profitable to operate the well, the costs of operation being higher than the small remaining production is worth. This happens before all of the oil is removed from the well. There are techniques such as water injection which can be used to increase the rate at which oil comes out of a well, but this may increase the decline rate so that the total production of the well is less in the end.

Discovery of new oil resources must make up for the decline of existing wells and allow for increased use of oil as the economy grows. For the last few decades this has not happened, and it appears to me that the production of "conventional" oil peaked around 2005. This was reflected in the increase in the price of oil from around $12 per barrel in late 90s to just over $140 per barrel in the summer of 2008. The price of oil goes up as demand exceeds supply or even if events make it seem that supply might soon be constrained. It seems that in the months leading up to the summer of 2008, both of those factors were involved in making the price of oil spike upwards.

Looking back on the effect of oil price on the economy, post 2008, it became clear that almost every recession since the 1950s had been preceded by a spike in the price of oil. It turns out that the demand for oil is not nearly so inelastic as some had imagined. When the price goes up we see what is known as "demand destruction"—economic growth slows and people find themselves short of cash, cutting back on discretionary spending and doing whatever they can to use less energy. If the price goes high enough, even conservation begins to look like attractive.

At the same time, the idea that there is no alternative to oil turns out to be a little too simplistic. As the price goes up, oil wells that have been shut down as unprofitable become profitable again. Alternative forms of oil, what is known as "non-conventional oil" (deep offshore oil, Arctic oil, fracked oil, heavy oil and bitumen from tar sands) which had previously been too expensive to bother with, also become economically feasible.

The demand for oil dropped off from 86.3 million barrels per day in 2007 to less than 84.5 in 2009, and the price dropped to just over $40 per barrel. As the economy recovered, non-conventional oil made up for the decline in production of conventional oil and total demand increased to over 99 million barrels per day in 2018. Higher prices 2010 to 2014 (peaking at over $100 per barrel in early 2014) no doubt drove developments in non-conventional oil, while at the same time slowing the recovery of the economy.

In that period (2008 to 2014) the idea of Peak Oil was alive and well. Lots of people were interested, there were numerous websites and books being published, and a variety of groups, (of which the Transition Town movement is probably best known) sprang up in an attempt to bring people together to prepare for what was coming.

And while overall global oil production kept growing, many oil exporting countries reached their production peaks. In a phenomenon described by "The Export Land Model", this happened even quicker than it might have otherwise. As most such countries were experiencing growth in their own economies and improvements in their standards of living, so their domestic consumption of oil was increasing, leaving even less to export than could be accounted for by natural decline, and putting their balance of payments in an ever worsening situation post peak.

In the Middle East climate change brought on increased temperatures and droughts, making agriculture less and less feasible. And this was at a time when money to import food and jobs for bankrupt farmers fleeing to the cities were both in short supply. There is no doubt in my mind that both climate change and peaking of oil exports were factors in the so called "Arab spring". But changing governments does little to improve the situation when there are real, fundamental problems that even the best government would be hard pressed to cope with. In general, everywhere in the world, there is growing disillusionment with new governments, elected to deal with economic and social problems, who turn out to be just as inept as the old ones, and just as much in denial about what's wrong.

It was sometime after 2008 when I put together the missing pieces in my understanding of economics.

The first thing was to realize that it's not really about money.

Money is just a convenient set of tokens—a medium of exchange, a unit of account and a store of value. Of course, a whole "meta" level of business, the financial sector, is based on money. But it's vital not to lose sight of the underlying realities.

The second thing was to understand role of growth in the economy.

Modern economies run on credit. Money is created by the banks as debt and those debts must be paid back with interest. The extra money for the interest comes from yet more loans. This works fine as long as the economy is growing and the banks have good confidence that debtors will continue to pay back their loans, with interest. If the economy stops growing, or even if its growth slows down very much, governments, businesses and individuals who have taken out loans find themselves unable to continue making their payments and are forced to default on their loans. Too many defaults and the banks themselves start failing. So it is vital that the economy continue to grow.

The third thing is the role of energy in the economy.

The reason that debtors can pay back loans is that they used the borrowed money to set up enterprises that create more value than the capital and labour that are put into them. This surplus value can be used to pay off loans, with interest, and leave something as well for the owners of the enterprise. Or in the case of large companies, pay dividends to the investors. Conventional economic theory is pretty vague about where this extra value comes from. But when I read up on "biophysical economics" it became clear to me that the extra value comes from the energy inputs to the process, because the energy costs substantially less than the value it enables us to create.

That Wikipedia article I linked to doesn't mention the two sources where I learned about biophysical economics: Energy and the Wealth of Nations by Charles Hall and Kent Klitgaard, and Life After Growth by Tim Morgan. Morgan also has a website with up to date information.

Extra value (wealth) coming from surplus energy was true to a limited extent even in the past when energy came in the form of food and was converted in mechanical form by human or animal muscles. Things improved somewhat when we learned to harness the mechanical energy in moving air (wind) and falling water. But with the invention of engines that could convert the heat of burning fuel into mechanical energy, things really took off. These engines could drive automated factories which could produce goods with a fraction of the human labor previously required. This started with steam engines burning coal to pump water out of coal mines, replacing horse powered pumps. What followed was the industrial revolution.

The economy grew as it never had before, and as long as abundant cheap energy was available, it continued to grow.

Throughout the history of fossil fuel use, we've used the lowest hanging fruit first—the easiest to access and the highest quality fuels among those. With the result that as time passes, the remaining fuels are harder to access and/or of poorer quality. This leads us to concept of Energy Returned on Energy Invested (EROEI), and the related idea of surplus or net energy.

Taking a typical oil well from the early twentieth century, the energy equivalent of 1 barrel of oil would have been used to get 100 barrels of oil out of the well. This gives you an EROEI of 100, and surplus energy of 99 barrels of oil equivalent.

Looking at present day corn based ethanol, to produce 1.3 gallons, it takes the energy equivalent of 1 gallon of ethanol. This gives you an EROEI of 1.3 and surplus energy of .3 gallons of ethanol equivalent.

This can be helpful in choosing the sorts of energy we should be using—early twentieth century oil wells are something we can only dream of today and the corn ethanol business is hardly viable without large subsidies. But there is more to it than that, because surplus energy is what drives the economy and makes economic growth possible. If you look at all the energy sources a country uses and calculate a weighted average EROEI, it can tell you quite a lot about that country's economy.

As that average EROEI declines toward about 15, economic growth grinds to a halt and it becomes difficult to raise capital to start new ventures and to maintain existing infrastructure. Below 15 a modern industrial civilization quits working. Because this is a weighted average, choosing to produce more energy from low EROEI sources makes things worse while temporarily seeming to make them better. It has been estimated that the current average EROEI of the world economy is around 11. Of course some lucky countries are doing much better than that.

But because of our "lowest hanging fruit first" approach, EROEI continues to decline. Real economic growth appears to have stopped in the 1990s, with governments using clever new ways of calculating gross domestic product, and unemployment and cost of living statistics to make things look better in the short run. And low interest rate policies to encourage lots of borrowing and keep the economy growing, again, in the short run.

By early 2014, oil prices had topped $100 per barrel and it looked to many of us like the economy might fall apart again as it had done in 2008.

But then oil prices started to fall, bottoming out below $40 per barrel. Why the slump happened is not well understood, but it had been predicted by a few (notably Nicole Foss of the Automatic Earth) as yet another step on the way to Peak Oil.

There was a glut in oil supply from 2014 to 2017. Several factors contributed to this.

The first, no doubt, was the increase in non-conventional oil production, particularly tight oil in continental US, accessed through the "hydro-fracturing" process, commonly referred to as "fracking". Contrary to popular belief this was not enough supply all of America's demand for crude oil. But it did add about 4 million barrels a day to US oil production.

All the hype about fracking as a new source of crude oil and natural gas caused some people to conclude that Peak Oil was dead, and that any shortage of oil was a very long way in the future. Even President Obama announced that there was enough tight oil to last 100 years. In fact, nothing could be further from the truth. In 2017, the United States produced an average of about 14.2 million barrels per day, and consumed about 19.8 million barrels per day, with the difference made up by imports, changes in petroleum inventories, and petroleum refinery processing gain.

No doubt fracking has significantly decreased the amount of oil the US has to import. But this is temporary—the decline rates of fracked wells are much higher than those of conventional wells and most of the sweet spots in the tight oil plays have already been used up. Realistically, America's supply of tight oil will likely run out early in the 2020s.

But even if there was enough tight oil and gas to last 100 years, fracking is a classic case of trying to use a low EROEI energy source (somewhere between 3 and 5, in this case) to keep an economy going. You might expect that this oil would be more expensive than conventional oil, but as we learned in 2008, high energy prices cause recessions, which should lead to over-production and lower prices.

Parts of this happened—oil prices certainly went down. But oil consumption continued to grow, by about 1.7% per year. Strangely, it appears that this extra energy did not result in corresponding growth of the US economy. It is a bit of a puzzle where the energy went, until you realize that fracking is a very energy intensive process (the "energy invested" part of EROEI). Fracking itself is the "gas guzzler" that was causing the growth in US oil consumption. This is what I call "energy sprawl", where the extensive infrastructure and energy use required to make low EROEI energy sources work begins to dominate the economy and the landscape.

OPEC was initially unwilling to cut back production to bring the price back up, but in late 2016 an agreement to cut production was signed by many OPEC producers and Russia as well. At the same time, many other non-OPEC producers were experiencing natural decline.

The price of oil bottomed out just under $40/barrel in early 2016, bounced around in the $40s and low $50s, and then in mid 2017 started to increase pretty much steadily, as the glut began to dwindle. Today the price is in the high $70s/barrel and has topped $80 in the past few weeks. The glut is over and the U.S. government has quietly asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day to bring the price down to a more acceptable level.

OPEC economies were hurt badly by several years of low prices and one suspects they will be only too glad to increase production. The question is how long they will be able to do so before the natural decline rates of their oil fields catch up with them.

The major oil companies were hurt by low prices too, and cut back on their investment on discovery in order to save money. This has left us in a very bad situation as far as oil supply goes over the next few years. Trillions of dollars would have to be spent on discovery to catch up with demand. It seems to some of us that there is no sweet spot where oil prices are low enough to keep the economy growing and high enough to make the oil business profitable.

In any case, it seems unlikely that there are actually sufficient oil resources out there even if we could find the money to spend on discovery. Beyond natural supply decline and reduced spending on discovery, we are seeing geopolitics playing a role in Peak Oil as well. Major oil producers like Venezuela are facing sanctions and internal economic chaos. Their oil industry is suffering as a result and production is falling off. If President Trump gets his way, something similar will likely happen with Iran. An overall peak in production will likely occur sometime in the next few years.

How will the economy respond to this? Not well, to be sure, but the specific details will include some surprises that are very hard to anticipate.

That's my "Peak Oil Journey", to date at any rate. No doubt there is more to learn. We're pretty good at explained what just happened, but not so good at predicting what's coming next. It always seems to involve something we just haven't considered yet.

While I was following the story of Peak Oil, my life carried on and I tried to prepare for the challenges that lay ahead. Eventually this lead to me starting this blog and calling myself a "Kollapsnik". More on that next time.


Links to the rest of this series of posts:

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Monday, 15 January 2018

The Bumpy Road Down, Part 3

Winter on Lake Huron

In the last post in this series I talked about the next financial crash and how it may well be serious enough to spread into the non-financial sectors of the economy and effect supply chains and critical systems in ways that we did not see in the Global Financial Crisis of 2007-08. Systems that most of us depend on for the necessities of life may fail and many kollapsniks see this leading immediately and inevitably to a hard, fast and permanent crash of industrial civilization.

I disagree, seeing this as just one more bump on the road down, the cyclic pattern of crash and partial recovery that I believe will characterize the rest of the age of scarcity.

To understand why I hold this opinion, I said we need to do a couple of things:

1) take a systems dynamic approach to the events we are talking about. Specifically, we need to look at what happens when overshoot occurs in nature, in systems like the one we inhabit. Which is, after all, a subset of the ecosphere. Overshoot is a common enough phenomenon and usually works in fairly predictable ways.

2) look at the sort of things governments, communities and individuals can do to limit the damage of a financial crash and its spread to other critical systems.

Today we are going to do that.

(Note: all three of the graphs below are smoothed out, idealized and imprecise representations of the processes they illustrate. The point is to allow me to make some points visually. I hope not to get into much in the way of quibbling over minor details, of which no doubt a few are missing, inaccurate or outright wrong.)

So, first, let's take a look at how overshoot works. Take moment or two with your favourite search engine and you will find a graph that looks something like this:

1) typical overshoot situation with constant carrying capacity

The green line shows the behaviour over time of the population of a species which finds itself initially at a level well below the carrying capacity of its environment (the dashed blue line). Because that environment provides lots of whatever the species need to grow, it does grow. This tendency to grow in response to favourable conditions seems to be an inhernet property of life. As is always the case, this is exponential growth—it starts out slowly but eventually reaches a point where it takes off and quickly exceeds the carrying capacity of the environment.

What happens then is interesting, especially since we currently find ourselves in just such a situation. You get some oscillation of the species population, above and below the carrying capacity, until it finally settles out somewhat below the carrying capacity.

First, let's be clear that it is possible to exceed carrying capacity in the short run, at the cost of damaging the environment and reducing its capacity—overpopulation has a negative effect on that capacity. There is also some time delay built in to the effect of population growth, as newly born individuals add relatively little to the species impact on the environment compared to what they will add once they have grown up. The negative feedback and the time delay result in the oscillation shown in the graph.

Of course, the straight line representing carrying capacity would actually have some peaks and valleys, corresponding to how the environment responds to the stress of overpopulation and how it recovers when the population falls. If we idealized both the blue and green lines into something like a sine wave, we would see that the variation in the carrying capacity leads the variation in the population by about 90 degrees.

The red line, by the way, represents a fast and permanent collapse. In order for this to happen the carrying capacity has to fall all the way down to basically nothing. This can happen for a variety of reasons, but overshoot isn't one of them, because as soon as the population falls off below the carrying capacity, the stress on the environment is relieved and it begins to recover.

There is, in fact, no such thing as a "balance of nature" and it is by no means inevitable that the oscillations damp out and the population settles down just below the carrying capacity. In many cases what we actually get is the situation in the next graph, where populations oscillate on an ongoing basis.

2) continual oscillation of predator and prey populations such as foxes and rabbits

You might think that the population of rabbits and foxes in an ecosystem would level out at steady values, but that is not in fact what is observed.

If we start at a moment when there are relatively few of each species, we see that the population of rabbits (the prey, dashed blue line) grows rapidly. It is well below the carrying capacity of the ecosystem for rabbits and there are relatively few foxes (the predators, green line). But the increasing number of rabbits make hunting easier for the foxes, and their population starts to increase too. Eventually there are enough foxes to overhunt the rabbits, resulting in a crash in the rabbit population. This is followed by a crash in the fox population, since there are no longer enough rabbits to support it. This brings us back to where we started and the cycle carries on.

The reason the cycle can carry on indefinitely is that the foxes limit the rabbit population so that it never exceeds the carrying capacity of the ecosystem for rabbits—the plants the rabbits are eating never get over grazed.

The situation for the human population of this planet is, as you might expect, more complex.

The impact (I) that the human population has on our environment is determined not just by the size of that population (P), but also by the level of affluence (A) we are living at and effectiveness of the technology (T) we are using to maintain that affluence.

This gives us the famous equation, I=PAT. Since I am going to be using the term "T" in another equation shortly, I'll change this to I=PAD, where "D" stands for decoupling. Decoupling is the use of technology to produce affluence at a lower cost to thge environment and it is a number between 0 and 1, with 0 being the goal we would aim for, eliminating our impact altogether. In fact it is proving so difficult to get decoupling anywhere near zero that it is very unlikely to be the solution to our problems.

Carrying capacity (C) also works somewhat differently for human populations.

We can increase the size (S) of our environment by expanding into new areas of the world and habitats previously occupied by other species or by "indigenous" humans.

We can tap into forms of energy (E) beyond just food. For somewhere between two and three million years we've been using fire for landscaping, for cooking our food and for heating our shelters. In each case we were using the energy in burning biomass to increase the carrying capacity of our environment, increase the value of our food, and/or expand the range of environments that we can live in. For the last few hundred years we've been using the energy of fossil fuels to radically increase the carrying capacity of our environment in many seemingly clever ways.

Since whatever method we use to acquire energy consumes energy in the process, it's actually the energy that is left over, available for use (the surplus energy) that's important. This is best expressed as "Energy Returned on Energy Invested", EROEI. This is a dimensionless number and the larger it is, the more surplus energy. When the EROEI is equal to one, the process is just breaking even and there is no point in doing it—we want a much higher EROEI.

Hunter-gather and pre-industrial agricultural societies managed average EROEI's in the high single digits at best. Industrial societies based on fossil fuels in the twentieth century had EROEI's many times that high, which made possible high levels of growth and the development and use of technologies which had previously been completely out of reach. Today the average global EROEI is around 11.

Which brings us to our use of tools and technology (T). With just Neolithic technology (fire, stone tools, weaving, tanning, pottery, boats, agriculture) we spread over the whole planet except for the Antarctic, occupying and thriving in environments very different from the ones where we evolved. Since the Renaissance, the Enlightenment and the Industrial Revolution our use of technology has exploded. And not just material technology, but financial, organizational and information technologies as well. All of which has enabled both our population and affluence to grow at heretofore unprecedented rates.

So, the carrying capacity of this planet for the human race can be represented by the equation C=SET. Clearly, I (Impact) must be less than C (carrying capacity) or we are in overshoot. And since sometime in the late 1970s we have indeed been in overshoot. Currently the level of overshoot is around 60%. That is, our impact on the environment is 1.6 times what can be sustained on an ongoing basis.

3) oscillating overshoot with declining carrying capacity

From left side of this graph to point "a" we see the long and very slow growth of the human population before the discovery of the New World. After point "a" the carrying capacity began to increase significantly as the size of our environment effectively took a large jump with the European settlement of the New World, as the use of fossil fuels greatly increased the amount of surplus energy available and as we developed numerous new technologies to use that energy. Human impact increased with the carrying capacity, as our population grew and affluence increased.

The growth of carrying capacity continued until the last quarter of the twentieth century, point "b", when depletion of fossil fuels and reduction of their EROEI, diminishing returns on technological innovation and stress on the environment from human activities started to reduce the carrying capacity.

Human impact has continued to grow since then, and is now so far above carrying capacity that one has to expect a crash in the near future, point "c". As I said in my last post, this is likely to start with a financial crash. The financial sector of the economy, since it deals largely with non-material things that don't have much inertia, can change very quickly. It is currently under a lot of strain from huge amounts of risky debt. I favour a scenario where a spike in the price of oil, brought about as the current surplus of oil bottoms out, sets off a currency crash in one of more countries, leading to a wave of bankruptcies and governments defaulting on their debts. After point "c" human impact will start to decrease rapidly, primarily due to the effect of the financial crash on affluence.

Note that I have again included a red line (and a light blue line), which represent a fast and permanent crash of both carrying capacity and population. This is possible and some would argue that climate change and ocean acidification (among other things) may be damaging the environment enough to make it the most likely outcome. I don't think so. The ecosphere is amazingly resilient, once human impact is reduced. People have gotten the wrong impression about this because we have been playing the silly game of upping our impact and then wondering why the situation keeps gets worse, as if it wasn't our fault.

To the right is a little chart that contains some shocking information. The top 20% of the human population (in terms of affluence) is responsible for 76.6% of our impact. A financial crash will be very hard on those top 20% and in the process will drastically reduce human impact. Sadly, myself and most of my readers are in that top 20%.

Referring back to diagram 3, I expect that at point "d", where "I" is finally less than "C", the carrying capacity will begin to recover, and a while later at point "e", human impact will begin to increase once again as well.

Remember also that carrying capacity is defined by C=SET, and there is much that humanity can do to change the value of "T" in that equation. I am by no means saying that we will find a "solution" to our problems based on material technology. What I mean is that a major factor in the big decrease in carrying capacity during the upcoming crash will be the failure of our financial and organizational technology to cope with the situation. And there is a lot we can do to reorganize our financial, economic and political systems to work better under the new conditions. Once we are forced to do it. So I do expect there will be a recovery after this crash.

It is very likely that during the crash the financial chaos will spread to the rest of the economy and that there will be some reduction in the growth rate of our population as the support structures provide by industrial civilization fail completely in some parts of the world. But it seems likely that human population will continue to grow until it once again outstrips carrying capacity, at point "f". And then at point "g" we will have another crash. I suspect depletion of fossil fuels, water for irrigation and phosphorous for fertilizer, and the effects of climate change will lead to a collapse of agriculture in many parts of the world. Famine and epidemics will at that point start to rapidly reduce our population and eventually reduce it back below a once more reduced carrying capacity (point "h") and another recovery will begin (point "i").

Beyond point "i" it is hard to say much about exact details or how many more crashes will take place. But the trend of continued oscillation with decreases in both carrying capacity and human impact will continue. The downward trend is because our current system relies on non-renewable resources that we are using up. That trend will continue until our impact can be sustained solely by renewable resources. Along the way we will go through some very hard times (point "i" and subsequent valleys in the green line) because of the damage done to the planet in the process. But eventually, with our impact drastically reduced, the ecosystems will recover. I expect that at this point we will have retained some of our technology and because of this the overall carrying capacity and our population/impact will settle out a bit above what it was in pre-industrial times.

One further thing I want to emphasize is how uneven this whole process will be. Yes it is likely that the impending financial crash, because it involves systems that are highly interconnected and global in scale, will be felt to some extent over the whole planet. But the degree to which the financial chaos spreads to the rest of the economy will vary greatly from place to place. And subsequent crashes, once the high degree of global interconnection has been broken, will most likely occur at different times in different places.

Wherever people are not completely dependent on global supply chains, the effects will be less severe. To the extent that they are not ravaged by climate change, some parts of the developing world where subsistence agriculture is practiced may continue on with little change. Unfortunately many areas will suffer the ravages of climate change—droughts, flooding and heat waves. Many countries (particularly in Africa and the Middle East) do not produce enough food for their own populations. With supply chains broken and agriculture struggling everywhere, these areas will find it difficult to continue importing the food they rely on. Supplies of energy and water will also prove problematical.

I am well aware that all these graphs and explanations do not constitute a proof of my assertions about the bumpy road down. But I hope I have succeeded in making what I'm trying to say much clearer. It's up to you to decide if there is anything to it or not, now that you know what "it" is.

The other area I wanted to touch on today is the sort of things governments, communities and individuals can do to limit the damage when a financial crash spreads to other critical systems.

As the financial crash starts to gain momentum, governments will (to whatever extent they can) use the same tools as they did in 2008 to get things under control— loans and bailouts for faltering businesses, and keeping interest rates very low. It also seems likely that, as the situation worsens, "bail-ins" will be used as well, where depositors are required to accept discounts on their deposits to reduce the pressure on failing banks. And "haircuts" where bond holders have to accept discounts on the value of those bonds in order to reduce the pressure on the governments that issued them.

These efforts will have mixed results and the crash will no doubt spread to the non-financial sectors of the economy. Many governments will try switching failing critical systems over to a direct command “martial law” economy. This will be done with varying degrees of skill (or ineptitude as the case may be) and varying degrees of co-operation from their citizens. Vital materials which are in short supply due to supply chain and production breakdowns will be placed under government control and rationed (food, energy—especially diesel fuel, water treatment and medical supplies), and attempts will be made to patch supply chains and production facilities back together with whatever comes to hand.

I have no doubt that this can be made to work, at least to some extent. It does require convincing the public that it is necessary and that it is being done fairly—applied equally to the rich and powerful as it is to the poor and weak. And inevitably there will be thriving black markets.

Governments that already operate some of these systems directly will be better prepared and experience greater success. System that have been contracted out to the lowest bidder—companies that are primarily responsible to their stock holders rather than their customers—may fail in a variety of ghastly ways.

On the other hand, I think there will also be quite a bit of quiet heroism on the part of companies and individuals in critical industries whose job it is to keep things working. These folks are for the most part competent and highly motivated, and their efforts will be more successful than you might think.

Some governments will be so successful that their citizens may hardly be aware that anything is going on. In other countries, people will be reduced to relying almost entirely on what can be done locally, with locally available resources. Right wing capitalist governments whose primary obligation is to the rich and power will begin to practice wholesale abandonment of the poor and unfortunate.

There are also things that can be done by local communities, families and individuals to be more self sufficient—to be able to carry on during those periods when industrial society fails to supply the necessities. Increasing local inventories in order to be more resilient in response to supply chain failures would be a good beginning. But just being clear about what the necessities are and not wasting resources try to maintain luxuries will be one of the biggest challenges. The first step is realizing that much of what we consider necessary is, in fact, not.

So, as I've already said, I'm expecting a recovery, or rather a series of recoveries after a series of crashes. These crises are going to cause some changes in the way things work, resulting in a very different world. We'll have a look at the trends that will lead to that new world in my next post.

P.S.
If Blogger's statistics and Google Analytics are right, a lot of people are reading this blog on mobile devices. I'd be interested to hear how the graphics in this post worked on those devices.


Links to the rest of this series of posts:
Political Realities / Collapse Step by Step / The Bumpy Road Down

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Sunday, 26 November 2017

Collapse Step by Step, Part 8

Lake Huron Waves Breaking Along South Pier, Kincardine

The Bumpy Road Down, Part 1

The term “bumpy road down” refers to the cyclic pattern of crash and partial recovery that I believe will characterize the rest of the age of scarcity and make for a slow step by step collapse, rather than a single hard and fast crash. Indeed, that is where the "step-by-step" in the title of this series of posts comes from. And yes, many of the individual steps down will happen quite quickly and seem quite harsh. But it will likely take many steps and many decades before we can say collapse is essentially complete, and between those steps down there will (in many areas) be long periods when things are stable or even actually improving somewhat.

The fast collapse is a favourite trope of collapse fiction and makes for some exciting stories, in which stalwart heroes defend their group from hungry hordes and evil strong men. And if the story happens in the U.S. the characters get to do their best to stop a whole lot of ammunition from going stale. But it seems to me that in most parts of the world things will progress quite differently when disaster strikes. Indeed there is a branch of sociology which studies how people and societies respond to disaster, and it has identified a set of incorrect beliefs, known as "the disaster mythology" that much of the general public holds on the subject. In particular, the expectation of looting, mass panic and violence is not borne out in really. Here are some further links on the subject: 1, 2, 3, 4.

Dysfunctional as today's world may seem to many of us, it is working fairly well for those who are in power. They have a great deal invested in maintaining the "status quo", and in making sure that whatever changes do happen don't have any great effect on them. They also have a lot of resources to bring to bear on pursuing those ends, and a lot of avenues to go down before they run out of alternatives.

The other 80% of us, who are just along for the ride so to speak, still rely on industrial society for the necessities of life. We are hardly self sufficient at all, dependent on "the system" to a degree that is unprecedented in mankind's history and prehistory. As unhappy as we may be with the way things are at present, it's hard to imagine collapse without a certain amount of trepidation. Denial is a very common response to this situation.

Some of us, though, aren't very good at denial. Even if we only follow the news on North American TV, which largely ignores the rest of the world, we've seen lots of disturbing events in the last year or two and it is hard not to wonder if they are leading up to something serious. Many people in the "collapse sphere" are predicting a major disturbance in the next few years, and some think that this will be the one that us takes down—all the way.

I definitely agree that something is about to happen, but I don't think it is going be the last straw. Just one more step along the way.

As always, I am directing this mainly to those who are not highly "collapse aware", so a closer look at what's going on and what this next big bump might look like would seem to be a good idea. And of course I am making generalizations in what follows. As always, things will vary a good bit between different areas and at different times, and all of this will affect people of the various social classes differently. Also beware that I am not an economist, just a layman who has been watching the field with keen interest for some time. What follows is a summary of what I have learned, in a field where there is lots of disagreement and where the experts themselves have been wrong again and again.

Despite all the optimistic talk about renewable energy, we are still dependent on fossil fuels for around 82% of our energy needs, and those needs are largely ones that cannot be met by anything other than fossil duels, especially oil. While it is true that fossil fuels are far from running out, the amount of surplus energy they deliver (the EROEI—"energy returned on energy invested") has declined to the point where it no longer supports robust economic growth. Indeed, since the 1990s, real economic growth has largely stopped. What limited growth we are seeing is based on debt, rather than an abundance of surplus energy. And various adjustments to the way GDP is calculated have made the situation seem less serious that it really is.

Because of the growth situation, investors looking for good returns on their money have been hard pressed to find any and so have turned to riskier investments, which has resulted in speculative bubbles and subsequent crashes. The thing about bubbles is they are based on trust. Trust in some sort of investment that in saner times would be recognized for the risky proposition it really is. But always there comes a day when the risk becomes obvious, people rush to get out, and the bubble crashes.

The dot com bubble was the first to burst in this century, and the real estate bubble in the US was the next, leading to the crash of 2008.

After 2008 many governments borrowed money to bailout financial institutions (banks) which were in danger of failing, since that failure would have had a very negative effect on the rest of the economy. To control the cost of that borrowing and stimulate the economy, they lowered interest rates. These low interest rates have made it possible to use debt as a temporary replacement for surplus energy as the driver of the economy. Unfortunately this is pretty inefficient—it takes several dollars of debt to create a dollar's worth of growth, and the result has been debt increasing to totally unprecedented levels.

Meanwhile, much of the ill advised risk taking in the financial industry that led to the crash in 2008 has continued on unabated. You may wonder why responsible governments didn't enact regulations to stop that sort of thing. And indeed they did, to a limited extent. I suspect, though, that really effective regulations would have stopped growth cold, and no one was willing to accept the negative results of that. Better to let things to go on as they are, leaving future governments to worry about the consequences.

So, in 2017 we are deep into what might be called a "debt bubble." It relies on trust that interest rates will remain low and that any day now there will be a return to robust growth so that we can all make some money and pay off our debts. Those are risky propositions, to say the least.

On top of that, low interest rates have made it much more of a challenge for pension funds to raise enough money to meet their obligations, a vital concern for retired baby boomers like myself.

Those same low interest rates have made it possible for many non-viable or barely viable businesses to continuing operating on borrowed money, where under more normal circumstances they would have been forced out of business. This makes for a weaker economy, not a stronger one.

Here in Canada we still have a real estate bubble going on, especially in cities like Toronto, Calgary and Vancouver, and that despite recent government efforts to cool the real estate market by making it more difficult to get a mortgage, and by applying a tax on foreign real estate investors.

And over the last year that have been a long list of natural disasters which have increased the financial stress on governments, insurance companies and even re-insurance companies (who insure the insurance companies themselves).

The more conventional economists have come to think that all this is a normal situation and that it can just keep on keeping on. But there are others who think that this will lead to a crash of even greater magnitude that 2008. And many kollapsniks think this crash will mean the end of industrial civilization.

Some commentators expect this crash to take the form of a rash of debt defaults by governments who can no longer carry the debt loads they have built up. And a similar wave of bankruptcies of those shaky businesses I was just talking about, when they finally get to the point where they can no longer hold on. Tim Morgan, one of my favourite economists (who is certainly aware of the possibility of collapse), speculates that this bubble may burst in a different way than those of the past, with the collapse of one or more currencies. He points to the British pound as a prime candidate for the first to go and thinks that the U.S. dollar may follow it.

Other experts I've asked say that while the U.S government does have huge debts, they are not so large in comparison to the size of its economy—an economy that is strong enough that trust in it is unlikely to fail. I am not so sure. Much of the strength of the U.S. dollar comes from the fact that all trading of oil is done in it. If you want to buy oil then you need U.S. dollars, so the demand for them is always high. But a number of countries who are not allies of the US have proposed abandoning this system, suggesting that they are willing to accept other currencies for their oil. If this were to happen on a large scale it would significantly weaken the US dollar.

But it takes some sort of unusual event to start a crash like this, to initiate the loss of trust. And that brings us back to the fossil fuel industry.

While the falling EROEIs of fossil fuels have hurt economic growth, it is a mistake to think that those fuels are not still the life blood of our civilization. The success of modern industry is based on the productivity boost provided by cheap energy. The price of oil, for many years, was a fraction of its worth in terms of what could be made with the energy embodied in that oil. But when the price of energy goes up, it reduces the profitability of industry, often leading to a recession.

The oil prices I quote here are for Brent crude, just to keep things simple. In fact, oil trades at a dizzying variety of different prices, depending on where it comes from and its quality, among other things. If you look back over the history of recessions since the 1950s it is interesting to note almost all of them were preceded by a spike in the price of oil. In the summer of 2008 the price of oil, which had been going up for several years, topped out just before the crash at almost $140 per barrel.

After the crash, the economy slowed down significantly, and the price of oil dropped to around $30 per barrel due to falling demand. Starting in mid-2009 the economy began to recover and the price of oil increased to over $100. This appeared to be a straight forward case of supply and demand—an indication that the supply of oil was barely keeping up and suppliers were being forced to turn to more expensive sources of oil to meet the demand.

Then in mid 2014 something surprising happened— the price of oil and many other bulk commodities began to go down. By early 2016 the price of oil was under $40/barrel, and it stayed in the range between $40 and $60 until quite recently when it edged up over $60.

All kinds of ideas have been put forth as to why this drop in the price of oil happened, many of them contradictory. It is my thought that two things have been happening. First, demand destruction—a slowing down of the world economy caused by high energy prices. Second, a temporary increase in the supply of oil, mainly from fracking in the continental US and tapping of unconventional oil—tar sands in Canada, heavy oil in Venezuela, and deep offshore oil in various place around the world, that were suddenly profitable when the price was around $100 per barrel.

Whatever is the cause, it is clear that we have had a surplus of oil for the last few years, and this has kept the price down. OPEC discussed limiting supply to force the price back up, but very little came of it, even though the lower price was severely hurting the economies of the OPEC nations.

In the short run, lower oil prices have had a beneficial effect on economic growth. But unfortunately, the big oil companies were making so little profit that they couldn't afford to invest much in oil discovery.

Regardless of what you may think of the idea of "peak oil" on a global basis, it is a simple fact that the output of any individual oil field declines as it ages. Exploration for new oil aims to match that natural decline with new discoveries. For conventional oil, that has not happened since 1963 and by the start of this century this was becoming a problem. A problem that likely had something to do with the run up of oil prices prior to 2008.

Following 2008, higher prices and improved technology (like fracking and the syncrude process for getting oil out of the tar sands) made more oil accessible. But with the current lower prices, that is no longer the case. Furthermore the wells opened up by fracking are proving to have very high decline rates.

So it seems that sometime in the next year or two, the decline rate of the world's oil fields will have eaten up the surplus of oil. Discovery of new oil fields doesn't happen overnight, so there will be a crunch in oil supply. Not that there will be no oil available, but oil suppliers will be hard pressed to keep up with the demand and the price will spike upward. There may even be shortages of some petroleum products until those higher prices pull demand back to match the available supply.

It seems very likely that such a spike in the price of oil will touch off a loss of trust leading to a recession of such severity as to make 2008 look minor.

In my next post in this series I'll look at how that recession—might as well call it a crash—might proceed and what will likely be done to mitigate its effects.


Links to the rest of this series of posts:
Political Realities / Collapse Step by Step / The Bumpy Road Down

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