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Converging crises - Synchronizing failure
Climate mayhem, falling net energy and debt deflation
We are in for another global oil supply crunch from 2018 onwards that many experts say will trigger another severe economic recession if not depression. A fragile global economy, with a massive debt overhang, cannot handle too high oil prices. A large portion of most countries budgets, and individuals budgets as well, are spent on fossil fuel energy. That's why rapid price increases (over $60 per barrel) crushes demand and flips the economy over into a recession. In turn, leading to the bankruptcy of non-profitable unconventional energy ventures like tar sands and fracking. Thus further reducing supply over the long term.
Since the early 1970s global energy costs have steadily increased. Even if oil prices have oscillated with recurring spikes and drops, as the economy tries to adjust, the overall trend is a steady increase. This is due to the fact that extraction has become increasingly difficult and costly, yielding ever lower return on investment. The problem of course is that we built our economies based on cheap energy that yielded relatively high net energy to society. But that is a thing of the past and now we are struggling to afford our current lifestyles. Thats basically why we started this massive global debt bubble, pulling forward future consumption with cheap credit. But costs will eventually have to be paid.
We have now reached a point when all the energy and resources available to society are required just to maintain our existing level of complexity. A phenomenon puzzling many commentators, calling it secular stagnation. All these factors have made the global economy so fragile that even small perturbations from climate change, wars or falling credit could tip the system over into a deflationary spiral. With economic inequalities already increasing, increasing social instability, this is a recipe for disaster.
No economy will be able to recover unless it transitions to non-fossil fuel energy sources and writes down its debts. And even then net energy will likely be much lower, meaning that society still has to lower its overall consumption of energy and resources. Implying a voluntary measure to reduce organizational complexity in society. Something few previous civilisations managed, perhaps the British did when they dismantled their empire.
Implication for food security
Global food prices have increased steadily since 2005, about the time of global peak oil, now at 1970s highs or above. Further exacerbating the problem is booming populations, freshwater scarcity and climate change.
Today’s population levels depend on fossil fuels and industrial agriculture. Especially vulnerable to rising food prices are people with low purchasing power and without subsistence farming to fall back on. We know that food price increases that reach 200 on the FAO index have led to riots and unrest.
Many countries in the Middle East are especially vulnerable due to convergence of several different crises. State revenue losses from falling oil exports, due to depleting resources and higher domestic consumption, with a need to cut food and fuel subsidies usually make people very upset. Especially when, as is the case in the region, people have no way of making a living coupled with overexploited water reservoirs and eroded soils. As if that wasn't enough, scorching heat and significant risk of recurrent droughts makes the entire region utterly unsustainable. Without energy they have nothing. The chances for further conflict and wars in the region are high. Massive, continuing, migration flows towards Europe is to be expected.
The infamous ‘Doomsday Clock’ is again at two and a half minutes to midnight - the closest since 1953
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