#190. Mapping the economy, part one



Because almost every aspect of our lives is shaped by material prosperity, anyone wishing to understand issues such as government, business, finance and the environment needs to make a choice between two conflicting interpretations.

One of these is that the economy is a purely financial system which, if it were true, would mean that our economic fate is in our own hands – our ability to control the human artefact of money would enable us to achieve growth in perpetuity.

The other is that, on the contrary, money simply codifies prosperity, which itself is determined by the use of energy. This interpretation ties our circumstances and prospects to the cost and availability of energy, and explains growth in prosperity since the late 1700s as a function of the availability of cheap and abundant energy from coal, oil and gas.

The critical factor in the energy equation is the relationship between the supply of energy and the cost (expressed in energy terms) of putting energy to use. The cost element is known here as ECoE (the Energy Cost of Energy), which has been rising relentlessly over an extended period.

This means that ECoE is the ‘missing component’ in conventional economic interpretation. Whilst ECoE remained low, its omission mattered much less than it does now. This is why conventional, money-based economic modelling appeared to work pretty well, until ECoE became big enough to introduce progressive invalidation into economic models. This process can be traced to the 1990s, when conventional interpretation noticed – but could not explain – a phenomenon then labelled “secular stagnation”.   

If economics should indeed be understood in energy terms, the possibility exists that we can model the economy on this basis, expressing in financial ‘language’ findings derived from energy-based interpretation. From the outset, this has been the aim of the SEEDS economic model. The alternatives to this approach are (a) to persist with money-based models which we know are becoming progressively less effective, or (b) to give up on modelling altogether, and ‘to blindly go’ into a future that we cannot understand.

SEEDS has now reached the point at which we can ‘map’ the economy on a comprehensive basis, starting with a top-level calibration of prosperity which shows that rising ECoEs are impairing the material value of energy, and will in due course reduce energy availability as well.

Starting from this top-level calibration, SEEDS goes on to map out the ways in which, as we get poorer, our scope for discretionary (non-essential) consumption will decrease, whilst economic systems will become less complex through processes including simplification (of products and processes) and de-layering.

As involuntary “de-growth” sets in, a financial system based on the false premise of ‘perpetual growth’ will fail, resulting in falls in asset values and a worsening inability to meet prior financial commitments. If we persist in using monetary manipulation in an effort to defy economic gravity, the result will be a degradation in the quality and viability of current monetary systems.

As personal prosperity shrinks, public priorities will switch towards a greater emphasis on matters of economic well-being, including the choices that we make about the use of prosperity, and its distribution as wealth and incomes.

The aim here is to explain the mapping process and set out its findings. This article starts the process by looking at how prosperity is calibrated, and the trends to be anticipated in aggregate and per-person prosperity.

A second article will evaluate what this will mean in various areas, including finance, business and government. It might then be desirable to examine how we might best adapt our systems to accommodate changes in an economy that is turning out not be a money-driven ‘perpetual growth machine’ after all.       


Energy supply          

It’s an observable reality that the dramatic expansion in population numbers and economic activity since the start of the Industrial Age in the late 1700s has been a product of access to cheap and abundant energy from coal, oil and natural gas.

This has been reflected in a correspondingly rapid rise in energy use per capita. This metric has expanded along an exponential progression that has been checked only twice – once during the Great Depression of the 1930s, and again during the oil crises of the 1970s. Even these interruptions to this progression turned out to be temporary, though both were associated with severe economic hardship and financial dislocation.

Importantly, neither of these events was a function of changes in energy fundamentals. Rather, both were consequences of mismanagement within a physical (energy) context which remained favourable for growth. Preceding financial excess was at the root of the Great Depression, whilst the crises of the 1970s resulted from a breakdown in the relationship between producers and consumers of oil.       

In recent times, belated recognition of the threat posed to the environment by the use of fossil fuels has shifted the focus towards ambitions for dramatic increases in renewable sources of energy (REs). But the assumption has remained that we will nevertheless be using more energy, not less – and, very probably, more fossil fuels – for the foreseeable future.

The consensus expectation, as of late-2019, was that, despite an assumed rapid increase in the supply of REs, the world would nevertheless be using about 14% more fossil fuels in 2040 than it used in 2018, with the consumption of oil increasing by 10-12%, and no overall fall in the use of coal.

These assumptions were reflected in the depressing conclusion that emissions of CO² would continue to grow, with massive investment in non-fossil alternatives doing nothing more than blunt the rate of emissions increase.

The flip-side of these projections was the almost unchallenged faith that continued to be placed in a ‘future of more’ – for example, it was assumed that, by 2040, there would be an increase of about 75% in the world’s vehicle fleet, and that passenger flights would have expanded by about 90%. Automation – as a use of energy – would continue, as would the consumption of non-essential (discretionary) goods and services.

Government, business and financial planning remains predicated on this assumption of never-ending economic expansion.  

Fundamentally, none of these assumptions has been re-thought because of the coronavirus crisis. Expectations for the future ‘mix’ of energy supply may have changed since late-2019, but the consensus view seems to remain that, after the energy consumption hiatus caused by the covid crisis, the future will still be shaped by a continuing expansion in the use of primary energy. It still seems to be assumed that there will be no overall reduction in the use of fossil fuels, at least until the middle years of the century. Needless to say, faith in a ‘future of more’ remains unshaken.

Some commentators may opine that the fossil fuel industries are ‘finished’, but realistic assessments of the rates at which RE capacities are capable of expanding do not support a view that REs can expand rapidly enough to replace much of our current reliance on oil, gas and coal.  

The problem with all of the consensus forecasts seems to be that forward energy use projections are a function of economic assumptions. Thus, if the economy is assumed to be X% bigger by, say, 2040, then its energy needs will have risen by Y%, and the deduction of non-fossil supply projections for 2040 leaves our need for fossil fuels in that year as a residual.

This, of course, is to take things in the wrong order. What we should be doing is assessing the future energy outlook, and only then asking ourselves how much economic activity the projected level (and cost) of energy supply is likely to support.

For this reason, SEEDS no longer uses consensus-based projections for future energy supply. The SEEDS alternative scenario sees the world having 8% less fossil fuel energy available in 2040 than was used in 2018. The inclusion of assumed rapid increases in contributions from non-fossil sources still leaves total primary energy supply no higher in 2040 than it was in 2018. Even this scenario might turn out to have been over-optimistic.

This in turn means that primary energy use per person has now started to decline. Something along these lines happened during the 1930s and the 1970s, but neither was more than a temporary hiatus in a continuing upwards trend.

Fig. A

ECoE and surplus energy

For the purposes of economic modelling, the aggregate amount of energy available at any given time needs to calibrated to incorporate changes in the energy cost of accessing that energy. The principle involved is that, whenever energy is accessed for our use, some of that energy is always consumed in the access process, meaning that it is not available for any other economic purpose. This ‘consumed in access’ component is known here as ECoE (the Energy Cost of Energy).

The processes which drive changes in the level of ECoE are reasonably well understood. In the early stages of the use of any type of energy, ECoEs are driven downwards by a combination of geographic reach and economies of scale. Once these drivers are exhausted, depletion kicks in, driving ECoEs back upwards.

Technology acts to reinforce the downwards pressures exerted by reach and scale, and mitigates the upwards cost pressure of depletion. But the scope of technology is limited by the physical characteristics of the energy resource, such that no amount of technological progress can, for instance, cancel out the effects of depletion.

Thanks to scale and reach, assisted by progress in technology, the ECoEs of fossil fuels fell steadily for most of the Industrial Age until they reached a nadir that occurred during the twenty years after 1945. This meant that, until this nadir arrived, we benefited both from increasing total energy supplies and from falling ECoEs. This is to say that ‘surplus’ (ex-ECoE) energy availability increased more rapidly than the totality of supply.

For a long time now, though, the ECoEs of oil, gas and coal have been rising, a function of depletion, only partially mitigated by technology. With fossil fuels still accounting for more than four-fifths of all primary energy consumption, this has meant that overall ECoE, too, has risen relentlessly. This overall trend, as calibrated by SEEDS, is that ECoE rose from 1.8% in 1980 to 4.2% in 2000 and 6.4% in 2010, with the number for 2020 put at 9.0% and an ECoE of 11.6% projected for 2030.      

This interpretation, taken together with volume projections – themselves heavily influenced by ECoE cost trends – suggest that the decline in total energy use per person will be compounded by a still-faster fall in surplus energy supply per person. This, incidentally, means that surplus energy, both in aggregate and per capita, would fall even if the over-optimistic consensus view on aggregate energy supply turned out to be correct.

The great hope, of course, has to be that the downwards trend in the ECoEs of REs will continue indefinitely, eventually driving overall ECoEs back downwards. This is unlikely to happen, not least because expansion in RE capacity continues to depend on inputs made available by the use of resources whose availability relies on the use of fossil fuels. We cannot – yet, anyway – build wind turbines or solar panels using only the energy that wind and solar power generation can provide.

Though the ECoEs of REs are indeed at or near the point of crossover with those of fossil fuels, this is really a function of the continuing, relentless rise in the costs of accessing oil, gas and coal.  

It is, of course, a truism that equal calorific quantities of energy from different sources have different characteristics. Energy from petroleum, for instance, is ideally suited for use in cars and commercial vehicles, whereas wind and solar energy are better suited to transport systems like trains and trams. Public transport systems, powered directly, can greatly reduce our reliance on the insertion of batteries into the sequence between the supply and use of electricity.

This, essentially, is a management issue, in which trying to drive petroleum-optimised vehicles with wind or solar electricity can be likened to trying to propel a sailing ship using steam directed at its sails. 

Fig. B

Economic output

With the role of prosperity-determining surplus energy understood, the next stage in energy-based mapping of the economy is to connect this to the financial calibrations through which, by convention, economic debate is presented.

Unfortunately, the conventionally favoured metric of GDP is unsuited to this purpose, essentially because rapid expansion in debt (and in other liabilities) creates a sympathetic (and artificial) increase in apparent GDP.

Regular readers will be familiar with the ‘wedge’ interpretation set out in the next set of charts. Between 1999 and 2019, reported GDP increased by $66tn (PPP*) whilst debt expanded by $197tn, meaning that each dollar of reported “growth” was accompanied by $3 of net new debt. Over a period in which GDP grew at an average rate of 3.2%, annual borrowing averaged 9.6% of GDP.

With these credit distortions understood and excluded, the rate of growth falls from the reported 3.2% to just 1.4% on an underlying basis. The calibration of underlying or ‘clean’ output (C-GDP) reveals that the insertion of a ‘wedge’ between debt and C-GDP is reflected in the emergence of a corresponding wedge between reported (GDP) and underlying (C-GDP) economic output.

This in turn means that we are deluding ourselves, not just about the real level of economic output but also about the various ratios and distributions based upon that metric.

Fig. C


Ultimately, the basis of any effective system for interpreting and modelling the economy must be the identification of prosperity, a concept which can then be used as the denominator in a host of important equations. The SEEDS model accomplishes this by identifying C-GDP and then deducting trend ECoE.

C-GDP defines economic output, but recognition of the role of ECoE means that this output is not, in its entirety, ’free and clear’. Output, measured as C-GDP, is the financial counterpart of the aggregate energy available for use. But a proportion of this energy value – and, consequently, a corresponding proportion of economic output – is required for the supply of energy itself, and is not, therefore, available for any other economic purpose. Accordingly, trend ECoE is deducted from C-GDP output to arrive at a calibration of prosperity. This, of course, can be expressed either in aggregate or in per capita amounts.

Before going further, we can note that an equation involving four components defines material well-being calibrated as prosperity. First, we need to know the quantity (Q) of energy available for economic use. Second, we need to identify the conversion efficiency (CE) with which this energy is turned into economic value (O).

Third, we need to deduct ECoE to know how much of this economic value is ‘free and clear’ for use in all economic purposes other than the supply of energy itself. Fourth, the division of the resulting aggregate prosperity (P) by the population number (N) tells us the prosperity of the average person in the economy.

At the top level, this equation reveals the onset of a deterioration in global prosperity per person. Energy quantity growth (Q) is slowing, and the best we can expect for conversion efficiency (CE) is somewhere between static and gradually eroding. ECoEs are continuing to rise, and the number of people between whom prosperity (P) is shared continues to increase.

A summary of projected trends in prosperity per person is set out in the following table.

Table 1

 A critical determinant which emerges from this equation is the existence of a direct correlation between ECoE and prosperity per capita. In the United States, prosperity per person turned down after 2000, when American trend ECoE was 4.5%. The coronavirus crisis seems to have brought forwards the inflection-point in China to 2019, when the country’s trend ECoE was 8.2%.

Broad observation across the thirty countries covered by SEEDS indicates that complexity determines the level of ECoE at which prosperity per capita turns downwards. In the sixteen advanced economies group analysed by the model (AE-16), the inflection point occurs at ECoEs of between 3.5% and 5%. The equivalent range for the fourteen EM (emerging market) countries (EM-14) runs from 8% to 10%.

This has meant that EM countries’ prosperity has continued to improve as that of the AE-16 group has turned down. This in turn has meant that global, all-countries prosperity has been on a long plateau, with continued progress in some countries offsetting deterioration in others.

Now, though, the model indicates that the plateau has ended, meaning that, from here on, the world’s average person gets poorer.   


Fig. D


These top-down findings are a good point at which to conclude the first part of this explanation of the energy-based mapping of the economy of which SEEDS is now capable. In Part Two, we shall follow some of its implications, looking at assets and liabilities, the outlook for businesses and the challenges facing government.



* Global aggregation and international comparison require the conversion of other currencies into dollars. One way of doing this is to use market exchange rates. The other is to convert on the basis of purchasing power parity (PPP).

Except where otherwise noted, SEEDS uses the PPP convention. Where circumstances make market conversion preferable, the annotation ‘MKT’ is used.    




133 thoughts on “#190. Mapping the economy, part one

  1. A very good summary of a perceptive way to model the economy.
    At the end of the comments in the previous post, I asked about the prospects for any of the ‘green revolution’ initiatives actually working. Sleeping on the subject did reveal one perhaps novel thought. And Alice Friedemann today assures us that there won’t be any toasters:
    The thought that occurred to me in sleep is that we can create certified products which create only recyclable waste and/ or are very long lived. The certification process would be similar to the Organic certification…that is, the product has been examined and certified. Thus, toasters as presently configured would not be certified, but a metal toaster designed to be held in a fire might be (if you have ever used one of these while camping, you know what I am talking about). Products which mix metals and plastics would not be certified, since the plastic is particularly subject to failure. Without trying to write a manual of specifics, I will just leave you with the general idea. The certification might also be a convenient way to segregate the essential from the luxury and thus enable tax discrimination.

    Don Stewart

  2. Tim,

    Remember Goerings dream of a 20000 plane Luftwaffe, something even the USAF only just about managed at the end of WW2 and which entirely ignored how he proposed to get the fuel for them.

    Richard Douthwaite pointed out that there was a district in Ireland which was in economic terms ‘Third World’ but full of rather nice new houses and well fed people, basically when a couple got married the community got together and built them a house, usually on land already owned by the family.

    The result,a pretty reasonable standard of living but not much cash changed hands

    GDP is far from the B all and End All

    • Interesting. What comes to mind is Bruce Darrell’s “Red Gardens Project”, in the Irish midlands near the ‘eco-village’ of Clough-Jordan (sic?). Mr. Darrell has been blogging regularly about his abiding concern: about how best to produce food in his chosen environment and enters into detailed calculations as part of his continuing assessment. His most recent video on YouTube, entitled “The Larger Context” presents his thoughts about the current situation and the somewhat urgent and pressing need for new gardeners NOW along several timelines into the future. It may be of interest to some readers of this site as well. https://youtu.be/XBgoa3tRmXQ

    • Adolf Galland once related, in an interview, how he sat in a deckchair looking up at USAAF vapour-trails – he had plenty of aircraft, but no fuel.

      In West Wales, there was a tradition that, if a house could be built in a day, such that smoke was coming out of its chimney by sunset, the owner could throw a stone, and the circle of land within the radius of the stone’s fall became his. The way this was done was to build a circular stone house around a central stone chimney. These houses are known as “stone’s-throw” houses, some still exist, and I once spent a night in one.

  3. I very much appreciate your continued very thoughtful posts, Dr. Morgan.

    “Some commentators may opine that the fossil fuel industries are ‘finished’, but realistic assessments of the rates at which RE capacities are capable of expanding do not support a view that REs can expand rapidly enough to replace much of our current reliance on oil, gas and coal.”

    I think this is accurate, but I was wondering what is the data behind this that leads you to this conclusion.

    • Thanks.

      In millions of tonnes oe, consumption in 2018 was 13,932 – FFs 11,744, REs 629, nuclear + hydro 1,613.

      As of late-2019, the consensus view for 2040 was total of 16,612. Deduct REs of 1,006 and N + H of 2,230, this leaves FFs at 13,375 (+14%). I don’t think that FF number is feasible.

      I assume that REs can do better than that, but we’re still left needing a lot of FFs unless we accept significantly lower total supply in 2040.

    • It’s a combination of factors. Here are some of them.

      First, consumption of FFs in 2019 was 11,826 mm toe. Total RE was 691 mmtoe, but the only REs capable of substantial growth are wind and solar, which supplied 486 mmtoe. Even if total demand doesn’t increase, can we grow these from 486 mmtoe to 12,312 mmtoe, to replace FFs? If so, by when?

      Second, doing this would require vast material inputs, for most of which we are dependent on fossil fuel energy.

      Third, the FF-based infrastructure was built when the ECoEs of FFs were far lower than they are today. We couldn’t have built this infrastructure at any level of ECoE likely to be attained by REs.

      Fourth, the idea that we can “replace” FFs with REs is popular with politicians and others – that is, with non-experts. Expert forecasting authorities don’t make any such case, confining themselves to “a lot more” REs. This kind of more achievable plan has been costed, again by experts, at between $95tn and $110tn. Can even the ‘rich’ countries afford this – and supply the physical inputs which such sums of money represent?

      I’m all in favour of REs – not least because the rising ECoEs of FFs not only would kill but are killing the economy. But ideas that we can make FFs ‘redundant’ by the expansion of wind and solar are – to put it politely – ‘visionary’ and ‘ideological’ rather than rational.

      Finally, we’re not investing remotely enough to be on track even for more modest goals. Neither are we prepared to accept that – for example – an economy optimally powered by electricity would be an economy of trains and trams, not of cars.

    • Dr Morgan,

      Your reply to Justin mentions the ability to construct the infrastructure of wealthy countries. I wonder if SEEDS takes infrastructure maintenance into account?

      If a new bridge is constructed it increases prospertiy by providing an additional way to cross over an obstruction, but if a bridge is just repaired to bring back to proper working order all the energy used in the repair process is ‘wasted’. Tainter and others have zeroed in on the cost of maintaining complexity as one of the key drivers of declining prosperity (or even societal collapse).

      So, I think that even after useful surplus energy is segregated from its energy cost, it would be important to see how much of that surplus is used in just maintaining the status quo. If that amount is increasing, prosperity is declining, even if ECOE remains the same.

    • Rde:
      “it would be important to see how much of that surplus is used in just maintaining the status quo. If that amount is increasing, prosperity is declining, even if ECOE remains the same.”

      Excellent point, Joe.

    • Thanks Joe.

      I think SEEDS is already telling us this.

      SEEDS enables us to identify the level of ECoE at which prosperity per person turns down. For advanced economies, this happened at ECoEs of between 3.5% and 5.0%. The equivalent level for EM economies is between 8% and 10%.

      This emerged as soon as SEEDS was able to produce prosperity per capita data, enabling this comparison with ECoE to be made.

  4. Bardi on Energy Transition
    With no technical comment from me, here is Ugo’s modeling of the energy transition from a few years ago:
    “the energy transition will be neither easy nor impossible, but it will require a substantially larger rate of energy investment than the currently allocated one. An increase of the order of magnitude we estimate here will require effort, planning, and resource prioritization. This result contrasts with the optimistic view that market factors alone will be sufficient to carry out the transition without any reduction in the energy supply. It shows, instead, that a crucial policy priority is, at present, to increase investments in renewable energy as fast as possible. One such avenue is to convince institutional investors that renewable energy expansion in diverse global regions with its long-term, tangible, essentially guaranteed physical energy yields should be preferable to bonds that currently yield negative inflation-adjusted returns (e.g., US treasury bonds) and even nominally negative returns for the cases of German bonds. Governments can establish the confidence that the new renewable infrastructure offers a much better use of their monetary capital issuing energy infrastructure bonds of their own.

    From an energy balance and resource availability perspective, we can achieve a 100% renewable energy system. It will require supporting innovations from research and commercial diffusion of energy storage mechanisms. More than that, it will require planning how much energy will be needed in order to achieve it, also taking storage into account. For such planning, we need to democratize the fora of the energy transition discussions while strengthening the public’s trust to the scientific process. A 100% RE energy system is neither impossible nor uneconomical. The scientific community and the civil society need to work closely together in helping it become a reality before it is too late to avoid the disastrous effects of climate change.”

    Now a couple of observations from me:
    *Strong political leadership is what Biden and Xi are apparently going to try to give
    *We have not, in fact, used the last few years for transitioning at the speed required
    *Bardi sort of assumes the ‘death of fiat’, to be replaced by renewable energy bonds
    *I am not sure about process heat. That is a big deal with people like Alice Friedemann. Electricity can recycle steel, but currently doesn’t make steel.
    *The forecast for the next 7 days in North Carolina is rain punctuated by gloom and drizzle with occasional bright spots of simply overcast. I assume such forecasts are not unheard of in Europe. Winds are all less than 10 mph. Are we sure about all this?
    Don Stewart

    • ‘This’ was pointed out to me.
      ‘ “This pioneering partnership with Xcel Energy and Lightsource BP marks a milestone for the development of our new rail mill and will make EVRAZ North America the industry leader in the use of renewable energy to produce the greenest steel and engineered steel products in the world, from rail to rod and bar,” said Skip Herald, president and CEO of EVRAZ North America, in a statement. “This long-term agreement is key to our investment in Colorado’s new sustainable economy.” ‘

    • @postkey
      Thanks for the link. As I understand the steel industry, the old style steel mills (ore mined in Minnesota, shipped down the Great Lakes to Detroit, then through the whole process of producing pig iron using coking coal on down to various types of steel and finally becoming the body of an automobile) have been dying for decades. They were replaced by ‘mini-mills’ which used electricity to recycle steel. A very high percentage of steel is recycled, and the US use of steel slowed greatly as the country matured. China in recent decades has used an enormous amount of traditional steel because they were building their infrastructure from scratch.

      Again, if I understand it correctly. The mini-mills could be operated during times when solar electricity (or wind) was being produced and shut down when it was not available. The old continuous process mills could not be shut down without various disasters happening.

      The recycling plants are much lower capital intensity, much smaller in size, and have generally been non-union and located near their resource, which is not ore and shipping lanes and coal but instead reclaimed steel. So instead of Pittsburgh, we got mini-mills all across the country.

      I’m not sure about glass, but I expect that glass might follow the same model. But glass is usually colored, and recycled glass might all end up brown or grey? We used to recycle glass by color here, but they stopped when China stopped buying scrap for recycling. Now it all goes into a big container. The amount paid for recycled materials has been in free-fall since China stopped buying it.

      Virgin aluminum is enormously energy intensive and continuous process. That is why lots of US states passed laws making it a crime to throw away beer and soda cans, so that the recycling of aluminum could supply much of the demand. Skid-rows all across the country featured poverty stricken people selling cans they had collected in order to make a few dollars. Much of the virgin aluminum production in the US was once powered by the electricity produced by dams in the Tennessee Valley Authority.

      Don Stewart

  5. Possibly next UN Secretary General on Circular Economy
    Over 90 percent of the global economy continues to operate on the “take, make, toss” principle. “But the materials needed to decarbonize electricity and mobility are supplied by mining and extractives industries, places where impacts from natural resource extraction can be most severe. Manufacturers of wind turbines, photovoltaics, batteries and vehicles—critical technologies to the clean energy transition—still primarily rely on feedstocks and inputs from natural resources as opposed to waste for processing and production.”
    I will only observe that a circular economy for the materials needed to make solar and wind systems will likely increase the cost. Therefore, the current apparently low cost of wind and solar is not solving the problem.
    Don Stewart

  6. Well presented, Dr. Tim. Monetization of debt is the only path I see being undertaken by most governments. The drama will increase. Not fun for Mary and Joe Public, though.

    • For how long can they monetize? Just wondering. So most here agree the “real” economy is a physical system. I would add “and a human social system.” Money is a marker of that system. We cannot print our way to prosperity. So in the end, there must be physical/energy system limits on governments’ (particularly the U.S.) ability to monetize debt? Maybe the system feedback comes in the form of geopolitical turmoil, or domestic social or political instability, or the sudden and “unexpected” crisis in the financial system. At some point, governments might be forced to align their currencies with value produced from the physical system. That means default rather than monetize?

    • Anyone doubting the relationship between money and physical (energy) output could try being cast adrift in a lifeboat, with vast amounts of money, but no food or water on which to spend it.

      The authorities have no real choice about ‘monetisation to the point of collapse’. Any chance that they might have had to get off this track came and went in 2008-09.

      On ‘when?, we can’t know, and it might take a little longer than seems rational. The first country to monetise its currency to destruction is likeliest to be the UK, though the US is a definite contender. The only government which seems to me to be conscious of this risk is China, noticeably more so under Mr Xi.

      Politics and government are going to change drastically, in ways that few involved can even understand or contemplate at this point.

      This is something that I hope to get on to later in this series.

  7. One meta-pattern I think I see in this work, a pattern I applaud, is the widening of the lens of the things that economic thought must cope with; an internalization of elements previously deemed to be “externalities.” The next step is to include the “Ecological costs of Civilization” (ECoC) as ral factors in our economcis seeing, thinking and doing. After all,as a species, we are already in ecological overshoot. The clock is already ticking down to our self-inflicted suicide. It would be ironic if as we finally agree on the importance of the ECoE we also find that we are done in as human cultures by our blindness to the ecological costs of our ways of apprehending and responding to reality.

    • Spot on, Ruben. Good to see you on this forum. Most comments pertain to prosperity. Many H. rapacious-superstitious are struggling to survive, and long term thinking is off their radar. The “First World” is not well suited to endure when energy descent speeds up. Yet the toxification and depletion of nature’s bounty is global. The luckiest remote subsistence farmers, fishermen, hunter gatherers will be the last people standing in my opinion.

    • “ The clock is already ticking down to our self-inflicted suicide.”
      Exactly. Enjoy your popcorn, everyone!

      Our blindness, though, is really in my opinion just part of human nature (painful though it may be to us Cassandras). Every step of “development” in our “progress” of civilization “seemed like a good idea at the time.” As others have said.

    • In his blog Tim Watkins under the subject “Let us talk CROCI” raises a very useful
      concept which could help with correlation between the energy depletion via ECOE and carbon consumption via CROCI. Taking these two factors in to consideration could model the ecological consequences

      CROCI definition – Carbon reduced on carbon invested.

  8. I’m really starting to get into the graphs, it’s becoming easier for me to relate real life as lived and experienced to the line traced,
    the recent period 2007-2019 has been the plateau, 2020 a covid drop and 2021 the beginning of unavoidable decline,
    it’s also encouraging to see population getting a mention as this is one of the few variables we still have some scope for altering, that could have an appreciable impact, either way,

    C-GDP per capita is a real world figure, but still averaged across population,
    at some point it would be nice to see C-GDP per capita broken into some broad income groupings to illustrate the nature of the K shaped ‘recovery’ we are currently in,
    the current scheme of income distribution is likely to be described as;

    “never in the field of human economy has so much been gained by so few, at such a cost to so many”

    this is likely to be the friction experienced within the politics of decline,

    a popular aphorism being that a trouble shared is a trouble halved,

    this is my view from the bottom, I doubt I’m visible from the top, they seem to have their heads in the clouds.

  9. Hi Dr. Tim,

    Thanks for the article!

    The laypeople are becoming aware of the credit adventurism happening around the world. However, they are hearing these arguments from “investment experts” from Youtube championing Bitcoin. They believe Bitcoin might reach $1m valuation. This is happening to a few friends in my circle.

    The huge inequality, QE, ZIRP and general perceived decline of standard of living seem to have swerved many to believe Bitcoin as the savior. Bitcoin as alternative “store of value” is becoming more mainstream. Is this the technological society’s response towards the decreasing prosperity?

    What’s your thought about the bitcoin trend and also the increasingly skeptical citizens who are getting their monetary economics education from Bitcoin-related channels?

    • I am another interested layperson. Surely if money is not ‘real’ then Bitcoin is even less so? And all those Cloud servers, using massive amounts of energy…what happens to the Bitcoins when they fail? Or do I not understand the real situation?

    • Kate
      You must listen to their perspectives from their community themselves. I cannot reproduce their arguments convincingly. A few of the links my friends sent me:

      IMO, the information presented in those videos are half-truths at best and outright misinformation at worst (such as the renewable studies. It is useless when the electricity usage is growing too) Perhaps people just need rationalization to jump on the bitcoin bandwagon.

      On another hand, I believe that with ZIRP + QE, people with the borrowing means are able to inflate the price of any asset and drive a mania with it. An exotic & “shiny new thing” such as cryptocurrencies are perfect for such scheme.

    • If investors believe that the authorities are utterly committed to pouring money into the system, rises in stock prices and cryptos make solid sense – stocks to ride the tide of liquidity, cryptos as a defence against the inflation that extremely loose monetary policy is likely to create.

    • Ronny and Kate,
      The discussion on the YouTube between the “orange pill “ bloggers Stacy Herbert and Max Keiser and Jay Martin of Cambridge House is certainly not b———- .
      That couple have got a very good handle on the Bitcoin concept and how it can keep the greedy predators of the banking community at bay and thereby create a less unequal society by giving control to the individual.
      Another very good source of info on Bitcoin/Blockchain is presented in the book
      “The Truth Machine” by Michael J Casey and Paul Vigna .

    • Kate

      This interview between Michael Saylor and Ross Stevens I think is the most compelling interview around Bitcoin. It is about an hour long but he explains the rationale very completely.

      There is a specific section on energy use of Bitcoin around 25 mins.

      Although I’ve become a firm believer I’m not sure it is in anyway the answer to the issues of energy and declining prosperity however perhaps increasing adoption of either cryptos, some stablecoin or other asset may allow us to gradually move away from fiat currencies, so that they wither on the vine so to speak. It might be a way for Governments to let them inflate away slowly with the least collateral damage.

  10. Thank you for the essay. The trends around Prosperity per capital are telling and I would suggest that if the point about deteriorating income equality (Matt’s comment) was factored in, the picture would show a very serious decline. The many protests and examples of civil unrest around the world are indicators of the deteriorating trend and how the burden is falling on the bottom 80% (perhaps even more). I wonder if the SEEDS model could incorporate some sort of Gini coefficient to account for this?

    • Thanks.

      On the question you raise, the mapping project has been the ‘ultimate aim’ for SEEDS, and that is now in sight. In subsequent parts of this series, we’ll look at finance, business and government. The latter, logically, includes issues like unrest.

      Social and political pressures are likely to be exacerbated by (a) worsening impoverishment, and (b) mass migration from countries whose plight deteriorates towards or below subsistence. Some sectors are likely to have to be taken into public ownership, starting with some of those which provide essentials.

      Incorporation of Gini is certainly a possibility, at a later stage. But for now I’m concentrating on the fall in average prosperity per capita to the point where it squeezes out discretionary consumption, and pushes ever larger numbers below the point at which even the essentials are affordable.

  11. @postkey
    A couple more thoughts on circular economy and recycling raw materials. You understand, of course, that I am just an interested bystander…not an expert. The free market will almost always choose the lowest cost option. So long as energy and raw materials are cheap, virgin production is likely to be the cheapest way to make things. If the economy is growing rapidly (the US in the hundred years from 1875 to 1975; China in recent decades), then virgin production will account for the bulk of what is produced. Recycling almost always involves a lot of human labor. Thus the skid row aluminum can scavenging in the US and the people living in the trash piles of Mexico City looking for anything of value and the people in my neighborhood who hang out at the recycling center going through what people throw away.

    Mainstream capitalism has chosen miniaturization and exotic materials as more productive of profits. Thus, we get cells phones and chips in everything and carbon fiber bicycles and so forth. But the ironies are that miniaturization turns out to require enormously expensive, continuous process plants now located in a very highly concentrated industry (see Alice Friedemann’s recent articles) and many of the exotic materials are not recyclable.

    A true free-market believer will shrug their shoulders and say “if the cost of energy increases, then the market will shift toward recycling”. The ‘green’ advocate will point to the scandalous amount of waste produced by the free market and appeal to moral reason. Unions will point to the impossibility of ever unionizing the skid row people who collect aluminum cans and seek legislation…which explains why the Democrats ‘green’ initiatives have met so much resistance in organized labor.

    There are real conundrums involved. I am not sure that a congressional pork allocation of money is any better than just letting the market work. What we typically do is subsidize plants such as the one in Colorado (I don’t know the details on it). But if we were really serious, we would recognize that energy subsidies have to come from some other energy source and using fossil fuels to subsidize ‘renewables’ is delusional thinking.
    Don Stewart

    • Recycling in a way that is foreign to most in the west but will come soon enough.
      The following is shot in India. The preamble: In the Dharavi slums, in the heart of Mumbai, live more than a million people. We always think that slums are poor and depressing places, but are they? Jelle talks with potters and plastic recyclers, bodybuilders and tailors, and also sees a blue dog walking by.

  12. As always thanks for a thoughful piece.
    I think that the problem as to how declining prosperity is shared (or not) is important and I’d like to see more discussion about this – as others above have suggested. Incorporating the Gini coefficient would be interesting but this would be incorporating an historical metric into future trends with its attendant problems. It raises the question as to whether we should expect the same trends of growing inequality in the future as we’ve seen in the last several decades or will things be different? The last 20-30 yrs has seen growth in the size of the pie to be shared (albeit much on the basis of borrowed money) but how will the pie shared when it’s getting smaller? Can we learn from historical depressions or periods of economic decline? In the past economic contraction (both at the state level and within states) sees the fit, healthy and well-off leaving or emigrating; those remaining are the poor, disadvantaged and elderly. Is this a model for where we are going?

    • Thanks David.

      A lot of the issues that we’re discussing here may become clearer after part two – having addressed the ‘top level’ picture of energy and prosperity here, the plan is to move ‘downstream’ from that, hopefully looking at the financial situation, business and government, if all of these can be fitted in to a single article.

      Several parts of that might feed in to the theme of inequality. One of these is discretionary prosperity – the ability to afford non-essentials without recourse to credit. As this continues to contract, increasing numbers will fall below a level that we might call ‘civilized subsistence’. At the same time, governments’ tax bases will contract, and adverse trends in finance are likely to reduce the theoretical (i.e. paper) wealth of the better off.

      These trends are likely to create political pressure for redistribution, and governments may need to intervene in some sectors to try to contain the cost of essentials.

      I’m looking at Gini, and trying to work out whether this can help us to calibrate these pressures. Up to now, SEEDS analysis has stopped at per capita results. What I’m thinking about is whether Gini can help us produce an inequality-weighted per capita number.

    • @Dr. Morgan
      “Civilized subsistence”
      is a slippery concept. For example, there is now a loosely organized group of people in the US who live in vehicles (typically old trucks) parked on US government land (typically Bureau of Land Management land in the West). Their income levels put them at ‘severe poverty’, but they do not exhibit Dickensian dysfunctional poverty…they just don’t make and spend very much money at all. They live on the fringes of a rich society…e.g., they have computers which they can use at Wi-Fi hotspots, but they don’t have electricity or running water in their trucks.

      So a relevant question now and in the coming decades is “what is really essential?”. In a perfect world, governments would make it easy for people to meet their essentials through self-reliance and cooperative efforts and using common resources. However, governments have increasingly become focused on the notion of forcing people to pay taxes, as government debt has escalated. I don’t have many suggestions for an analytical scheme which makes sense of all this…I’m just pointing to a trend already evident which undermines many assumptions about “American life”.
      Don Stewart

    • Thanks Don. The whole concept of essentials interests me, for a number of reasons. It’s also one of the few ‘Blocks’ remaining to be finalised before the SEEDS mapping process gets to where it’s intended to get. (Incorporation of inequality is another such Block, and obviously these two are related).

      ‘Essentials’ isn’t the easiest concept to define. Yes, we all need food and drink, obviously, but we don’t need Beluga or Bollinger, even if some of us think we do. We need electricity, but how much of it? We need a roof over our heads, but it doesn’t have to be of any particular size. And so on.

      Likewise, paying for government services is “essential” – in the sense that we have no choice about it, whether we do or do not agree with any particular form of public spending, or would like to see less or more of it.

      This of course feeds into poverty, as in ‘lack of’ or ‘inability to afford’ the “essentials”.

      I think part of this includes how we fit in to society – do we feel ‘deprived’, and to what extent are “poverty” and “essentials” relative concepts? Our grandparents wouldn’t have felt “deprived” if they didn’t have cars or refrigerators, but today most of us would. This suggests changes over time, and variation by location.

      This is of particular interest to me, as I’ve been concerned about poorer country poverty ever since I had (and asked for) this brief in the student union way back.

      I think I’ve got a reasonable handle on essentials now, for the purposes this fulfills in SEEDS and the mapping project.

  13. Currencies are a proxy for energy and are created at will by a very select and evil few.

    Unless population growth is halted and reversed, no proposed solution to economic harmonization will succeed. Does the SEEDS model factor this?


    Also, recycling is energy intensive, polluting and uses equipment and resources that could be of better use elsewhere. Repair, reuse and improvise is more efficient.


    • @ Harquebus, agreed, over-population’s the mammoth in the room that nearly everyone doesn’t discuss, the key they won’t see that’ll unlock the solution to it all.

      Re energy, I’ve quite a few highly qualified acquaintances met mostly through work, who despite being more able than most to identity and analyse the energy aspect of the bio-economic system of life on our planet, are resolutely blind to it. When making gentle enquiries as to how we’re going to solve the issue of rapidly diminishing usable energy, beyond cognitive dissonance, the only intelligible response I get equates to ‘new tech will save us’, the modern equivalent of magic.

      As for recycling, yes, if a product isn’t designed with definite and easy recycling possible, we shouldn’t bother this late in the game.

    • It seems hard for many people to appreciate that the capabilities of technology are bounded by the limits of physics. This was why fracking was never going to turn the American oil industry into the equivalent of Saudi Arabia – the physical characteristics of the resources were never going to make this possible.

    • @Dr. Morgan
      Some physicists see an emerging world of abundance. Frank Wilczek, the Nobel winning physicist, writes in Fundamentals: Ten Keys to Reality:
      “The Future of Material Abundance…The principle that the essence of human purposes is expressed through flows of information in dynamic complexity, rather than through details of chemistry and physiology is both mind expanding and liberating…Our profound understanding of matter gives us several ways to manufacture large scale dynamic complexity that are quite different from making and breaking chemical bonds. We can replace chemistry with electronics and photonics…”

      The quotation is from his chapter There Is Plenty of Matter and Energy. He does recognize two mortal dangers: global warming and nuclear war. In the Introduction he states that “Science reveals that the nearby world contains, in known and accessible forms, far more energy and material than humans presently exploit.”

      It occurred to me several decades ago that so much of the hard work we do in the world is about rearranging complex patterns in the brain. That recognition causes one to be interested in things like mind-altering drugs…thus the current renewed interest in psychedelic drugs in the most prestigious research universities.

      As for my opinion, I am impressed by the edifice plants and animals have built on the marvelous capacity of microbes to make and break chemical bonds. The microbes supply us with the raw materials of the life we evolved to live…but not the life we have come to expect as our birthright.

      Don Stewart

    • The link works fine. I only posted it for you because, I wrote it.
      Let me know if this proplem persists. It is not a long piece so I might be able to post it to you on your contacts page.

    • The aimn site brings similar responses from Safari and Chrome browsers:
      This site can’t provide a secure connectiontheaimn.com sent an invalid response.

      Perhaps it is a US thing. Pls email text to me:

    • Hi Kurt.
      I tried to email you and got this message back.

      Microsoft Outlook
      Remote Server returned ‘550 5.0.350 Remote server returned an error -> 552 1 Requested mail action aborted, mailbox not found’

  14. For those who’ve expressed an interest in this aspect, I think I’ve found how to incorporate Gini into the per capita prosperity dimension of the model, and to adjust parts of the ‘essentials’ calibration accordingly.

    Initial results show it doesn’t look at all bad for Denmark, but looks grim for the US and outright frightening for South Africa.

    Bill Gates has ben commenting on the comparative importance of climate change vis-a-vis covid. What he didn’t mention, so far as I know, was the global cost of tackling either. But if we put the reasonably well-known estimates for cost of tackling climate change into the context of prosperity per capita as we understand it here, the numbers are daunting.

    • if you wanted an illustration of the fragility of the UK situation this article in the Grauniad seems suitable,


      according to the article cutting the extra £20 a week will effect 6 million families,
      the ONS gives the UK population as 66 million people,
      of the 6 million families effected 700,000 will be pushed into poverty, though no clear indication is given of who’s methodology poverty is defined,
      of those 700,000 it claims 490,000 will be individuals in working families,

      I can’t help wondering how many self employed people aren’t captured in these figures,

    • It certainly would be interesting to see the Gini data – perhaps in some indicative countries. But as you say above a lot will depend on Governmental responses. If these is a decline in tax receipts then raising taxes in a progressive way will tend to reduce inequality, if public services are cut, then it will worsen.

    • Hi David,

      I’m not really worried about inequality,
      I’m worried about how many people have reached the bottom of the scale or are slipping off the end of it,

      I’m not unduly discombobulated by the fantastically wealthy, it’s just their incomprehensibly large incomes distort the median figures giving the impression that generally people are better off than they are in reality.

    • Matt, David

      The critical thing is the relationship between incomes and assets. This relationship has been bent out of shape by policies during and since 2008-09.

      The assets of the very wealthiest tend to consist of stockholdings, and those of the less wealthy are skewed by property prices. Both are notional values (“we could never monetise the whole lot”). “Making billionaires poorer” – by reducing stock prices – wouldn’t “free up” money for other people or other purposes.

      A sharp correction in stock or property markets would reduce apparent inequalities of wealth. So I don’t think wealth inequality is as important as income inequality.

      Within the latter, it’s extent of hardship that seems to me most significant. The best way to measure this might be to distinguish between average (per capita) and median (“50th percentile person”), which is where I think Gini can help.

      Results are most disturbing where per capita average incomes are low and Gini is high. My preliminary work on this shows results which become more disturbing when we superimpose the cost of essentials on to median incomes. South Africa is a case in point. My charts, still at the development stage, indicate that the income of the median no longer covers essentials as the model now calculates them. I mention South Africa because it’s hard to obtain the necessary data for many of the World’s poorer countries.

      FYI, the Gini Coefficient may be applied to either incomes or wealth. Data is available from the World Bank. My understanding is that this data applies to incomes, which is certainly the more relevant of the two. Data is available for most countries, but not for every year.

      Perfect equality of incomes would show a Gini of 0%. Total inequality – all incomes going to a single person – would be 100%.

    • Tim and Matt,

      Agree that the focus has to be on income rather than wealth whether stock or property. Can your data look at overall household income? – this would include earned income as well as benefits as the latter is becoming an increasing proportion of poorer families’ wealth. Using centiles of wealth has got to be more sensible than a per capita income which as you say is going to be skewed by the high values in a small proportion of people as you both point out. What about using deciles as per ONS data? – though realilse that your resources are liimited!
      Though South Africa sounds grim, I’m not sure about direct comparisons with western economies as a lot of Africans have the option of returning to and living off the family land when there is economic hardship, something not available to most of us.

  15. Dr. Morgan, can you explain how you obtained the 8% less FF available in 2040 vs 2018?

    According to my layman’s research, most estimated oil depletion rates I’ve seen hover around 3% to 5% per year. So even if partially offset by new discoveries, implies substantial energy contraction over a multi-decade period. Has anyone else seen similar figures? My understanding this is based on depletion rates of existing conventional oilfields.

    • Annual decline rates for oil fields outside OPEC countries tend to be between 6% and 7.5%, but these apply in the absence of any new investment.

      This investment isn’t confined to new discoveries, but also includes further development and extension of existing fields.

      In similar conditions, i.e. a total cessation of investment, production from US shale wells could be expected to decline at rates in excess of 50% per year.

      My energy supply scenario should be contrasted with the consensus view which, as of late 2019, saw continuing increases in supplies of fossil fuels out to 2040. This consensus included an increase of 30-32% in gas and 10-12% in oil.

      I cite late-2019 because this was immediately pre-covid. It’s not yet clear what changes to the consensus may have occured since then.

  16. Tad Patzek quoting his friend Brian from Seattle on an unpublished paper:
    “The more debt you accrue the slower you will grow, and this is a universal law.
    If you want to change your economy to a new mix of resources (“Green Revolution”), you will have to forgo your cumulative investment in the old resources, build a stock of new resources, and only then you will be able to grow again from a much lower level. This is a multidecadal process that no politician will be able to stomach, and the disinterested, uneducated public will refocus on the conspiracy theories and other lies.
    Current rampant borrowing will translate into GDP generation with a low and ever lower efficiency. And that’s a universal law again!”

    You can find it at Tad’s website, LifeItself….Don Stewart

    • I’d have to read the paper to know his definition of debt. In my view, if it is monetized it self-destructs and transfers the effect to the currency.

    • @Steven Kurtz
      I think his point is that the investments which were appropriate and productive under one method of production are no longer productive under the replacement method of production and thus the borrowing against the old assets leads to default. Take, for example, whatever sovereign debt the UK has incurred. If the country disassembles itself into Scotland, Wales, Northern Ireland, the impoverished North of England, and London, then what happens to the debt? There MIGHT be workarounds, and the debtors wills strive to pin the blame on somebody, but the truth is that the debt was built on sand. A current example is apparently happening in California. The commercial office space in California seems to be crumbling. The debt instruments which were floated during the high-rent boom times may never be paid. From what I hear from many commenters on this site, the same may be happening to housing prices in England. Another example is all the debt instruments related to retail malls in the US.

      I admit to coming from a different generation, which had a fear of debt instruments born of the loss of farms to the banks during the depression. But I see no reason why a 40 year old mall should carry a mountain of debt. The mall should have been on a cash flow basis decades ago. The monetization made some people wealthy, but it makes no sense from a public policy standpoint. The notion that everything should be highly leveraged makes no sense.

      Don Stewart

  17. @Steven Kurtz
    See Chris Smaje’s article today talking about the peasant future he predicts:
    “The capitalization of the farm in terms of buildings, tools, stock etc. is viewed as a long-term endowment, not as an embodiment of liquid capital seeking to maximize profitable return”

    This way of thinking is what I grew up with. Assets were not something to simply borrow the maximum amount of money against…they were an endowment enabling the family to prosper through the generations. As I aged, I met more and more people who thought that financialization of assets was the ‘natural’ thing to do. As old people tend to do, I think the change in mindset is at the root of our problems. (It’s not the only factor, but it is a strong inhibitor of the changes we need to make.)
    Don Stewart

    • Don S, I couldn’t find the article on the link you provided. I was referring to National debts, not private ones when I said monetization self-destructed debt and could affect the currency.

  18. Tim, a well written article.

    The plateau and decline in global prosperity per capita is disturbing. Such occurances have precipitated political revolution in the past that then leads to war. It doesn’t make me feel optimistic for the future.

    One thing I will throw into the debate. If surplus energy from fossil fuels is facing constraints due to geology, then investing large amounts of energy in building low power density renewable energy systems is likely to make the situation worse. This is because the materials budget and embodied energy of RE powerplants is much greater than the fossil fuel based energy systems that it replaces. Building RE power infrastructure at a rapid rate can only be accomplished by diverting already constrained resources away from consumption and investment in other infrastructure.

    Below is a link to the 2015 Quadrennial energy review, produced by the US department of energy.

    Go to Section 10, Table 10.4 for a summary of materials inputs into several different types of powerplant in ton/TWh. Here are some tallys per TWh:
    Nuclear (PWR) = 760t concrete / cement; 3t copper; 0t glass; 160t steel; 0t aluminium.
    Wind = 8000t concrete / cement; 23t copper; 92t glass; 1800t steel; 35t aluminium.
    Solar PV = 4050t concrete / cement; 850t copper; 2700t glass; 7900t steel; 680t aluminium.

    At a time when energy surplus is shrinking, we are faced with the apparent need to transition to energy sources that require much larger upfront investment of energy and materials. I would argue that it is unrealistic to expect that this would happen on a scale sufficient to supplant fossil fuels as our primary energy source.

    If there is a solution to this problem, it will more likely be the development of another low ECOE energy source, that can reverse the problem of rising ECOE.

  19. Behavioral Economics and the Transition Ahead

    This very interesting interview begins with a discussion of psychoactive drugs, but then transitions to a discussion of addiction and topics in behavioral economics at the 53 minute mark. Matthew Johnson makes the point that harsh laws can make everything worse for those addicted or dependent. Take, for example, taxes on fossil fuel use. They have a disproportionate impact on certain kinds of people who are highly dependent on them (e.g., the rural Yellow Vests in France) and if the taxes are high enough, they disrupt things like family life which disproportionately produces dysfunctional children. I’m not sure what is the most humane prescription for the changes we need to make, but I think that the findings of behavioral economics should be examined and thought through.

    It is an interesting thought that the psychoactive drugs do make many people more introspective and willing to question their assumptions about life (as discussed a few minutes before the behavioral economics discussion). Perhaps what we need is some targeted use of psychoactives plus a sensitivity to the problems of the addicted and dependent. By the way, I think we could classify most corporations as addicted to fiat money and financialization.

    Don Stewart

  20. Peak oil demand is coming – but first brace for an almighty supply crunch.

    The pandemic has distorted the immediate picture but not the underlying dynamics of the global crude market

    17 February 2021 • 7:39pm

    The greatest threat to Saudi Arabia and Russia over the next five years is a roaring bull market for crude oil, worse yet if prices spike to all-time highs of $150.

    Such an outcome is probably baked into the pie already. There is not enough supply coming on stream to replace the structural decline in old oil wells. The crunch will come before electric vehicles eat seriously into global fuel demand.

    The Saudis need to hold oil prices in the sweet spot of $60 to $70 – roughly where they are today. That is just high enough to keep the Kingdom afloat, but low enough to extend the oil era into the 2040s (they hope). But such calibration is beyond their power.

    Once Brent punches through $100, the cost advantage switches rapidly to the green camp. It accelerates the migration of Big Money into more lucrative green tech – the final heave that finishes off fossils once and for all.

    There is a paradox. Net-zero targets and good behaviour codes (ESG) make the problem worse before it gets better. Doubts over the long-term viability and morality of Big Oil – and fears of the long-tail legal risk – are closing the finance window. Talk of stranded assets scares away investors. Companies are reluctant to sink large sums into mega-projects that take seven years to reach fruition.

    The leading oil names are scrambling to reinvent themselves as green transition companies. “Essentially, all the ‘majors’ have now acknowledged the climate emergency,” said Jean-Louis Le Mee from the energy hedge fund Westbeck Capital. “BP, Shell, Total, ENI, Equinor, Repsol are all adopting carbon neutral targets that can only be met by increasing spending on renewables and letting their oil production decline.”

    Shell will cut oil output by 30pc this decade, BP by 40pc. “These are huge numbers. Exxon, Chevron and Conoco are behind but following the same path. They are the largest spenders on new oil projects around the world,” he said.

    Mr Le Mee thinks the global economy is on the cusp of the greatest supply squeeze in the history of the oil markets. Goldman Sachs and JP Morgan both say we are in the early foothills of a Himalayan supercycle for commodities.

    The world has turned its back on austerity. Keynesian reflation doctrines are triumphant. The Biden administration explicitly aims to run the US economy hot, with the help of the Federal Reserve. Global “green deals” amount to $16 trillion. “It’s going to turbo-charge oil demand in 2022,” said John Hess, head of Hess Corp.

    This spending may be low-carbon in ultimate effect but in the short-run it is brown. The transition requires infrastructure. It requires bulldozers and trucks. It requires the mining of iron ore and thermal coal, and the shipment to steel foundries. It trumps the $10 trillion infrastructure blitz by China, India, Brazil. and the emerging market “mini-BRICs” of the last commodity supercycle.

    If future demand is large, the shortfall in future supply is even larger. Investment of $600bn a year in non-Opec exploration and drilling is needed to keep the global show on the road. Spending collapsed after 2014 and has never recovered. Last year it was $300bn. It has been running at just 35pc of levels reached in the boom.

    This catches up with you in the end. The last two super projects to enter supply were Norway’s Johan Sverdrup and the Exxon-Hess Guyana venture. Henceforth it is a drought.

    Goldman Sachs estimates that 9m to 10m barrels a day of future supply have vanished. That is a tenth of the world’s 100m barrels a day production. Remember that a swing of just 1m either way in normal times can flip the market from slump to price spike. Short-term demand is inelastic.

    The elephant in the room is falling supply from non-Opec producers. These companies and regions (excluding US shale) were gently adding 500,000 barrels a day annually a year until recently. Goldman Sachs thinks they will soon be subtracting up to 1m barrels a day each year.

    The pandemic has distorted the immediate picture but not the underlying dynamics. Global demand has fallen by 6m barrels a day. Two thirds of that is jet fuel. Aviation will come back fast as soon as the flying world is vaccinated.

    Sitting in Europe, we must avoid the error of extrapolating from our lockdown psychosis. Oil use in China and India has already returned to pre-pandemic levels. There is a deficit of at least 1m barrels a day in the market. This will clear the global glut by the end of the second quarter.

    Mr Hess expects a V-shaped recovery in demand, inadequately matched by “sticky” U-shaped recovery in output. This time America’s shale frackers will not come to the rescue. In the glory days, they responded quickly and with gusto every time prices picked up. They made up the entire increase in global output over the last eight years.

    “Shale’s gone from a growth business to a harvest business. Too much money was thrown at shale from 2015 to 2017,” he told IHS Markit’s CeraWeek.

    “Discipline broke down. Frackers went all out for expansion, gobbling up $80bn of equity investment, and much debt, to cover capex spending running at 130pc of cash flow. They lost three times that amount of money this year. There have been 80 bankruptcies.

    “Sentiment has changed. It’s gone from ‘drill baby drill’, to show me the money,” he said. Frackers are being forced to cap reinvestment at 70pc and use the rest to pay down debt or pay dividends. They must refinance $100bn over the next four years,” Mr Hess added.

    Hess Corp is running just two rigs in the Bakken shale zone compared to eight in the heyday. Mr Hess says it will not go above four again even if oil prices soar. It is the same message from the big Texas frackers Pioneer and EOG. “Flat is the new normal.”

    The geology is eroding. Frackers have exploited their tier one properties. They are increasingly having to drill in tier two zones with lower yields. Many flattered their output before with heavy use of sand and chemicals. Now they face the payback of a steeper decline rate.

    The Opec-Russia alliance has of course stabilised prices by taking 7m barrels a day out of production. That has yet to come back on stream and hangs over the market. Bulls are betting that global demand will rebound faster than the Saudis and Russian can reopen.

    The larger question is whether Opec has the means to cover both the coming supply gap and normal demand growth, still running at 1m barrels a day annually despite EVs.

    “The real fireworks could happen in 2022 or 2023. The risk is that even the Saudis run out of spare capacity and lose control of prices. Then it’s the 2007-2008 scenario,” said Mr Le Mee. That would bring $150 into view. Even $200 is possible before the shock breaks the economy.

    Ten years from now we will be in another energy world. EVs will undercut combustion cars on purchase price by 2023 to 2024. At that point the switch will become a cascade. Western countries will roll out cash-for-clunker policies to take the old fleet off the road. The new middle class in China will leapfrog to EVs.

    The trucking industry will be on the way to electrification or hydrogen. Jet fuel mandates will force up the share of green synthetic fuel for aviation.

    By then we will be far past the point of peak oil demand and OPEC will be struggling to sell its output. But first we have to get through the next five years. Strap yourself in for the roller-coaster ride.

    • Yes it was a good read, I wonder what Dr Tim and commenters make of Ambrose’s bullish optimism re EVs

    • I’ll reflect on that, but the broader context, it seems to me, devolves into two questions.

      First, ‘can we reduce the threat to the environment by using less fossil fuels?

      The answer to that is ‘yes‘, not least because FF (and especially oil) supply is going to decrease, whether we like it or not.

      The second question becomes: ‘can we, within decreasing FF supplies, grow (or even maintain) the prosperity built, in the past, on the use of FFs?‘. My answer to that – based on modelling using SEEDS – is ‘no‘.

      If there’s a third question, it is that of how we make best use of the FF energy that remains to us. I see no alternative to prioritizing RE development over consumption.

      Logically, this makes public transport preferable to EVs.

    • I think, in this context, it’s worth noting what’s been happening to capital investment in the energy sector. Two questions arise here. First, what happened in 2020? Second, what has happened since 2014 (the year in which oil prices plunged)?

      Last year, investment in oil and gas fell by 34%, and was 55% lower in 2020 than it had been in 2014. Investment in oil and gas production (leaving refining and shipping out of the equation) fell by 63% between 2014 and 2020.

      Investment in renewables capacity fell by 4% last year, but was 3% higher in 2020 than it was in 2014. But investment in RE capacity is not remotely high enough. Last year, it was just over $300bn in real terms, which is less than was invested in 2011 (about $320bn at constant values).

      As a reminder, transition to an RE economy by 2050 has been costed at between $95tn and $110tn. These sums correspond to vast amounts of resources, including steel, copper and plastics, and these in turn translate into the quantities of energy required to supply them.

      What I might call the ‘official’ or consensus view is, not only that this can be accomplished, but can be done, not by 2050, but in ten years or so. There are various reasons why I don’t share this view. It has – for me – too much extrapolation (from recent rates of fall in the cost of RE power), and too little emphasis on investment requirements, and the resources that those financial requirements represent.

    • I just hope that report is better than the official National Balance Sheet – essentially, ‘you’ve never had it so good, thanks to inflated house prices’.

    • Ambrose Evans-Prichard’s analysis ignores the systematic consequences that an oil price rally would have on the economy. If there is another oil price rally as a result of geological supply constraints, three things will happen simultaneously.

      1. The price of goods and services will all experience substantial inflation as oil is required to make and transport virtually all goods and transportation is an essential element of any service.

      2. The cost of RE infrastructure, being both material and energy intensive, will increase. So investment in RE will not stretch so far.

      3. With more money flowing out of importing countries to oil producers, the value of currencies will weaken relative to commodities and the currency of major exporters. This will make all imports, including RE infrastructure, more expensive in major consuming markets.

      Central banks will be caught between a rock and a hard place. Seeing threats to value of currencies and apparently rising inflation due to increasing cost of goods and services, they are likely to raise interest rates. Unfortunately, this will destroy the ability of debtors to service debts and will result in banking crisis, much as occurred in 2008.

      With high unemployment, pension funds and other institutional investors wiped out, investment in RE infrastructure will decline. Electric vehicle sales will be lower in 2025 than they are now. Investment in renewable energy over the past decade, has only been made possible by effectively zero interest rates and very low bond rates. This made high capital costs affordable, as they never had to be repaid with interest.

      We face a problem resulting from declining EROI of fossil fuel energy. The solution to our problems will not come from switching to ambient energy sources with even poorer EROI. We need high energy density energy sources, with a high overall EROI value, that can be built quickly. That means concentrating efforts on developing modular nuclear reactor systems and developing fusion fission hybrid systems. Low power density ambient energy is not a solution to our problems.

    • All of this is logical, and there are only a few points that I would add.

      First, of course, we’ve spent a year creating purchasing power (credit and money) out of thin air – not a new form of behaviour, but a major acceleration.

      Second, we have boosted demand but not supply by supporting the incomes of idled people whilst we cannot replace their lost output of goods and services.

      Third, nobody seems to be prepared to ‘pay for’ the costs of the crisis, other than through money either borrowed by governments and/or created by central banks.

      Fourth, rising inflation infers the possibility that nominal interest rates will rise.

  21. Frank Wilczek and Limitless Energy and Prosperity
    I recently pointed to Frank’s book as an example of a very optimistic physicist (if we can avoid global warming and nuclear war). Here is a detailed review of the book from the standpoint of a skeptic:

    The review is a lot closer to my own opinion than Frank’s optimism. I think that our near-term future is finding a way to leverage microbes. 5 years ago few people had heard of the gut microbes….now every snake oil salesman west of Dubuque has them in his wagon. Yet the complexity is daunting. The polyphenols influence the brain, but the brain also influences the polyphenols, and the combination of microbes and polyphenols can produce hundreds of thousands of chemical compounds.

    The moral: it might be to drink your red wine and coffee and eat some onions and some broccoli…each of which have abundant polyphenols. People have been doing that for centuries.

    Don Stewart

  22. If Russia kept its hydrocarbon reserves to itself from now on, it could eke out its civilized quality of life for decades longer than almost everywhere else and it’d be the only place the US wouldn’t attack to steal oil/gas given the nuclear deterrent. The whole of Europe would then be their vassals and the US competition fade away, with only China as a counter-balance to stop her being a lone superpower. Most world leaders are currently psychopaths of one sort or other, but Putin is smarter than most, so if anyone squeaks a total energy transition in in time, I’d bet on Russia. Culturally, Russians are more amenable to going back to a less consumptive lifestyle, having experienced it in recent, living memory and are also more unified as a people than ‘western’ competitors.

    So If they hoarded their hydrocarbons and linked their currency to that value store as well as their significant gold reserves, they could end up with the only solid currency too, again if anyone pulls it off, it’d probably be them. Especially when cooperating so well with China as they are doing now.

    • Dmitry Orlov on the collapse of the US
      Many of you may consider Dmitry nothing more than a Kremlin mouthpiece. But, if you wish to get behind his paywall, I suggest a careful reading of his current post. It isn’t about the survival of Russia and China, but instead a diagnosis of collapse in the US:
      “It is not too difficult to demonstrate the delusional nature of Trump’s ideas using facts and logic in ways that most Americans might grasp. But taking this explanation just a step further leads to the realization that for most Americans would be far too unpleasant; that the American nation is a cancerous tumor on the body of our planet, and that the best it can do for the good of humanity is to swiftly commit mass suicide. Since American politicians cannot transmit this simple thought to the American masses without putting a swift end to their political careers, they cannot wage battle against Trump using reason but must appeal to emotion instead.”

      He includes a pithy description of what it actually takes to make America again a net exporter of industrial products. The current belief in the US is that we can accomplish it through trade barriers…but trade barriers don’t create export surpluses.

      Let me interject my usual reference to Lisa Barrett…how can Trump create the emotions in the public that he creates so easily? Because the alternative to pie-in-the-sky is third-world-suffering along with a mountain of debt. The brain, evaluating those two alternatives, will almost always choose the former. It takes a certain kind of education, uncommon in the US, to create a third alternative.

      Dmitry thinks that the Rest of the World is tired of accepting US dollars in return for materials and goods, and this will lead to collapse. If the collapse is fast and efficient, then Trump will have been a ‘useful idiot’. But if the collapse is slow and involves a lot of pain for everyone, then Trump will have been simply ‘an idiot’.

      I suggest that Surplus Energy Economics shares some of the same perspectives.

      Don Stewart

    • SEEDS analysis suggests that the economic policies followed by the West, and by the US and the UK in particular, are looking increasingly self-destructive.

      My take on this is that economic extremism seldom works out well. One form of extremism brought down the USSR, and a diametrically opposite type of extremism threatens something similar for the West.

      The West misread the failure of extreme collectivism as endorsement for the alternative extreme.

    • A friend sent me the whole essay by Orlov, and it is one of his best. I can only add that dictatorial countries can be just as negative to societies and the planet as the capitalist/monopolistic oligarchies. The lesser evils in my view are homogeneous, small scale societies with social cohesion. Unfortunately they are rare, and population pressures elsewhere drive migrants to attempt to escape intolerable situations by emigrating there.

    • Off hand, the country which gets nearest to the Western ideal of democracy is Iceland – perhaps its small population is a factor in this.

      Where the situation in the West is concerned, people can accept a great deal if it happens gradually. In Britain, for instance, the average person has been getting gradually poorer since 2004, and gradually more indebted for rather longer. Mistaken government policies have made people gradually less contented, and society gradually more unequal and antagonistic, over time. Conditions of employment have worsened, but again fairly gradually. People may grumble, but they tend to ‘put up with it’, and few have left ‘for pastures new’. Much the same, it seems to me, can be said of the US.

      Change is likely to happen in one of two ways – popular discontent builds up like pressure in a saucepan, and/or adverse trends become dramatic rather than gradual.

      “Brexit” and the election of Mr Trump are examples of discontent rising gradually. What we’re facing now looks more like a ‘dramatic rather than gradual’ situation. The stresses identified and now mapped by SEEDS are intensifying, and the failures of policy are becoming more damaging, as prosperity deteriorates and financial instability worsens.

  23. Related to Orlov’s Prognosis
    Ugo Bardi refers to a book originally written in German, now translated into English:

    The collapse scenario for the US described by Dmitry Orlov is somewhat similar to the scenario described for all of our fossil fueled civilization. Also similar to Dmitry’s book on the Technosphere.

    Don Stewart

    • Thanks, Don. This is what I have been thinking but he sums it up very well. I’ve been taking all those things for a long time. But yes, especially vitamin D. So with a strong immune system you might not even know if you’ve got Covid. But if you do get diagnosed and you immediately take ivermectin, along with your strong immune system, you’re probably going to be fine. I have no words for how disgusting and criminal our system is, with Big Pharma running the show. Homo not sapiens deserves our fate.

  24. Dr. Tim, I think that your description of folks in the UK ‘gliding into deterioration’ is accurate. The process means that decline is more readily assimilated, and helped along by the traditional stoicism of the British – acceptance accompanied by grumbling. One thing that I think is relevant to the UK situation, however, is that the trend was for some time temporarily masked – or mitigated – not just by credit expansion but through PPI-redress also. The PPI-redress mask is no longer available, and as you say we may be approaching credit exhaustion. Consequently, we may witness a greater awareness among people of the true reality of their deteriorating situation. There is no doubt in my mind that national policy-makers are truly desperate, and clutching at straws as they attempt to maintain the illusion that in the end all will be well. Post-Lockdown hope seems to be resting upon the population having a Viv Nicholson moment – ‘Spend! Spend! Spend!’

    • In relation to Tim’s comment on the gradualness of change in Britain I suggest, there is a related dimension which we do not see.

      I lived through WW2 as a child when cars and telephones were few and far between. Then in the 1960s highway traffic congestion became a problem in cities and popular holiday routes. Then in the 1970s and 80ss holidays abroad became normal. And then, in the current era, laptops and mobile phones became part of normal life.

      And, as Tim has pointed out, the average person has become poorer, more indebted, less contented and society more unequal.

      I neither expected each era to be as they occurred nor noticed the changes had taken place. The remarkable thing to me is not just the gradualness, but also the inability, maybe unwillingness, to imagine that the future could be different. I certainly didn’t see that, as a transport planner in the 60s and 70s.

      Widespread use of telephones, cars, air travel and the internet were all revolutionary developments in communications, which were not expected. Each of which re-shaped our world. And were inherent aspects of the growth and decline of prosperity.

      Is it possible that nothing has changed? Are we still unable/unwilling to contemplate the probability of a future reshaping, by a communications revolution, yet to be recognised as such?

      Which might reverse the current decline in prosperity.

      A nice aspect of de-growth maybe?

    • Re:
      “…the probability of a future reshaping, by a communications revolution, yet to be recognised as such? Which might reverse the current decline in prosperity.
      A nice aspect of de-growth maybe?”

      A “communications revolution” is what we’ve had the past two decades in my opinion. That’s been a double edged sword. More scientific/factual information and more false news and manipulative suasion.

      The only thought experiment that works for me is an unexpected sterility virus which affects 80+ % of Homo rapacious-superstitious who believe in supernaturals and hold the position: don’t confuse me with the facts, because I don’t like them. (facts = probabilities based upon best current evidence) If that ensued, by mid century the demands on the planet would have begun diminishing, pollution would likely have peaked, biodiversity loss might have bottommed…

    • The question that I have about the communications revolution is: how will it be paid for?

      A high proportion of communication activity – for instance, media and social media – is paid for by ad revenues. Most ads promote discretionaries, not essentials. Because discretionary prosperity is shrinking rapidly, discretionary consumption has become a function of money and credit creation.

    • Discretionaries can include types of food, drink, OTC meds, toothpastes, soaps, cleaning supplies, clothing, footwear…which are really essentials to all but the poorest. Thus, I suspect that ad revenues will not tank anytime soon as long as population keeps growing and a global depression doesn’t kick in. Frivolous stuff will likely be the first area to be pinched.

  25. It seems that even as the knowledge revolution has dragged up the aggregate IQ of the total population in countries with free, quality education, intelligent action just hasn’t followed. People still vote, live and consume with the same ignorance as they did when relatively uneducated. Quality of governance in richer countries is no better than in poorer, in general terms, people still choose instead superstition and cognitive dissonance in preference to the ugly truths in reality.

    Which is why they are so easily influenced by massive scare programs run by the mainstream media, even if the truth eventually leaks out, here’s a recent crack in the wall for example: https://www.theguardian.com/world/2021/feb/19/how-the-beach-super-spreader-myth-can-inform-uks-future-covid-response

    • Why should one hope for any progress in that respect?

      As Isaiah Berlin liked to quote:

      ‘Out of the crooked stick of humanity one cannot make anything straight.’

      We live on the earth, are animals, and are subject to physical forces almost completely beyond our control.

      Most formal education is, quite simply, time and energy utterly wasted.

  26. Excellent explanation of the type of immediate energy-shocks we will be experiencing soon, with some warning shots having already happened. Predictable and ominous in equal measure is the total lack of alarm in the public non-reaction, mirrored by equivalent failure to understand what is happening by the relevant authorities who actually have the direct power to do something about it:


    • Thank you so much for pointing out this article.
      Tim Watkins’s approach is an excellent counter balance to Tim Morgan’s essentially finance based approach .
      Any follower on this blog ought to devote some attention to Watkins’s blog.

      The point Watkins makes about the approach to cost cutting in energy infrastructure and supply is something that has always baffled me.
      In the Uk there are umpteen companies vying to supply energy .The energy consumed in this marketing activity ( offices and IT infrastructure ) gains no advantage in the long run for the consumer of what should be a common utility.
      It also is a very non green pursuit.
      It has also distorted the view that ever cheaper energy is possible when clearly in the degrowth era ever increasing energy costs are inevitable..

    • Thanks. I very much like Tim Watkins’ articles – one of the few sites I make the time to read – but I would disagree that my view is a financial one, preferring to say that it’s a modelled interpretation. SEEDS is an energy-driven model, but its conclusions tend to be expressed in financial language, because that’s the idiom in which economic issues are discussed.

      One of the (as yet unpublished) inferences of my analysis is that domestic energy supply will, eventually, have to be subsidised, which might well imply that electricity, at least, will need to be taken into public ownership.

  27. Regarding electricity, one measure of reliability is number of minutes of power outages per year. According to an article in “Zero Hedge”, the average Japanese home loses only 4 minutes per year. However, the USA Midwest loses 92 minutes per year and the USA Northeast loses 214 minutes. These figures cover only regular outages not those caused by extreme weather or fires. And major outages in the USA (affecting more than 50,000 homes or businesses) grew ten times more common from the mid-1980s to 2012.

    Incidentally, there are at least ten countries with 100% reliability for 2019, mainly in East Asia but also a couple of Scandinavian countries and even one in South America, Chile:


  28. Regarding mapping prosperity, one measure is the average size of new house built for which the UK (Local Authority Building Control) has reliable records going back almost one hundred years:


    Their records show much what you might expect. The average new house was small in the 1930s @ 68.3 square metres, grew steadily bigger to reach their maximum in the 1970s @ 83.3 square metres, then shrunk again to their current size of 67.8 square metres. So now slightly smaller than the 1930s!

    Incidentally, other difficult to fake measures of real prosperity in UK are average age at marriage or average age of mother at first first birth, which both correlate equally well to average size of housing.

    So peak real prosperity in the UK was probably fifty years ago, much like the USA.

    • Thanks.

      SEEDS data starts for most countries in 1980, and I think that, in the UK and the US, purely material prosperity per person peaked in 2004 and 2000, respectively. Recently, I’ve watched four films, made recently but scrupulous in their accuracy, set in the UK in 1974 (2), 1980 and 1983. It seems to me that prosperity per person was lower then than it was in 2004. All four, by the way, were based on books by David Peace.

      Quality of life, on the other hand, is a very different matter. Somebody who had been “frozen” ‘back when’, and who returned now, would, I believe, find quality of life lower now than it used to be. A novel, published about ten years ago, featured a man released after spending twenty years wrongly imprisoned on death row in the US. He notices greater material prosperity, but is shocked by many other deteriorations in the quality of life. Another recent film, a superb reproduction of UK life in 1963 starring Luke Evans and Jim Broadbent, conveys the same effect.

      Another point is that, obviously, people cannot know what the future holds. On that basis, the ‘feel good’ high-point of life in the US might well have been the Eisenhower years.

    • ” …research shows that houses in England have less space than any other European country with an average of just 71.9 square metres…”


      In fact, UK shit-boxes (homes) are now so small that IKEA produces smaller sized furniture uniquely for the UK market as compared to on the EU continent. Some years ago people in the UK would get their IKEA furniture home and couldn’t move it from room to room once assembled!

  29. Dr Tim asked: “The question that I have about the communications revolution is: how will it be paid for?”
    I suspect it will be paid for by changes in lifestyle.
    My guess is that there will be a decline in discretionary travel and the opposite of the past 100 years or so of car-based growth can be expected. There will be a modal shift from travel to telecoms. The development process will be telecoms based.
    This could imply increased working from home and migration from high-density urban areas to country areas, with telecoms reducing the need for travel.
    Maybe creating home-based suburban and rural villages, with services within walking and cycling distances.
    Could this turn out to be the future?. Not one that would be believed by the establishment, because it would undermine their vested interests. So it might be!

  30. @Jomelco, you’re very welcome and I’m only giving back, I’ve gotten a lot of pleasure educating myself with information shared here over the years. The 2 Tims agree hugely so there is a lot of overlap in their respective areas of interest, but where they differ gives us more to enjoy thinking about and thus a fuller picture, so I’m grateful to both.

    Re: your point on the UK energy market’s inefficiencies, (ironic given neoliberalism’s supposed main ‘win’ is supposed to be competition leading to the best price for the people) that’s reflective of the destruction by neoliberalism generally. The real intention of neoliberals is to maximise profit to themselves at absolutely any cost, so trashing the environment and the little people who are not them is a sacrifice they’re always happy to make.

  31. Covid Mutations and Nitric Oxide
    This is off topic but may be very important to you and those close to you.
    Charles Smith posted a link to an article from Rutgers University in New Jersey to the effect that there are currently 7 mutations of Covid 19 circulating in the US. (When I tried to look at the article a second time, it was behind a paywall.) The results from South Africa give one concerns that the mutations make existing vaccines less effective. I won’t speculate about the likely course of coronaviruses and vaccines, but I suggest that it makes one of my themes over these last 12 months even more relevant. That theme is Nitric Oxide. Here are 3 videos made by an MD in Hawaii relevant to the subject. Briefly, there are tons of studies using inhaled nitric oxide…but you can get it best by what you eat, by not using antiseptic mouthwashes, and by humming. Looking at the basic science and the results of trials completed and underway it seems highly likely that the home remedies will make it unlikely that you will contract a severe case of Covid 19. Required viewing for anyone over 45 years of age….Don Stewart

    • Hi Dan, those videos were totally fascinating. Thank you so much. By the way you can get around pay walls by going to archive.vn and pasting your URL into the blue bar below. If that shows it has not yet been archived you can then paste it into the red bar and after a minute or so of processing you’ll be able to read your article in most cases.

    • Justin
      I am reluctant to copy things behind pay walls. For example, I know several bloggers who depend on income from Patreon, etc. to pay the rent. Even someone like the New York Times was forced to move to cheaper quarters. I don’t mind copying and pasting an excerpt, because I figure is someone is interested they will pay a little to follow up, But thanks for the link.
      Don Stewart

    • Don, Don you feel the same about scientific journal articles? Nearly all authors will gladly send you a copy if you email them. There is a free (donations accepted) portal which I’ve posted before:

      Just enter the DNS, and if they have the article, it appears.

    • @Steven Kurtz
      I do sometimes pay for the journal articles where no free PDF is available. The journal articles are a little more painful, since there are tons of them I would like to read and I would soon be penniless. Also, having to pay and not wanting to requires me to distract myself with working in my garden, which is a good way to stay healthy and sane. So I guess life is a balancing act.
      Thanks for the tip
      Don Stewart

    • You are welcome. I’m not interested in supporting empire publications like the Washington Post or the New York Times. I support at least four independent journalists through Patreon or substack. Whatever works for you. Cheers.

  32. In case you were unaware, Dr. Morgan, you may be interested in watching Adam Curtis’ latest documentary series on BBC iPlayer Can’t Get You Out Of My Head. Consider it a companion piece to the SEEDS analysis relating to energy and resource overshoot, if you will.

    • Thank you Matt! I tried to VPN my way onto the BBC iPlayer last night but was put off in the end by questions on registration and tv license. Will try this link tonight!

  33. At what point is enough enough? The rearview mirror is never wrong but can be somewhat cryptic.


    I will argue here that technocracy must prevail as soon as the ratio of mechanical power to metabolic energy oversteps a definite, identifiable threshold. The order of magnitude within which this threshold lies is largely independent of the level of technology applied, yet its very existence has slipped into the blind-spot of social imagination in both rich and medium-rich countries. Both the United States and Mexico have passed the critical divide. In both countries, further energy inputs increase inequality, inefficiency, and personal impotence. Although one country has a per capita income of $500 and the other, one of nearly $5,000, huge vested interest in an industrial infrastructure prods both of them to further escalate the use of energy. As a result, both North American and Mexican ideologues put the label of “energy crisis” on their frustration, and both countries are blinded to the fact that the threat of social breakdown is due neither to a shortage of fuel nor to the wasteful, polluting, and irrational use of available wattage, but to the attempt of industries to gorge society with energy quanta that inevitably degrade, deprive, and frustrate most people.

  34. TonyH
    on February 18, 2021 at 2:46 pm said:
    Ambrose Evans-Prichard’s analysis ignores the systematic consequences that an oil price rally would have on the economy. If there is another oil price rally as a result of geological supply constraints, three things will happen simultaneously.

    Tony, the issues you raise are being modelled here by the Centre for Understanding Sustainable Prosperity


    • I think they may have picked the wrong scent trail.
      This from the link above says it all, I believe:
      “The energy sector is populated by green and fossil fuel energy firms that produce the energy that is used in the production process of the final good and capital firms. Hence energy is used only as
      an intermediate input by firms in the final and capital good sectors, and is not purchased directly by households. However, one of the ten industries in the final good sector is an energy utilities sector. The underlying assumption is therefore that while the energy sector itself does not directly sell to consumers, households still purchase energy via the utilities sector, which acts as a kind of middleman between the energy firms and the households. Energy firms are taxed by the government when their profits are positive.”

      So there is no notion of imbedded energy in this paper and then I hit this little gem in the concluding remarks:
      “The two simulations modelled in this paper are restricted to a reference (NT) case and a fast transition (FT) scenario that takes place over a period of around 6 and a half years. By any standards, that speed of transition might be considered punitive, particularly for an industrial economy with a wide range of path dependencies and carbon intensities. Longer transitions are more likely in practice, even if a shorter timescale such as the one envisaged here is more in line with climate science.”
      Climate science? The science said forty years ago, more really, to stop burning carbon at that level then! Then I hit another gem, this paper is full of uncut semi-precious stones:
      “Despite the simplifications necessary to facilitate the development of a working model, this project has successfully demonstrated the ability of the AB-SFC framework to simulate the emergent properties of an economy composed of multiple, heterogeneous agents operating under conditions of uncertainty, incomplete information and bounded rationality under conditions such as
      those that are likely to be encountered during a transition towards net zero carbon.”
      I’ll tell you exactly what ” net zero” looks like, can you say FIELD WORK!

  35. I wonder Tim if you consider the rise and apparent fall of the Department Store as a proxy measure for prosperity? The arc of the rise and fall of the department store model of retailing is the arc and fall that traces the prosperity and disposable income of the middle classes.

    It’s widely considered that the demise of the department store is mainly an online phenomena but I wonder if it is also connected with the rise and fall of discretionary prosperity, particularly among the group we describe as middle class?

    Many of these businesses are much loved venerable institutions that are failing before our eyes.

    We are told by the retail guru’s that “experiences” are the future of retailing but that’s exactly what the department store has been offering for many years.

    I wonder if the real reason for their decline is not simply online competition but the decline in prosperity that we have been discussing here? If it is, then the suggestions that all will be made well by application of an online sales tax is probably wrong.

    • Thanks, an interesting thought.

      All that I’ll venture on here is that the disappearance of traditional retailing, and the assured triumph of on-line retail, are not assumptions that I’m inclined to accept.

    • High street retail was, of course, quite definitely in trouble in the UK before the pandemic fuss started,and about 100,000 job losses were predicted for that sector anyway.

      Why? Declining prosperity, and over-supply of shops (same thing with restaurants) much more than online erosion -but certainly if Amazon sells cheaper, and one can get free postage, that’s where people will go.

      But what we are seeing now is nothing less a determined attempt by the government to simplify, or even finish off ,as much of it as possible, and to move commerce online.

      There is no other way in which to interpret the pre-Xmas restrictions, nor the current lock-down which delivers no health benefits that could not be met in other ways, but is 100& effective at crushing businesses and people. .

      In respect of small businesses, this has been likened to Soviet De-kulakisation, with good reason.

      This is to fulfill the (naive) aim, espoused by the Techno-loonies and WEF-ers, of a totally-digitised economy asap.

  36. Bill Rees on The Real Problem
    This compact talk to some people in Israel by Bill Rees is what I would label ‘in your face’. He says that climate change is not the biggest problem humans face…and I expect he would say the same thing about debt. The biggest problem is to achieve a reduction in humanity’s ecological footprint while equitably sharing the resources in the reduced footprint. Or we might call it Degrowth.

    He says that we cannot expect individuals to solve the problem. He has no intention of trying to live within his share of the footprint…it takes societal change.
    Don Stewart
    PS. After watching this video, the spies at Media Central decided I needed to watch a whole bunch of You Tube videos featuring off-grid houses. It’s interesting to try reverse engineering whatever Media Central is thinking about (if you can say AI is ‘thinking’.

    • Ah, just got done watching this too. Nothing new to be gleaned if you’re already up-to-date with overshoot literature, but a great video that summarises the issues for a newbie. The 20 minute talk he did at SFU in 2019 is also good if one is time constrained.

    • Actually, you know what’s funny? Compartmentalisation of knowledge.

      I’m watching an old Prof. David Battisti video on food production impacts from climate change, and he ends an otherwise sobering talk on a positive note that encompasses mindset and alternative energy. The one shining light he can end with, and it’s basically the same concept as the Green New Deal: we can avert catastrophe by using renewables and eating less meat.

      Fine. It’s a noble idea, but it flies in the face of what Prof. Rees states which is that climate change is merely a symptom, growth of population and/or consumption is the problem. Whenever I hear someone talk about EVs and wind turbines and eating soy or working from home, I can only imagine they are missing, intentionally or otherwise, the big picture. That, so long as we have the idea of things that can mitigate certain perceived problems as indicated by the MSM, we’ll be fine.

      I have to say, when one has their eyes opened to the anomaly of our present civilisation, you cannot go back through the looking glass. It radically alters how you see things and can drive one crazy with the idea that everything is setup to fail, from the financial nature of the economy, to the mindsets we have, it all just seems almost crazy.

      So, even though one person groks the problem with CO2, they inevitably don’t fit this into a more holistic view any better than Jaguar Land Rover switching to EVs acknowledge dropping prosperity and a not fit for purpose electrical grid.

      When you try and raise this fact, well, Adam Curtis had a video for that too: Oh Dearism.

    • I’ve known Bill Rees for ~ 20 years. We met twice presenting at Sustainability Conferences in Toronto. We communicate regularly, and he is a member of a small list I’ve mentioned before that I co-own. Rex Wyler, a co-founder of Greenpeace is also a member. Neither is optimistic about our future. (species, civilization) If you want more info, email me: kurtzs@ncf.ca

    • Hi Don,
      I binge watched everything I could find with Bill Rees after seeing that video presentation,
      in a very similar vein is B Sidney Smith,

  37. ladydog70: Actually, that issue has been discussed here and on other related blogs, such as Tim Watkins’, because the general narrative of online killing brick and mortar is so prevalent. But it’s not to be the whole story. Obviously, online shopping has several advantages, and many of those undercut physical shops in the high street, but the idea that taxing online will reinvigorate our shopping centres and streets is misplaced optimism.

    I’ll let the good doctor give his thoughts, however, the basic principle of loss of discretionary income means penny pinching, which in turn means going for the cheaper option almost always. In the UK, the rise in the discount German supermarkets is a good indicator too of this phenomenon since 2008. I still see people with PCP funded Aldi and Merc cars in the car parks of otherwise cheap and cheerful discount supermarkets. An interesting juxtaposition.

  38. @Matt
    Just watched B. Sidney Smith. His discussion is almost exactly the journey I went through. I first became aware of Peak Oil around 1964 (I was a little early). I was born into the late Depression, and since my family was poor, I experienced Depression until I began to make my own money. I married a young woman who had a similar background. Both of us quickly made more money than our parents ever made in their lives. But we both shunned debt. We never financed an automobile or consumer goods. We did take 15 years to pay off our mortgage, but I went to extraordinary lengths to save enough money to pay down the principal directly. We got friendly help at critical times. We had a good life with 3 children and now 2 grandchildren. We even did a few fancy vacations, such as a sailing trip around the Caribbean with a rented boat. But more typically we took the children on canoe camping trips, sleeping on sand bars. I sort of put the concerns about Peak Oil on the back burner. About the year 2000, I once again became very alarmed about that prospect. I had lived in Oklahoma and seen the oil ghost towns, and worked in the Permian Basin around the time it peaked. The Dot.com bust and the subsequent financial shenanigans of the early 2000s convinced me that time was about up, and what had concerned me back in 1964 was coming to pass. I began to look around for something to give us more security in our old age. I found a small farm nearby, and began to work there part time. I was acutely aware of the dependencies on fossil fuels, the vagaries of dealing with degraded, carbon poor soil, and the increasingly unreliable weather which required expensive remediation such as plastic tunnels and irrigation. I relearned a lot of physical labor lessons I had forgotten in my office worker career. One of the things I saw very clearly was the cost of distribution…harvesting and cold storage, processing, trucking the produce to a farmer’s market, customers driving to the market, the inevitable wastage, etc. I worked with an old, experienced farmer and a whole bunch of wonderful young people who were dealing with the 2007-8 financial debacle, student debt, and lack of the jobs in their fields.

    In the meantime, the regenerative agriculture movement was maturing. Just as in human biology, we were learning that the soil microbes are key to production and they need carbon which is supplied by the soil food web. The farmer I worked for didn’t really understand that, and I saw the costly consequences of destructive farming by hand and the occasional roto-tiller. I was 74 when I retired from the farm…because I couldn’t any longer gracefully keep up with kids half a century younger than me. Since then, I have built a garden which I manage with regenerative practices to the extent I can. My theory of gardening is to grow perishables, and count on commercial farms and transportation to supply dried grains for the bulk of our calories. I also sprout a lot for nutrient density.

    I was always a student of the old canals and river transportation. In my opinion, very local kitchen gardens coupled with a lot of water transportation of dried high-calorie foods is the likely future for food. If there are reasons for optimism in terms of food, I think they revolve around our better scientific understanding of regenerative agriculture. The weakest links are the utter delusion in governments, the investment by the corporate class in a destructive food system, the lack of widespread knowledge about the requirements of regenerative gardens, the control of land by a tiny aristocracy, and delusional techno-optimism.

    Thanks for the link. It brings back intellectual adventures from decades ago.

    Don Stewart
    PS. For one example of a regenerative system appropriate for kitchen gardens up to commercial, see:

    • Alas, power and the direction of policy is, as you say, in entirely the wrong hands, which means that we will all now have to suffer the consequences of their Techno-centric delusions and grift (as well, of course, of nearly three centuries of heedless expansion and destruction of natural resources).

      The 5G-enabled digital prison is now being constructed, on the implausible pretext of a ‘deadly’ pandemic that never was; and they have very clear ideas about agriculture and food, too – see Bill Gates’s latest ‘predictions’.

      The game is over, really: they are too powerful, and over the next few years they will have ample resources to put their new structures into place. They will crush, regulate or outlaw any opposition. No hope at all of a saner agriculture, nor of much sanity in any case, anywhere…..

    • Thanks and, as I think this is your first comment here, welcome to SEE.

      I think I’d take issue with the point about ample resources. Amongst the privately wealthy, most of their assets are in the form of stockholdings, not money. Governments were already – before the pandemic – living far beyond their citizens’ means, when measured (as at this site) as prosperity.

      Looking at the 16 advanced economies covered by the SEEDS model, revenue and spending have both grown at just over 3% annually over twenty years. This has been broadly in line with GDP.

      But GDP is a wholly misleading number, inflated by buying each $1 of “growth” with $3 of debt, and borrowing at an average 9.6% of GDP to deliver “growth” of 3.2%. When we look at both public services and transfers (welfare, pensions and so on), governments face affordability headaches of which, I think, they may as yet be only vaguely aware.

      I’m hoping to cover as many of these subjects as a I can in the next article here.

  39. Don, I’d thought I’d answer an off the cuff question you asked way above, why a 40-year old shopping center still had debt on it. I am a business attorney and have had almost 40 years of experience working on real estate investments, including real estate tax shelters back in the 1980s when Ronald Regan made commercial real estate depreciable over 15 years instead of its customary 40 years.

    During this period, I’ve encountered only two or three clients (family business, with no or very few outside investors) whose goal was to hold a debt free property for the long term, to provide a relatively risk-free annuity for their heirs. The tax and legal structures for owning real estate allow the owners to pull out refinancing proceeds on a tax-free (really, long term tax deferred) basis. The plan is to buy the property, improve the property, lease it up, hold it for a few years, and then refinance the mortgage at its new much higher value (typically on an 80% loan-to-value basis), and distribute the cash remaining after paying the old, lower mortgage to the owners tax free. Rinse and repeat every 5 years or so. It’s been a great scheme as long as real estate only goes up up up.

    It’s not that they couldn’t pay it off in this time, they didn’t want to.

    Once you leave the realm of family – owned businesses, businesses in America are not run to do the thing that they do. They are run to make money – to create large salaries and bonuses for the officers and “shareholder value” for the owners. The business of companies is to make money, its actual business is just the field it works in to make that happen.

    The business of ERCOT, the private Texas company that delivers electricity in Texas, is not electricity. It is not comprised of men and women who love the grid and want to make the best damn electrical grid in the country. The business of ERCOT is creating returns for its shareholders. Since utilities are a “natural monopoly,”, when you hand this over a utility to a private company, you are giving that private company hostages – i.e., customers who can’t go anywhere else. Just as you do when you permit banks to use depositor money to gamble in the securities and derivatives markets. The government HAS to bail it out. The predictable result is for ERCOT to cut costs to the bone, because when the inevitable catastrophic loss occurs, it HAS to be absorbed by the state – i.e., you are giving the company the ability to socialize losses and make only profits. Doubtless our friends in the UK could tell us what has happened to British Rail since it’s been privatized.

    We are fast approaching the end of the era of “profits.” Already many companies can make profits only by cutting labor costs to subsistence or sub-subsistence levels, and off-loading the responsibility for avoiding starvation to the governments and charities, and housing costs to governments and small landlords who are not allowed to collect rent or evict.

    My point is that, if we are going to keep some semblance of social cohesiveness during de-growth, governments are going to have to subsidize a lot more than just the energy production and delivery. They’re going to have to take over many essential services too. I’m not saying this is going to happen, but I think it is safe to say that more than just energy production subsidization is required, and if the austerity or ideological mindset precludes it, what little social cohesiveness is left is going to dissolve pretty damn quickly. The current go-to solution seems to be UBI, because it kicks the can down the road for making profits. Think of it as a universal subsidy for business. However, it only covers up the fact that, really, just like money can’t make money anymore, business can’t make profits anymore.

    • Wow, good explanation of how most business in a kleptocratic system is just a money slide from the unconnected masses into the Swiss bank accounts of the few. I think of it as those machines in modern meat plants that suck fragments of flesh, sinew and gristle off bones to reconstitute into ‘fun’ shapes that’re then sold to schools for poor kids’ meals. Sweating the weak for every last cent they have.

      Re: UBI, it has already begun under the radar, check out this clip of Prof Mark Blyth from Brown University in answering the question on Scottish independence explaining that most constituent parts of the UK have been effectively surviving on welfare from London. Once that sinks in, I’m sure you can then think of examples correlating to the depressed areas in most countries, like Italy’s south, etc:
      https://www.youtube.com/watch?v=PEYwKalRLAg (Around the 3 min point for those who lack patience, though the whole thing is quite short and interesting)

  40. @Tagio
    Thanks for the informative and thoughtful response.

    And also…
    Some thoughts about how change actually happens:
    View at Medium.com

    The authors note that Adam Smith was not describing the DOMINANT business model of his day, but selected specific examples of what were POSSIBLE business models. Somebody coined the phrase ‘Speak like you are sure, but listen like you may be wrong’. Which springs from the notion that it only takes one contrary example to prove that another way is possible. Just as some nagging measurements of very small phenomena showed that Newton had not discovered the laws of reality. I have tried to include some posts which cite counter examples, small though they may be, that indicate that humans don’t necessarily have to live the way the dominant paradigm in the US and the UK currently indicate, or that very poor people watching television would absorb.

    Therefore, I suggest that a mature outlook on our current situation would include the following:
    *The world is working in destructive ways which are collapsing
    *But we can find examples of better ways which are either less destructive or actually constructive
    *Whether the mass of people and institutions can change is an open question…the same sort of question that Adam Smith could not definitively answer.
    *From the standpoint of the individual or small group, the best solution is probably to try to avoid having to subsidize the folly of the Status Quo, while building the physical, mental, and social capital to do things differently.

    Don Stewart

  41. Worth Reading

    The knee jerk reactions from powerful people reflecting their political biases is very evident. My own opinion is that heavy reliance on spot markets is not a good way to ensure long term stability or short term coping abilities when one has a mix of two sources of power which are substitutable for each other, with low marginal costs but high investment costs. I remember when advertisements touting spot markets as the solution to all problems, paid for by Enron, were still appearing 2 days after their bankruptcy.

    I remember when Richard Feynman, the Cal Tech physicist who was active in the Manhattan project, took over the investigation of the explosion of the Space Shuttle. One of his first actions was to ban ‘those god-damned little bullet point charts’ [otherwise known as Power Point] that the bureaucrats were using to obfuscate everything. I don’t think we still have anyone of his caliber to put a stop to all the nonsense.

    I think the Texas example is probably indicative of what will happen in the future as energy supplies become less reliable and more complex mixes are required for a functioning grid.

    Don Stewart

  42. Pingback: #191. The map unrolled | Surplus Energy Economics

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