Showing posts with label oil. Show all posts

When greed and growth kills


The capitalistic system only has two modes of operation, either expanding or collapsing. That's why people are so obsessed with growth, because it stabilises the system. Capitalism is premised on the logic of never ending growth: debts are made on the basis that they can be repaid with future income, and profits are invested to gain future profits. It's the only super-exponentially expansionary socioeconomic system in the history of humanity. And its only made possible by consuming and depleting finite fossil fuels. But it's now coming to an end.

The absolutely religious idea that a nation must grow its economy by 2-3% and population each year only emerged over the last 100 years. The idea of social progress only came about because people attacked peoples spirituality and wanted to replace it with materialistic values and short-termism, viewing the world as a machine, nature to be dominated, and people of as slaves to the system. Taking away everything of real value to people meant it had to be replaced by something else, and that became economic structures, commodification of life. Instead of people's well being and survival focus shifted to financial flows.

Now we pray to the measure called GDP because we have no higher purpose than to be debt slaves until we die. A tragic fate that people strangely cling onto no matter what the costs. We don't even blink when 70% of insects gets annihilated, I mean we all have to make money so whatever….right? No, not if you want to be able to eat in the future. Fishing out the oceans, filling them with plastics, and eroding half of the Biospheres topsoil and people say we should not question material growth!?

The idea of perpetual expansion has taken over our language and infiltrated our subconscious, talking about “green growth”, “personal growth”, “smarter growth” etc. These oxymorons shows how desperate we are to continue lying to ourselves that “everything is fine” and we “only have to make small adjustments” to our way of life. 

Under crude capitalism, stagnation leads to exploding debt, followed by a crisis and austerity for the people while the rich escape safely. And thats what will happen again and again as the world economy gradually contracts until it breaks abruptly and people really start to suffer. And then when you are dirt poor and could have really used a healthy piece of land with access to freshwater to grow food on and insects to pollinate those crops there are none, because you already destroyed them, and so you have to fight for the last remaining resources left to survive. 

That's whats happening in Yemen right now, where millions of people are starving, because they are being bombed to pieces, there is no access to energy or water and people cant afford food. Of Yemen's population of 30 million, 17 million are in desperate need of food aid, and seven million Yemenis are at risk of famine, many children already starving, which the UN has warned would be the worst the world has seen for 100 years.
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Collapsing systems

Credit: Devfactory, CC-BY-SA 2.0

Another great systems theory based book on why nations fail is out. This time its academic, journalist and writer Nafeez Ahmed, who long wrote for the Guardian but now has his own crowdsourced news site (Insurge-intelligence), who has delivered the goods. 

In his book, "Failing states, Collapsing systems: Biophysical Triggers of Political Violence", Nafeez presents the essential data on resource depletion, net energy decline, economic stagnation (debt bubble) and ties it nicely together with the acceleration of civil unrest around the globe. It's a big picture analysis of how the triple crises of energy, climate and food production impact societies around the world. A current example, according to Ahmed, of how these multiple stressors interact and can lead to systemic failure is war torn Syria. 

Syrian oil production peaked in 1996 while population, and thus consumption, kept increasing. By 2008 the government, who relied on petrol money for maintaining the state budget, had to slash fuel subsidies which tripled the price of petrol and food almost overnight. A huge deal to anyone already spending almost half of their income on food. At the same time as an ongoing drought in the eastern part of Syria devastated harvests and drove people from the countryside into the cities. Yemen experienced a similar fate of depleting resources, peak oil, and the resulting high vulnerability to shocks. Based on these two cases it takes about 15 years for a country that experiences its peak in oil production before additional pressures, such as climate change, contribute to systemic failure. 

It's not only the Middle East. Many other countries, for example Mexico,  are well on their way of having little to no extra oil to export for keeping their budget in balance or pay for subsidies that people depend on. And the counties who are still able to import some oil or have some mix of energy sources to depend on will be a target of immigrants looking to flee bankrupt and failing nations. Which in turn will fuel the nationalist sentiments and a grab for what's left, military interventions. Something we are already witnessing in Europe and the US.
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Death of the American Empire: A dangerous time for peace

Two destroyed tanks in front of a mosque in Azaz, Syria. Credit: Christiaan Triebert (CC-BY-2.0)

History is full of empires which in the process of their decline refused to go down peacefully. How will the American Empire end it’s days?

I hope no one is stupid enough to launch World War III. However, many states are fragile now (due to for example: overpopulation, environmental degradation, resource scarcity, bankruptcy, inequality and corruption) so very little is required in terms of external force to trigger conflict. This is clear in the context of the Middle East. Already fragile states, for example Yemen and Syria, turned into complete war zones after civil unrest and aggressive foreign military involvement. Now there are millions of refugees trying to escape the region and people wonder why.

There is a risk that hugely over-armed United States, constantly spreading war propaganda, turn a trivial incident into a major conflict or war. Especially if the domestic population really believe that “America is exceptional” as president Obama declared at the UN General Assembly in 2013, where he listed Russia, ISIS and Ebola as major threats to national security. In 2015, Obama also added Venezuela to that list of threats. Talk about crazy. Of course we all know there is oil in the Middle East, in Russia and Venezuela. Coincidence? 

According to historian and author William Blum, since the end of World War II, the United States has:
- Attempted to overthrow more than 50 foreign governments
- Attempted to assassinate more than 50 foreign leaders
- Attempted to suppress populist or nationalist movements in 20 countries
- Dropped bombs on peoples of more than 30 countries
- Grossly interfered in democratic elections in at least 30 countries
- And have been more involved in the practice of torture than any other country in the world

Even if these numbers are incorrect its no secret that the rest of the world view the United States as the major threat to peace. While war mongering people in Washington utter crazy statements like “Assad must go even if Syria goes with him” - State Department spokesperson Mark Toner. Since the 80s, the US has intervened in the affairs of fourteen Muslim countries, including: Iran, Libya, Lebanon, Kuwait, Iraq, Somalia, Bosnia, Saudi Arabia, Afghanistan, Sudan, Kosovo, Yemen, Pakistan and now Syria. So, I can kind of understand if there are some pissed off muslims. 

Not only has the US threatened Russia but also China by surrounding it with military forces. In a report on US-China relations published by the Council on Foreign Relations in 2015 it is stated that “there is no real prospect of building fundamental trust, ‘peaceful coexistence,’ ‘mutual understanding,’ a strategic partnership, or a ‘new type of major country relations’ between the United States and China.” And thus, the report declares that, the US must develop “the political will” and military capabilities “to deal with China to protect vital U.S. interests.” What interests? South China sea oil? Global dominance? 

I hope the US runs smack into hard physical limits that cannot be solved by borrowing or printing money, finally forcing them to cut military spending or totally bankrupt the population to the point of domestic revolution. I'm sorry my american friends but your “leaders” are not just nuts they also have way too much destructive power at their disposal. 

“Interventions are not against dictators but against those who try to distribute: not against Jiménez in Venezuela but Chávez, not against Somoza in Nicaragua but the Sandinistas, not against Batista in Cuba but Castro, not against Pinochet in Chile but Allende, not against Guatemala dictators but Arbenz, not against the shah in Iran but Mossadegh, etc.” – Johan Galtung, founder of the discipline of peace and conflict studies
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Nine Meals Away from Anarchy



Venezuela has rapidly devolved into utter chaos as hyperinflation, black outs and lack of basic goods are having ever more serious effects on its inhabitants. Doctors are fleeing the country, people are looting grocery stores and killing cats, dogs and doves for food. 

Hunger destroys social order as desperate people take desperate steps to secure food for survival. If people go hungry for too long a revolution is likely. 



Relying on a ‘just-in-time’ delivery system in a period of financial collapse is like begging for social upheaveal in my mind. There is no redundancy at all if the food supply chain is interrupted, at most grocery stores keep some 3 days of inventory. After that, people start bartering and looting until the situation becomes so unbarable that they revolt or flee to another country.

Lack of food security is also caused by a shifting climate with more extreme weather events (e.g. stronger El Niño, more severe droughts) leading to crop failures and people flooding into already overpopulated cities. Creating social unrest as unemployment and crime grows. A situation that occured in Syria just before the civil war broke out. 

According to the latest Global Food Security Update (March, 2016) by the World Food Programme we can see (in the map below) how hunger hotspots are concentrated around the equator in very dry regions, in areas of conflict and countries vulnerable to changes in rainfall patterns due to El Niño. 

For example, food insecurity in Syria have reached alarming levels as most people struggle to find food or the money to buy food. Some 13.5 million people in Syria require protection and humanitarian aid. In Yemen, 56% of the population, i.e. 14.4 million people, are food insecure. In South Africa 31.6 million people have been affected by the poor rainy season due to El Niño. Ethiopia is also suffering from El Niño-induced droughts and some 10.2 million people are currently in need of food assistance.

Food Insecurity Hotspots (orange), WFP presence (brown). Source: World Food Programme, March 2016

Many commodity exporting countries relying heavily on oil for government income and spending (e.g. Venezuela, Niger, Iraq, Angola) are suffering major economic problems due to peak production, rising extraction costs and lower market prices. This is true also for countries like Russia, Saudi Arabia, Brazil and Canada. The less diversified a country is the more vulnerable they are to market shocks.
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Crude awakening?

Oil market in turmoil

There seems to be a lot of confusion regarding the recent behavior of the world oil market. After five years of relatively stable oil prices, a barrel of WTI crude has dropped from around 110 to 81 dollar (see chart below). I have been following a discussion in the opinion-pages of Svenska Dagbladet clearly displaying this confusion. The discussion started with an article from Kjell Aleklett, a physics professor in global energy systems at Uppsala University, arguing that falling oil prices may signal the start of a global economic downturn. After which Magnus Grill, a political representative of the Peoples Liberal Party (Fp) and energy businessman, replied by arguing that Aleklett did not understand economic theory and that we instead more likely will see an economic upswing in the close future. So how come these two prominent people get to totally different conclusions? While this is a very complicated subject, fraught with international politics, there are some key points I would like to make from the natural resource dynamics and economics perspective.

Source: U.S. Energy Information Administration

Geological point of view

First of, Grill makes a fundamental mistake when he writes that the concept of peak oil is about running out of oil resources. Peak oil simply refers to the peak in production of oil, as opposed to demand which is generally assumed to increase. The concept is mainly useful for understanding that there are geological conditions/limits to oil extraction which makes oil increasingly expensive and harder to extract, leading to higher capital expenditures (i.e. diminishing economic returns). Peak conventional oil is according to many system scientists not some fuzzy academic concern but a reality, for the US in 1970 and for the world since about 2005-2008 (e.g. Hall, 2010; Turner 2014). Even the conservative IEA has warned about peak oil. The issue is not really about how much oil there is in the world, since there are surely untapped reservoirs, but rather how much effort we can afford spending trying to get to those oil resources. The harder we have to work for getting more oil (e.g. tar sands, fracking, and deepwater drilling) the less net energy we produce for society. In the 1970s every one barrel of conventional oil in form of energy input yielded about 30 barrels of energy in output (i.e. 30:1). Today that relationship is somewhere around 18:1 (Hall, Lambert and Balogh, 2014). Since oil is still the largest source for global energy use (~33%) this has significant implications for the overall economy. 

Economic point of view

Whether or not you buy in to the fact that non-renewable resources are finite and has a depletion function, or maximum yield curve, there are simple economic factors connected to oil which impacts growth. We also have to think about that oil is subject to supply and demand. So while Saudiarabia may have released some reserves, as they are the price setters, there are other more long-term trends influencing the market. Conventional oil production has been stagnating while the production of unconventional oil, especially shale oil in the US, has compensated for the decline and allowed for a small production increase. However, at the same time, many of the major economies are in recession and reducing their energy demand. For example, Italy has lost 25% of its oil consumption over the last five years (Bardi, 2014). And many other economies are in trouble, now even perhaps Germany. So if there is a increase in supply while demand is falling the market may eventually determine that oil prices should go down. Here, the role of financial operators perceptions play an important role. How low prices will go depends on several factors, but short-term the markets confidence in oil can influence large swings, such as the drastic drop witnessed in 2008-2009. And Saudi oil policy also matters. In the long term, however, oil prices are likely to rise. Secondly, Grill argues that lower oil prices is a good thing that could lead to economic upswing. That depends, if you are an importer or exporter. Sweden is dependent on oil imports, mainly for transportation. So for us it is perhaps beneficial but may also deter our society to shift from oil to other liquid fuels. But, lower oil prices hurts economies dependent on oil exports and non-conventional oil drillers dependent on a high oil price (around 75-90/barrel) to break even (Forbes). If oil prices stay low for any longer period industry will probably produce less oil. Thus, lower oil prices in a resource constrained world does not necessarily imply increases in global growth. 

Conclusion

This is in essence what peak oil means. Peaking does not mean running out of oil but rather that producing more oil becomes much harder/expensive than before. It is therefore possible that oil will cost less in the future, but that we won't have the money to pay for it. So the real question is, up to when are we able to afford further production? And the crucial point is that when a society's economy is based upon non-renewable energy resources there are limits to growth. It is just how nature works, the laws of thermodynamics, and there is no point in trying to argue with nature. There is however a point in arguing with Magnus Grill since he doesn't seem to understand the complex relationships between ecological and social factors influencing resource extraction and energy availability.
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