Geopolitical Feedback Loops in Peak Oil

It is quite common to hear experts explain that the current tight oil markets are due to “above-ground factors,” and not a result of a global peaking in oil production. In reality, geological peaking is driving the geopolitical events that constitute the most significant “above-ground factors” such as the chaos in Iraq and Nigeria, the nationalization in Venezuela and Bolivia, etc. Geological peaking spawns positive feedback loops within the geopolitical system. Critically, these loops are not separable from the geological events—they are part of the broader “system” of Peak Oil.

Existing peaking models are based on the logistic curves demonstrated by past peaking in individual fields or oil producing regions. Global peaking is an entirely different phenomenon—the geology behind the logistic curves is the same, but global peaking will create far greater geopolitical side-effects, even in regions with stable or rising oil production. As a result, these geopolitical side-effects of peaking global production will accelerate the rate of production decline, as well as increase the impact of that production decline by simultaneously increasing marginal demand pressures. The result: the right side of the global oil production curve will not look like the left…whatever logistic curve is fit to the left side of the curve (where historical production increased), actual declines in the future will be sharper than that curve would predict.

Here are five geopolitical processes, each a positive-feedback loop, and each an accelerant of declining oil production:

1. Return on Investment: Increased scarcity of energy, as well as increased prices, increase the return on investment for attacks that target energy infrastructure. Whether the actor is an ideologically driven group (al-Qa’ida), or a privateer (youth gangs in the Niger Delta), the geologically-driven declines increase the ROI for attacks on energy, which will drive both decisions to act, as well as targeting decisions for that action. This is a positive feedback-loop because attacks on energy infrastructure and supply drive up the price, which further increases the ROI for such attacks. John Robb has calculated the Return on Investment for the most recent bombings of oil and natural gas pipelines in Mexico this September at as high as 1.4 million percent.

2. Mercantilism: To avoid the dawning “bidding cycles” between crude oil price increases and demand destruction, Nation-States are increasingly returning to a mercantilist paradigm on energy. This is the attitude of “there isn’t enough of it to go around, and we can’t afford to pay the market price, so we need to lock up our own supply.” Whether it’s the direction of a pipeline flow out of Central Asia, defending only specified sea lanes, or influencing an occupied nation’s laws on Production Sharing Agreements, there are signs of a new energy mercantilism all around us. This is a positive feedback-loop because, like an iterated “prisoner’s dilemma” game, once one power adopts or intensifies a mercantilist attitude all others must follow suit or lose energy share. It will act to accelerate oil production declines because mercantilism prevents the most economically efficient production of a resource, accelerating the underlying problem of diminishing marginal returns. This issue of energy mercantilism has recently hit the headlines again with the intensification of the race by several nations to to lay claim to the Arctic with its uncertain but possibly vast oil and gas potential.

3. “Export-Land” Model: Jeffrey Brown (westexas on The Oil Drum), has proposed a geopolitical feedback loop that he calls the export-land model (most recently discussed in his Iron Triangle post). In a regime of high or rising prices, a state’s existing oil exports brings in great revenues, which trickles into the state’s economy, and leads to increasing domestic oil consumption. This is exactly what is happening in most oil exporting states. The result, however, is that growth in domestic consumption reduces oil available for export. In states, such as Mexico, where oil production is also in decline, the “export-land” model predicts that oil exports will decline much faster than oil production—and this is exactly what is happening, with the latest PEMEX report showing 5% production decline year-on-year, but 11% export decline.

4. Nationalism: Because our Westphalian system is fundamentally broken, the territories of nations and states are rarely contiguous. As a result, it is often the case that a nation is cut out of the benefits from its host state’s oil exports. This will be especially apparent when the “export-land” effect reduces the total size of the pie to be divided. As a result, nations or sectarian groups within states will increasingly agitate for a larger share of the pie. We see this already within Iraq, Iran (Khuzestan), Nigeria (Delta State), Bolivia (indigenous groups), even places not normally associated with oil production such as Nagaland in India. This process will continue the spread and advancement of the tactics of infrastructure disruption, as well as desensitize energy firms to ever greater rents for the security of their facilities and personnel--both of which will drive the next loop…

5. Privateering: Nationalist insurgencies and economies ruined by the downslide of the “export-land” effect will leave huge populations with no conventional economic prospects. High oil prices, and the willingness to make high protection payments, will drive those people to become energy privateers. We are seeing exactly this effect in Nigeria, where a substantial portion of the infrastructure disruption is no longer carried out by politically-motivated insurgents, but by profit-motivated gangs. This is the ultimate positive feedback-loop: infrastructure disruption further degrades any remnants of a legitimate economy, increasing the incentive to engage in energy Privateering, and compensating for any diminishing marginal returns in Privateering caused by enhanced security or competition from other privateers.

We may see some or all of these effects in any given area, and are already seeing this in some trouble spots. Some states, like Iraq, have been thrown into full-fledged “Nationalism” and “Privateering”-driven geopolitical disruption by the actions of an outside power—in this case, the US invasion was itself largely the byproduct of a shift towards energy mercantilism. This is just one illustration of the synergistic interrelationship of these processes.

The big-picture effect of these geopolitical feedback-loops is this:

Peak Oil theory takes the logistic curve decline of oil from individual fields and producing regions and extrapolates those effects to the world. The result of that extrapolation is that world oil production will follow a geologically-driven logistic curve, and that it will peak and decline in a manner similar to individual fields or producing regions. The decline of a logistic curve gradually tails of in a "long tail" of oil production. The result is a phrase that has become virtual dogma: "Peak Oil is not the end of oil production, but rather the beginning of an inexorable decline in production." Geopolitical positive feedback-loops, however, do not act like logistic curves. They are positive feedback loops that are both self-intensifying and intensified by geologically-driven declines in production. While the geologically-dictated baseline in oil production decline may exhibit a long tail of ongoing production, geopolitical forces may abruptly chop off that tail. Commercial oil production requires some threshold level of security, rule of law, etc. to operate at all. Below that threshold, oil production does not gradually decline, but rather stops completely. Will geopolitical forces, combined with geologically-driven decline, be sufficient to bring oil production to a total halt in the near-term, at least regionally?

Excellent delineation of political and market forces and motivations.

Nationalism could be extended into Regionalism, where contiguous states join together to buy/sell energy products and perhaps enter into mutual critical infrastructure protection arrangements.

Also ethnic and/or religious entities in different nations (or even different regions) may seek to form similar energy pacts or privateering (with some seeking to disrupt instead of distribute).

Note that Saudi ARAMCO has been recently reported as establishing a 35,000 persons security force, so the ROI calculation will vary greatly depending on whether protection of CI is sought to ensure production income and market stability, or whether disruption is sought for price spikes with the possible result of market instability.

The above ground issues mentioned above are certainly factors limiting oil production (in addition to field declines), though I believe some oil execs combine these types of events with the slow rate of tar sand and oil shale infrastructure establishment and petroleum production for obfuscation purposes. The latter are really partly 'in ground' if we refer to THAI and other extraction methods for non-conventional oil. Refinement of non-conventional would be above ground.

So we should help establish a vernacular that helps the average interested person understand the issues. Perhaps we could say the issues are;

- Political Factors: includes Mercantilism, Nationalism, Privateering, and Cartel actions.

- Peak Net Export: includes the ELM in its various sensitivity analysis forms

- Above Ground Technical Factors: Transport and refinement of non-conventional oil, both technical challenges as well as rate of infrastructure establisment.

- In Ground Technical: Methods to extract non-conventional oil and the rate of infrastructure establishment; methods to extract a higher percentage of conventional resources.

Thoughts and suggestions?

I think that Saudi Arabia's 35,000 man security force is an interesting point. There are several ways to view it. One is that it represents probably in excess of one billion dollars a year in expenditure on security in the absence of any actual investment in an attack. I'm not convinced that it will have much preventative effect, as it is quite possible that it is really a PR move and works program for unemployed Saudis, but who knows. Having spent some time in critical infrastructure protection, there is a fundamental problem at work. There are functionally infinite valid CI targets. If you pick the top 10, 100, or even 1000 to protect, then, assuming that you make these invulnerable to attack through your protection (which doesn't happen), the net effect is to push adversary targeting down the list to the 11th, 101st, or 1001st target, respectively. In most CI scenarios, it is economically impracticable to protect all valid targets. It is the fundamental flaw in a reactive notion of CI security versus a proactive notion of CI security (which is much more difficult, especially for governments, to implement). That said, there has been an unexpected (in my view) calm in Saudi Arabia lately, so who knows?

Regarding your proposed vernacular, I think it is a great idea in the sense that it may help bring the reality of geological versus "above ground factors" more into the awareness of the public. I'm not sure about the specific labels. Several of the comments down thread suggest (and RR's post yesterday) that quite a few TOD readers and contributors (myself included) have recently finished reading Nassim Taleb's "The Black Swan." We should be careful to avoid applying inappropriate categorization to these matters--I think it is reasonable to categorize in this way for the purpose of raising public awareness or separating two commonly conflated issues, but we should avoid it in the quest for actual understanding. For our purposes I think it is important to view these phenomena as inseparable and part of the "system" of Peak Oil.

Thank you Jeff for changing the discussion from "depletion rates" and "mitigation/subsitutes" to the systemic analysis of Peak Oil.

I would even make the claim that the PO-System was born in the early 1970s once the USA geologically peaked. Just remember that the USA had been the world's largest producer and a mojor exporter!!

As evidence for this, the world production curve left the logistics (Hubert's) curve at the end of the '70s - making Hubert analysis and reliable predictions increasingly difficult. The "typical" event demonstrating this change(apart from OPEC's actions) was the overthrow of the Shaw in Iran and the ensuing Iran/Iraqi war.

We are currently entering Phase II of the SYSTEM of PO, now that the world is at peak.

The US seemed to have forgotten in the late '80s and through the '90s that this system exists. Living in Germany since the beginning of the '90s, I would however hardly imagine that most of the rest of the world was not aware that this system and the constraints of our FF resource base. Especially the Germans have kept "The Limits of Growth" in the back of their heads and are painfully aware that energy subjects will most likely dominate the future.

Cheers from Munich,
Dom
----------
Just remember the Golden Years, all you at the top!

I think privateering may also be a tactic used by nation states. The pipeline explosions in Mexico were apparently professional, but not seemingly tied to any recognized political movement.

Sheer speculation, of course, but somebody hopes to profit from such targeted attacks, and various economic interests may now be making longer term plans, as the gameboard shifts.

WARNING
This comment is pure speculation.

I was talking to a friend of mine who is going for a masters in political science. He thinks that the attacks were by drug cartels. The drug cartels are threatening the infrastructure to get Mexico to back off from their recent crack down.

If perpetrated by a drug cartel the attacks would be professional and no one would claim credit. It would not be in the interest of the drug cartel or the president to make the facts known to the public. If the public found out who was responsible they would demand a harder crack down which would cause more attacks and cause political damage to anyone in office.

I don't know anything about Mexican politics or drug cartels but it seemed like a good explanation to me so I am passing it on.

Tim

More pure speculation: the attacks were Venezuela dredging up the ghost of a long inactive revolutionary group to damage Mexico's economy and perceptions of Mexico as the safest place for FDI. Even if it isn't true, it makes a good story to get people motivated to do something about Hugo... I seem to remember something about Yellowcake?

Geological peaking spawns positive feedback loops ...

Brilliant -- though pretty frightening stuff.

Seems so obvious once one says it, so how come so few people are saying it?

Cathal Copeland

I was thinking about this topic this morning. When Jim Kunstler was in Dallas for a joint presentation with Matt Simmons, on 11/1/05, I arranged a meeting with the Dallas Morning News editorial board, and I sat in on the meeting. Jim spoke with them for an hour, laying out "The Long Emergency" case.

Except for the local NPR station and the SMU student newspaper, we had a local media blackout regarding the Simmons/Kunstler event, and there was no reference in the paper to the hour long interview with Jim.

I think that they are ignoring the issue, to the extent they can, not because they dispute the reality of finite resources. I think that they are ignoring the issue because they are afraid that Jim is right. For the overall population, it's the "Sixth Sense" thing. Our old way of life is dead, but most of us don't know it--primarily because we only see what we want to see.

... we had a local media blackout ...

WT, I think the BEST example of the MSM IronTriangle is the new's reporting of Myanmar.

Look at the difference between MSM's coverage of the story,

Myanmar junta continues to make arrests
http://news.yahoo.com/s/nm/20071003/ts_nm/myanmar_new_dc

Soldiers hunt dissidents in Myanmar
http://news.yahoo.com/s/ap/20071003/ap_on_re_as/myanmar

versus this one

Chevron’s Pipeline Is the Burmese Regime’s Lifeline

http://tinyurl.com/2wsq9x

or this one.

Oil versus monks
http://www.dailytimes.com.pk/default.asp?page=2007%5C10%5C03%5Cstory_3-1...

The Energy Angle is buried in the details.

Because “robustness tests bury the most important variance.”

In other words, Black Swans are seen as outliers to
be dismissed.

The Power of Power Laws

http://edgeperspectives.typepad.com/edge_perspectives/2007/05/the_power_...

...But it is not just social scientists who fall prey to this temptation to adopt a Gaussian (think Bell Curve here) view of the world. Business executives also are drawn to a Gaussian world. At one level it is much simpler – there is a meaningful “average consumer” that can be used to scale products and operations around – and it is a much more predictable world. In many respects, the history of Western business in the twentieth century represents an effort to build scalable operations through standardization designed to serve “average consumers”.

Arkansaw of Samuel L Clemens

Err, one of the main characteristics of a black swan is it shouldn't be seen at all, before the event that brings it to prominence.

It's not that people ignore the outliers, its that they cannot conceive of it as credible within their mental models. An effect that is erroneously ascribed too low a probability of occurrence isn't a black swan - its a risk assessment failure. There are plenty of those, but black swans are much more disruptive.

For instance, a space shuttle disaster was assessed in risk terms incorrectly, but it was not a black swan (eg even O ring and tile damage risks were known). However the space shuttle pilot taking control and smashing the craft into the White House as a hypervelocity missile would be a black swan, since most people wouldn't ever conceive of it as a risk.

Equally an oil consuming bacteria that spread across the globe, eating all of our remaining supplies would be a black swan; Saudi not telling the truth in reserves would not.

In short, to qualify it has to sound totally, weirdly extreme to the majority of peers in the field.

If we constrain ourselves to the definitions offered by Taleb it would be a Grey Swan, but the point is still well taken.

“robustness tests bury the most important variance.”

I'll disagree.

A Black Swan is something not seen by the overwhelming majority and anyone like, say, Taleb or Mandelbrot,
who point out that Black Swans are inevitable once the Fat Tail of the J Curve has been reached are sidelined.

Only when the Black Swan -Subprime Crisis, anyone,
as part and parcel of PO- is revealed does CW
acknowledge that, yes, it was there.

"Platonic 'maps' based on (Gaussian) bell-curve probability/statistical distributions (what Taleb calls the "Great Intellectual Fraud (GIF)") are like Guillaumet's map; they are (as Kapuscinski would have put it) 'map-mementos.' Platonic maps are too devoid of detail, too vapid, to serve as a useful guide when navigating a world shaped by extreme, catastrophic risk; those maps exaggerate non-dangers (like Guillaumet's 'giant' orange trees and the platoon of 'fearsome' sheep) while totally ignoring (or severely discounting) very serious dangers (like the actual mountains and platoons of hostile natives that Saint-Exupery was really worried about)."

Again. I'm saying a Black Swan is hitting us now.

We've gone over the top of the Gaussian Hubbert's Curve and it's usefulness fades with each passing day.

Because Power Law states that once we enter the Fat Tail
of the other side of the Apostosis, a non linear event-another name for Black Swan IMHO is inevitable.

To wait for it and then react will put us behind the Collapse Event.

as you Jeff should know-

"Thanks primarily to Jeff Vail’s recommendation, I have recently finished Joseph Tainter’s Collapse of Complex Societies."

"a civilization is a society which adopts increasing complexity as a general strategy."

We know that a Black Swan is coming.

Arkansaw of Samuel L Clemens

Thanks, I was not familiar with this concept of "black swan" before. Though it does remind me a lot of Iain M. Banks idea of an "Outside Context Problem". (He used the concept in one of his novels, "Excession").

Here's a description of an OCP in Bank's own (brilliant) words:

An Outside Context Problem was the sort of thing most civilisations encountered just once, and which they tended to encounter rather in the same way a sentence encountered a full stop. The usual example given to illustrate an Outside Context Problem was imagining you were a tribe on a largish, fertile island; you'd tamed the land, invented the wheel or writing or whatever, the neighbours were cooperative or enslaved but at any rate peaceful and you were busy raising temples to yourself with all the excess productive capacity you had, you were in a position of near-absolute power and control which your hallowed ancestors could hardly have dreamed of and the whole situation was just running along nicely like a canoe on wet grass... when suddenly this bristling lump of iron appears sailless and trailing steam in the bay and these guys carrying long funny-looking sticks come ashore and announce you've just been discovered, you're all subjects of the Emperor now, he's keen on presents called tax and these bright-eyed holy men would like a word with your priests.

Great article!

In my post a couple of days ago on the Economics of Peak Oil, I talked about discontinuities of oil exporters. The things Jeff is talking about are precisely those kinds of things.

Besides the geopolitical factors Jeff talks about, I can think of at least three other factors that will tend to hold down production of oil exporters to levels below what geology would suggest:

1. Hoarding: If oil will be worth a lot more later, it makes little economic sense to pump the oil now. This is one implication of the work of Harold Hotelling. In addition, the country may fear that oil will not be available elsewhere at a later date, and want to save the oil for itself.

2: Monetary / Debt Problems of Oil Importers: A former importer with rapid deflation won't be able to afford much oil; one with hyperinflation will have money that is changing in value so rapidly that it is questionable whether the importer should take it. If the importer has recently defaulted on its debt, there may be a question of how much the fiat money of the week is really worth. In some cases, the exporter may choose to require payment in goods, not money.

3: Indirect problems: There are a lot of things that it takes to keep oil fields functioning including trained engineers, replacement parts for machinery, and a functioning method of transporting oil from the field. Seemingly unrelated events, such as a disruption in imports from a country suppling spare parts for machinery, or a lack of trained engineers because of geopolitical problems, can result in a reduction in oil output.

Indy

Jeff, thanks for reminding all of us of these very important issues.

Gail and others mentioned currency issues. Regarding currency, we must avoid falling into the trap of assuming today's FIAT currencies are holders of value. Virtually all of them are inflating between 10-20% / annum. This specifically means, if energy is considered a non-FIAT currency, that in energy terms, the current environment is DEFLATIONARY.
This explains the "HOARDING" issue mentioned above, but from the producer's viewpoint, he is not hoarding. He is merely prudent, since his alternative is expenditure of a valuable resource for a fiction (FIAT money)

Can we sensibly extrapolate the Nigerian experience, to the world forum? Perhaps as a worst case?

Not to make too many headaches, but has anyone considered the impact of declining energy supplies on metals, specifically steel and aluminum. Also the impact on portland cement.

INDY

Check out Aluminum Iceland
for eco impacts.

And I believe that the production of cement
makes it the worst greenhouse gas producer.

Arkansaw of Samuel L Clemens

Look at the price of molybdenum as another great example of this. Moly is a key component in the steel blends used for oil wells.

While this is probably a pure economic positive feedback loop, it certainly fits into the larger picture, and, to the extent that it increases oil prices, will intensify all other feedback loops that are driven by oil price rises.

Moly is a key component in the steel blends used for oil wells.

and proper bicycles..

Hello Gail,

This would come under Nationalism I think:

Doomsday: Alberta stands accused

A huge fight between East and West -- over the oil sands -- is just starting

NICHOLAS KÖHLER | October 8, 2007 |

http://www.macleans.ca/article.jsp?content=20071008_110103_110103&source...

Alberta's energy industry.

Even now, fish pulled from the Athabasca downstream of the oil sands taste of gasoline and smell of burning galoshes in the fry pan. The landscape is perforated by more than 300,000 oil and gas wells. Water in some areas to the south can be set alight with a match, likely due to coal-bed methane developments. Doctors administering to Aboriginal communities not far from the oil sands report high rates of thyroid conditions and rare diseases such as cancer of the bile duct. Some from those communities have been employed at the oil sands raking in the carcasses of ducks floating on vast pools of rotten water, the by-product of the sands' oil-extraction methods.

Such are the claims contained in William Marsden's upcoming Stupid to the Last Drop: How Alberta is Bringing Environmental Armageddon to Canada (And Doesn't Seem to Care)

Arkansaw of Samuel L Clemens

This may be the perfect example of a "grey swan": nationalism (either pseudo Albertan nationalism or indigenous nationalist movement) leading to violence in Alberta's oil sands region.

Before the cries of impossibility ring out from all sides, I'm not saying that this is likely. However, it is possible. The confirmation fallacy--that it hasn't happened in the past, so it won't happen in the future--is at work here. If I were to suggest a nationalist/oil insurgency in some post-colonial third world country it would be superficially plausible, but not Alberta: rich, western, largely white/Anglo-Saxon, etc. But, despite its apparent improbability NOW, it would have a tremendous impact, exacerbated by how unanticipated such a scenario is. If there is continued economic decline, and Albertans realize that they are subsidizing the ballooning entitlement programs of the rest of Canada while seeing only environmental devastation for themselves, it may suddenly seem more possible. Especially as we use narrative to explain to ourselves, in hindsight, how such a thing was able to happen...

And it's not like there have not been discussions of provinces splitting off from Canada, e.g., Quebec.

I expect to see "provincial nationalism" as a developing theme within countries/unions, something along these lines, why should we export our food and energy supplies outside our region, when we don't have enough (long term) for ourselves? I think that this was a factor in natural gas shortages in the UK in 2005 to 2006 winter, if memory serves, when other EU members reduced their natural gas shipments to the UK.

This of course is also true of nation states, which may be--and almost certainly are--thinking long and hard about the wisdom of maximizing their fossil fuel depletion rate.

We've had this for a while with water - witness the most recent "no water outside the watershed" stuff coming out of the Great Lakes region, and its a perennial story out west.

Could you include passive nationalism in your theory?

As in failure to actively support the Iraq war due to the perception that the action does not benefit the core constituency? even if otherwise it would make sense strategically?

It just depends how far the reasoning is taken.

As usual, I find Jeff Vail's commentary insightful, and as has been said, frightening in its implications. A couple of broad - but I think critical - points to add.

First, what is implicit in Jeff's article should be clearly stated - when a field or a region peaks, it doesn't matter 'so much', as there are other fields or regions growing that will mask the peaking, and allow overall growth to continue. But when the globe peaks, there will be no mask. At first, there will be pseudo masks, as some regions are still growing, so the globe plateaus for a bit. It would seem we are there, now. But once all regions peak, the effect will be very different than anything we've experienced to date.

Further, when I saw #1 ROI, I was expecting a discussion of declining net energy. I think it's important to note that the downslope will be steeper than the upslope for this reason as well. Even if the gross oil extraction on the right side were to match that on the left side, the net available to society will be falling ever more sharply as we go deeper, further and muckier than simply sticking a straw into the sands of Texas or KSA (apologies to those who work hard in the industry, but you get my point). In addition to that, global population is now very much more than it was 'then', whenever 'then' was - and not just of people, but of cars. These two things act as - let me coin a term - misery multipliers.

Here's what I mean. Say that in 2020 we extract 24 billion barrels, which is about what ASPO projects. By then, because of our heavy reliance on oil sands, polar and deep water oil, the EROEI may be on the order of 7:1 or 8:1, so we'd have about 21 billion net available. When we extracted 24 b/b/y in 1960, EROEI was probably more like 50:1, so we had 23.5 billion net available. Also, global population in 1960 was 3 billion, whereas in 2020 it's likely to be about 7.5 billion. So whereas in 1960 we had 7.8 barrels per capita, in 2020, with the same extraction, we'll have 2.8 barrels per capita. And it's worse than that, because in 1960, how many of those billions owned cars and were dependent on them for their livelihood? And how many will (or expect to) in 2020? Let me just point out that this is a scant 12 years off. A child born today will be in middle school. Now, combine Jeff's feedback loops with this declining EROEI/increasing population effect on the net energy available to society, and you'll understand my choice of pseudonyms.

Dan Combs

...and that same child will not drive a 20mpg SUV but a 150mpg+ PHEV or electric bike perhaps with a huge efficiency gain muliplier -see yesterdays
"How Can We Outlive Our Way Of Life" post

He will be eating healthy, locally produced produce, be studying PermaCulture in High School and have more respect for the environment than his Elders who only seemed intent on stripping the Earth bare...

Regards, Nick.

As RR noted in his review of "How Can We Outlive Our Way of Life" on TOD yesterday, the essential fact is that we need immediate and fairly radical change.

We are too invested in the present way of life to make those changes.

Nearly all of us who remain in the cultural and economic mainstream but are aware of PO and GW continue to be too heavily invested in the present way of life to be able to make the changes we need to make.

We need to spend too much time and energy supporting kids or surviving within the context of the unsustainable, politically-driven "Corrupt Crony Capitalist" economy to invest enough time, money, and energy into sustainability. Maybe enough momentum will create more opportunity for change, but right now we seem to be completely invested in radical habitat destruction and resource war.

The ultimately suicidal end game appears to have enough momentum to grind along to the predictable end: the metaphorical "Last Man Standing" might have time to look around and say "I won" just before falling over dead.

I count on nature's processes, on mystery, suprise and miracle in order to keep any sort of positive outlook at all.

JV's comments seem pretty spot-on to me. I just need a dose of thought that opens the possibility that my own small efforts toward sustainability are not meaningless.

The "Great Game" is "Kill Off" not "Let Them Die Off While We Keep Going." This is a rather hostile context for living any kind of life.

And so you describe the J Curve heralding the upcoming
non linear events which always show up once
apostosis has been passed.

http://edgeperspectives.typepad.com/edge_perspectives/2007/05/the_power_...

The growth of the Paretian (80/20 ) world

Here’s the problem (or opportunity). Gaussian distributions tend to prevail when events are completely independent of each other. As soon as you introduce the assumption of interdependence across events, Paretian distributions tend to surface because positive feedback loops tend to amplify small initial events. For example, the fact that a website has a lot of links increases the likelihood that others will also link to this website.

Arkansaw of Samuel L Clemens

Thank you. The essay is an interesting thought piece. I don't find it very convincing, however, in demonstrating that the events of today are necessarily the result of peak having been or soon to be reached.
1. ROI on sabotage: Saboteurs of any stripe (freedom fighters to terrorists) will always go after high profile targets. Oil pipelines present high profile soft targets irregardless of peak oil. (and sorry, but the ROI link is just silliness)
2.Mercantilism: the rise of the global economy has been characterized by frequent (and some would say cyclical) periods of reaction/regress against so called "free trade." It remains open whether the samples you select in oil are the result of impending peak or simply another reaction to globalization
3.“Export-Land” Model: It's not clear precisely what you are arguing here. Rising consumption in producing nations is not directly (and certainly not only) attributable to peak oil. So, what precisely is the geopolitical event here? If the argument is that there is simply less oil to go around, I'm not sure that you've said anything that can't be said from a "simple" market perspective.
4. Nationalism: You don't need peak oil to generate nationalistic sentiment. Nationalism predates the use of oil on any scale. So, unless you can show a particular cause in peak oil, and something beyond mere jealous "protection" of resources, than there is nothing here to look at (move along).
5. Privateering: As with saboteurs, privateers are not motivated by impending or past peak. If there is an opportunity to make money, privateers will be there. Yes, the recent high cost of oil has brought privateers, but until you can demonstrate that the price of oil is a result of peak (or at least primarily due to peak) than you can't make the connection between privateering and peak.

I want to emphasize that I am not saying you are wrong. And certainly your logic stands up. But the connection to peak in the present has not been demonstrated.

Re: ELM (Export Land Model)

There are three key points, once a region starts declining:

(1) Only a small percentage of post-peak production will be exported (10% for the ELM);

(2) Net Exports will decline faster than overall production declines;

(3) The Net Export decline rate will accelerate with time.

Rising consumption in exporting countries, aggravated by rapid increases in oil prices, is very likely, but it is not a necessary ingredient for net export declines/crashes (e.g., the UK).

The key geopolitical result will be the possibility of conflict over dwindling resources, resulting from a rapid decline in world oil exports.

thanks wt. I do understand your argument about ELM - what i missed was where Jeff was going with it. If I understood the intent of his essay, he was trying to point to ongoing geopolitical events resulting from/exacerbated by peak or perception of peak. Conflicts over dwindling resources due to contracting export supplies remain an hypotheses (however probable) about the future, not an explanation of the present.

ttp://edgeperspectives.typepad.com/edge_perspectives/2007/05/the_power_of_po.html

So, why does this matter? In a world of power law or Pareto distributions, extreme events become much more prominent. Extreme events can take many forms. They can be sudden and severe disturbances like a class 9 earthquake or a financial meltdown like the one that occurred in US stock markets in 1987. As McKelvey and Andriani observe, “the lesson that we can draw . . . is that extreme events, which in a Gaussian world could be safely ignored, are not only more common than expected but also of vastly larger magnitude and far more consequential.”

As we live increasingly on the margins the current
MEME will be disrupted.

Gradualism will give way to a bifurcation
into a new steady state, which will, at the very least
, make Top Down hierarchy redundant.

People will not be able to wait for results from study groups,
for instance.

Specialization will be the worst thing possible
to adjust to the new MEME.

Arkansaw of Samuel L Clemens

So, why does this matter?

Because some sense of causality satisfies our basic understanding of the world?

(And trust me, it'll be more than the MEME that is disrupted.)

mcgowenmc:
Re; specialisation will be the worst possible response to the peak oil meme

What about specialisation in some type of energy production, or conservation? How about specialisation in organic gardening on a small scale?

Use a little common sense in making sweeping generalisations, please. Its a lot easier on my digestion.
Bob Ebersole

No. Because the energy production/conservation (p/c) will need
support. You will not be able to 24/7 do p/c
unless you're talking about making free energy
acquisition akin to shark feeding.

And where will that support come from?

And as a farmer, organic farming will give way to
how do I eat? How do I make clothes?

Or what can I barter?

In other words, hunter/gatherer.

Sedentary gives way to nomad.

Human pop will shrink to less than 2 billion.

It's raining at the N Pole.

http://casaubonsbook.blogspot.com/2007/10/peak-oil-2005-2007-2010-2012-w...

"Is it all bad? No, I'll give them credit for at least mentioning climate change and health care this year. And I honestly think that most of the people who run ASPO mean well. Their data analysis is terrific, and for people who are too lazy to read the papers on the internet and need to see middle aged men read them aloud to believe, there's value. But the reality is that ASPO has found its niche - and it is in saying "we're important, because we can tell you when...and we won't scare you by saying anything significant has to change." They are engaged in what James Kunstler has described as the notion that all we have to do is worry about keeping the cars on the road. And because most of them have access to an enormous amount of information that says otherwise, I find this particularly troubling. These are people who have read the data, and know that we're too close to peak oil for an easy, smooth transition - and yet, they are still selling one, or at least they were at last year's conference, and I don't see any evidence that that's changed."

Arkansaw of Samuel L Clemens



I tend to agree with Shaman. I think it more likely there is another chains of events which is being accelerated by Peak Oil rather than being directly caused by FF scarcity.


All of the described events can be associated with the creation of a new multi-polar world order. For a good analysis of this situation see the following-->

This is the real talk of the town in western Europe, Latin
America, the Middle East, Asia and Africa: US hegemony coming to an irreversible end, revealing, Wallerstein would say, "multiple poles of geopolitical power". We are entering "a situation of structural crisis towards the construction of a new world system" - with no hegemonic power.

http://www.atimes.com/atimes/Middle_East/IJ03Ak02.html


Increased mercantilism, the reduction in FF available for export and nationalism may all draw from growing independence of tier 2 states, states which seek to advance their self interest by arranging regional trade blocs.


I agree with Shaman that privateering is an opportunistic behaviour that may arise with or without PO. It is a form of arbitrage obtained by disregard for the law.

While an hypothesized collapse of U.S. power is certainly one explanation. It may not be the only. Indeed, you could just as well argue that the world is just now adjusting to the beginning of the era of U.S. domination/empire. The fits and starts, upheavals, etc., could have more to do with the internal "American" debate on our proper role in the world. In other worlds, are we the Roman Republic coming to grips with our Empire reality and have not quite yet agreed to appointing our Caesars?

Shaman: How does your hypothesis jibe with the reality of a nation that generated two thirds of global GDP at its peak and now generates 19%? The Roman empire wasn't the Roman empire when it was generating 19% of global GDP.


In other worlds,(sic) are we the Roman Republic coming to grips with our Empire reality . . .



I suspect this is the point of view of Washington's neocons. To the degree this view is widely shared around the world it likely motivates tier 2 states to enter into countervailing relationships.


An interesting perspective on Great Power decline can be found in Paul Kennedy's The Rise and Fall of the Great Powers: Economic Change and Military Conflict From 1500 to 2000.


The key attributes of Great Power decline identified by Kennedy were Great Power overinvestment in militarism in place of more productive investments such as healthcare, or better education. The outcome of this choice was increasing fiscal incapacity which undermined all potentials of the militaristic state. This series of events is, of course, independent of PO.

you didn't like my "other worlds" joke? bummer, and I thought it was clever.



I was acting on a variation of Occam's Razor. Do not multiply worlds unneccessarily.


Cheers!

You're assuming that the domestic GDP is the same as the empire's GDP. Rome the city was a small portion of the economic output of the empire. You have failed to learn the lesson of globalization. It's not my economy and your economy any longer.

shaman,
Do you have any histories or booksthat you can recommend on the GDP of the ancient empires? It sounds like an interesting area of study, and I've just not seen them.

The Romans had quite a bit of trade, but the ancient city itself seem to have run on the basis of slaves and tribute and a few manufactures for the luxury trade
Bob Ebersole

Bob - as you are well aware, there are not studies about GDP in Rome during the Empire. Infact, its difficult to find figures for GDP of modern cities that are anything more than guess work.

That said, there is perhaps no better work on the decline of the empire than Gibbons.

But, you probably knew that. The point I was trying to make to BrianT was that the economic size of the center of the empire does not have to larger than the rest of the world for that center to hold sway. Nor is it appropriate to look at the economy of the US alone to understand the full strength of the economy of the empire. This is the part about globalization. The global economy is one of the primary means by which the empire maintains control.

Indy
May I respond to Shaman's remarks.

1. ROI for sabotage is a function of the value of the target. Since oil went to $ 80/bbl, due to capacity constraints, sabotage of production and distribution infrastructure has become common, and it's effects are now critical.

2. Mercantilism only became possible when the supply demand equation changes in favor of the producers. The fact that mercantilism has returned, and the "free trade" model failed. But it was never free trade, it was dollar hegemony, with markets manipulated via derivatives financed by cheap central bank lending.

3. The Export-Land model says that there is no free lunch. If a nation's production fails and its domestic consumption continues to rise, it's exports will fall faster than the drop in production. Specifically, this means that OPEC will fail to export between 2012-2020. Specifically, this means that the US will not have 25% of world oil production, it will have 3%, ie domestic production. If that is not clear enough for you, try this experiment: Fill your tank this week and every week with 12% of what you previously have been using. Then reduce this amount by 5% each and every week for 50 weeks. Let us know wheh you get the point.

4. Nationalism is a cute word for "FUBAR" which is what Dubya and CO. have made of the middle east. They wanted it, connived to steal it. Broke it. and now can't fix it.

5. Privateering is a product of opportunity and lack of discipline. The bi-polar world imposed discipline, you may not have liked it, but at least the warriors believed in something higher than greed. Now, it's greed, pure and simple. As Jeff says, the pot of gold now is a pot of oil. Forgotten in all this was past greed on the part of the Seven Sisters. They took Nigeria's oil, and flared off the gas, leaving the citizens with NOTHING. To the point none of them had anything to lose, or any investment in keeping things going. Thank the IMF and World Bank for that, they bankrupted the Nigerian currency, to prevent domestic demand rising.... Peak oil's contribution is making the activity worth while.

Lastly, for you and anyone else in denial... No one drills for oil beneath the arctic ice cap, or in 5000m of ocean water if easier, cheaper stuff is available. NO ONE...
If there is so much there for the taking.... WHERE???
If you can't answer that question.... and the oil companies can't answer that question... DUHHHHH...
If it looks like a duck, quacks like a duck, flies like a duck,.... it's a duck....
Same with peak oil.....
I agree with Deffeyes... peak occurred in 2005...

INDY

Please, go back and read my comments again. You have grossly misinterpreted what I was getting at. This isn't about when or if peak happened.

I read your post and he answered it perfectly.
When peak happened was at the end, all the rest was blowing away your smoke.

4. Nationalism is a cute word for "FUBAR" which is what Dubya and CO. have made of the middle east. They wanted it, connived to steal it. Broke it. and now can't fix it.

Wrong, the current political establishment is the poster child for globalism.

The best example of nationalism is Russia under Putin.

Multi polar vs globalism is the struggle of our time. The rest is BS labels.

Under a multi polar arrangement the US would be one of the poles, and with a nationalist approach and full enforcement of constitutional law would become prosperous once again in relatively short order.

You raise good points, and, in my opinion, all of your proposed alternative explanation for the five phenomena that I named are certainly possible. While I think that we agree that the positive feedback loops that I identified likely exist as such, there is no reason why they need to be the only force (positive feedback or not), or even the largest force, leading to the end results (not that you were saying otherwise). Nationalism, for example, can stem from many causes. Unequal resource distribution along national lines is certainly one possible source, but I would say it probably isn't the most significant in most cases... However, to the extent that there is more than one force driving the observed phenomenon (almost always the case), it is likely that these forces are collectively syncretic--each individually provides positive feedback to itself and to all others.

Jeff, your observation about the "syncretic" impacts of various sources to geopolitical feedback is very helpful. In some ways we could point to the Iraq war as precisely such an event. While we don't have the space here to get into a complete analysis that would tease out all of the contributing aspects of the war, it always rings hollow to say the war is about oil. Certainly oil concerns were involved, but so were American designs for a world order, not a small amount of Orientalism (we could use the sage voice of Edward Said about now), domestic (U.S.) needs for diversion, and on and on.

My suspicion is that it will continue to be extremely difficult for those of us who are aware of peak oil to identify demonstratively the impact it is having on us until it is much too late. The task will be made even more difficult by the convergence with eco-failures brought on by GW.

I think it's very important not to focus on the particular phenomenon that Jeff discussed. Each of these are tied into many different active currents in the world "out there". What Jeff is poiting out is that SOMETHING is pulling all these seemingly indepedent events/issues into an obvious pattern.

The particulars are used as a demonstration of the SYSTEM involved with PO. I agree fully that to say the war in Iraq is about oil is completely missing the point. Instead: There is a SYSTEM out there connected to PO which demands such manifestations as American soldiers STILL fighting a seemingly otherwise meaningless battle on the Tigris-Euphrates.

The system has existed a long time (s. history of implementation and disposal of the Shaw of Iran) and has only begun moving into a new geopolitical phase since 2001.

Further economic/existencial developments/phases (such as blackouts/enery deficiencies in the 3rd. World) are obviously right around the corner and will play into Jeff's described system.

--
Just remember the Golden Years, all you at the top!

I would agree. And as I read Jeff's responses, both to me and to others during this discussion, I think that is where he was going also. To start the discussion he isolated particulars some particulars for demonstrative purposes. I was probably a too critical by insisting that that such isolation should not occur. I think the resulting discussions have been very good and think Jeff deserves kudo's for his essay.

Your notion of a PO system might have some legs, too. Combine that with Musashi's note's above about the dance between multi-polar and global views of the world, a dash of analysis about economic globalization and empire building and we might have the foundations of PO view of world order.

These things are notoriously difficult to anticipate, though. Once upon a time I took a class from William T.R. Fox, the man who coined the term "superpower." It was with immense disappointment to him, though, that when he first used that word, he used it in connection with the U.S., U.S.S.R and Great Britain. He seemed to have seen this as an incredible failure on his part.



My interpretation of the underlying pattern follows from a rejection of the "Clash of Civilizations" advanced by Huntington:

Huntington also argues that the widespread Western belief in the universality of the West's values and political systems is naive and that continued insistence on democratization and such "universal" norms will only further antagonize other civilizations. Huntington sees the West as reluctant to accept this because it built the international system, wrote its laws, and gave it substance in the form of the United Nations. Huntington identifies a major shift of economic, military, and political power from the West to the other civilizations of the world, most significantly to what he identifies as the two "challenger civilizations", Sinic and Islam.


http://en.wikipedia.org/wiki/Clash_of_Civilizations



Huntington envisions conflict based on the clash of different world views as embedded in different cultures. I
see future conflict as originating from within a debased western culture, one which fails to even begin to appreciate any form of culture and thereby devalues all forms of human organization other than its own.


To put this in other words; The west once had a deep
appreciation for culture and sophistication. This has been
replaced by a very crude emphasis on adherence to what is
"right" and this narrow world view is coupled with the force needed to wreak havoc on everyone who can be thought to be acting contrary to our entitlement to these "rights."


The outcome of this is that the golfer feels absolutely
justified in beating a child who infringes on the grounds of his golf club, the police feel absolutely justified to
excercise their "license to kill," and society feels
absolutely justified in killing a million civilians in
pursuit of "victory." None of the persons who are targeted
are "real people" so the violence done to them is easily
justified.


The mistreatment of others induces first fear and then
loathing. Eventually this leads to the rejection of western leadership and all attempts at hegemony. We have moved from a bi-polar world model anchored in two contrasting world views to a "triumphalist" global uni-polar world with a single dominant hegemon. We are now witnessing the decay of that hegemon and a growing global reaction to it.


The decay of the hegemon resuls from failures on the part of the hegemon coupled with PO, AGW, and fiscal problems "greasing the skids" and accelerating the rate of change.

I think I would agree all the way up to the point where you make the diagnosis that this is the "decay" of the hegemon.

I'm not completely convinced, but what we might be seeing is truly the full implementation of the hegemon. I think both processes could account for the current state of global relations, but my suspicion is that the last 60 years have merely been the warm up - the period where the U.S. society rewrote it's own internal rules to allow it to become the full ruler of the world.

I suspect this will ultimately fail because of the concurrence of PO and GW, but that is a separate issue. I know there are a lot of Tainter fans here, but I find Toynbee more useful for understanding the full process and I think we are just entering the era of the "Universal State" of the "American" civilization.

I am arguing for the decay of the hegemon and you advance an alternate hypothesis that the period of hegemonic control is just now commencing. Regardless of our differing opinion on this point, we seem to agree that the underlying process proceeds independent of PO and AGW.


If I am correct then I anticipate that PO and AGW will result in an acceleration of hegemonic decline. If you are correct then I would see both PO and AGW acting to arrest the rise of the hegemon. If something is scarce and everyone wants it, and I happen to have a large amount of it, then I can excercise a fair amount of coercion.


But if something is scarce and everyone wants it and I do not have a large amount of it, then I end up in competition with a 1,000 and one others all seeking to advance their own self interest at my expense. Since I am powerful, they will smile to my face and double deal behind my back. Since I feel free to repudiate all my international agreements why should I expect lesser states to behave differently? Such a world of mistrust would seem to undermine the benefits to be drawn from a true hegemon.


I disagree with the following:

the U.S. society rewrote it's own internal rules to allow it to become the full ruler of the world.

This implies a conscious set of decisions taken to achieve a specific goal. I think we are witnessing the outcome of a series of long term decision failures combined with the lack of an agreed goal. To put it bluntly, the core is collapsing and this transfers power to the periphery by default.


It is interesting that it is now acknowledged that the US forces in Iraq number in the range of 300,000 (add in the mercenary component which is reported to be larger than the US military) yet even with this force structure the Americans have yet to prevail. The hegemon is revealing itself to be weak and those revealed chinks in its armour will serve to weaken it and help bring it down.


I look at the complexity of what we are trying to describe, the large number of dependent variables, the way in which the situation changes before it becomes fully known, and I become more sympathetic to Tainter's emphasis on complexity. I am more familiar with Wallerstein and Braudel than with Toynbee (and I suspect you refer to the historian Toynbee and not the economist Toynbee) but will go and brush up on him.


Cheers!

Shaman,
Its now been a couple of years since the peak recorded production of light, sweet crude with constantly rising prices and sporadic shortages in areas. Although looking in the rear view mirror isn't absolute proof, two years as a record seems mighty like were post-peak on that commodity.
Also, westexas who responded to you above on the ELM concept is the guy who formulated the concept, and is therefore the reigning expert in that depressing corelary to peak oil theory. Just because it appears to be true though is no reason to accept it, look at the deniers of Darwin or Global Warming if you need inspiration as how to deny apparent truth! (sarcanol alert)
.
Personally, I think current events in Mexico show its going to be quicker and worse than Khebab and WT predictBob Ebersole

I think you misunderstood what I was trying to say.

As you suggest, we may or may not be past peak (personally, I expect one more "heroic" effort that will raise production above 2005, but I'm willing to accept I may be wrong), but this is not what I (or, indeed JeffVail) was talking about.

The question has to to with the geopolitical impacts of peak oil and whether or not particular events in the world today are due to (in part or entirely) peak or the perception of peak.

I happen to agree with Jeff's outline of places where peak will impact geopolitics (with the exception of his use of ELM, which I just didn't get). What I was questioning was whether the current events he was highlighting were demonstrably connected to peak oil. I don't think he made his case there.

Check out my colleague's comments on the recent Mexican (and other) pipeline attacks---

http://karlenzig.typepad.com/karlenzig/2007/09/pipeline-attack.html

He also includes a ranking of US cities most prepared for $100 oil.

Cheers!

K.

I think Jeff is trying to argue that Peak Oil exacerbates the issues of ROI on sabatage, Mercantilism, ELM, Nationalism, and Privateering. It's not that these issues haven't always been around. Instead, it's that above ground issues take on a life of their own when geology can't work to alleviate some of the strain.

- Scott
"Try sour grapes; you might like them."

This is a nitpick but you need to make it clear how effects on delivery, which all of you examples are, translate into effects on production. For example:

mercantilism prevents the most economically efficient production of a resource

needs to be developed to show why cummulative production suffers. Otherwise we just have longterm contracts that may be geared to extending the time over which both supply and income are available. Such instruments are pretty standard when it comes to exploration and production contracts. I can understand why invading Iraq is going to have a negative effect on the URR there, but this is not mercantile, it is just misguided aggression. Destroying the country means that only shabby and half-baked operations will be involved there as can be seen in, for example, private security firms.

I think you idea of geopolitical feedbacks has to be taken very seriously but it is also a very difficult thing to do. What do we make of this vague resource assessment larger than any estimate for the KSA?

With new horizontal drilling and completion technology taken into account, the technically recoverable resource
base for the entire Bakken Formation is potentially much larger. A draft study by the late organic geochemist
Leigh Price6 provides estimates ranging from 271 to 503 billion barrels (mean of 413 billion) of potential
resources in place. The study represents Dr. Price’s work as it stood at the time of his death in August 2000.

Could the US be trying to tighten supplies in order to gain more from this? The geopolitics of oil is very complex with some players attempting to use peaceful means to get oil and some relying on force. The effects you bring up here may be only the epiphenomena of a much bigger plays.

In the end, is seems to me, remaining on the pablum of fossil fuels keeps us playing childish games using deadly toys resulting in much death and destruction. Let's just switch to a more mature diet.

Chris

You raise a good point about production vs. delivery. I'm not convinced by the following argument regarding the impact of mercantilism, but here it is:

A (theoretical) free-market will have the best access to credit, funding, technology, manpower, etc. to develop and produce as much oil from a field as possible in the shortest possible time. Under a mercantilist scenario, where at least some of the possible technology, manpower, funding, etc. is not available, the immediacy of high production from a field should be lower.

Now, here is an alternate argument that I actually do buy in some instances: Once a nation (or other entity) has locked up a supply of oil for itself, it is probably best of NOT producing it. Buy oil off the world open market while that is still available in sufficient quantities/price, and shut in your own production capability. Then, when everyone else either can't get enough or can't afford it, begin (or ramp up) production from resources that you control and enjoy a comparative advantage. This requires discipline and long-term thinking, so it seems more likely a strategy of the Chinese than of the US. The end result would be lower near-term production, and especially lower near-term supply on the open market.

Other than mercantilism, I agree that priateering is probably a delivery problem. ELM is a location of delivery problem, which is a bit more complicated. Nationalism could disrupt near-term production to the extent that it leads to violence that makes operations impossible (see Iraq). ROI probably most directly impacts production rather than only deliveries, to the extent that it spawns attacks on infrastructure.

I guess I would hesitate discount the US's practice of long-term geopolitical thinking. You don't build an 11 (plus 2) carrier navy based on short-term thinking. We see a contrast of styles and perhaps some lazy thinking owing to the availability of the carriers, but the thinking is long term.

Chris

Keep in mind the USSR was cranking out naval ships, fighters, bombers, and hell even the Buran, right up until it collapsed.

I think that the US's ability to think long term has been greatly exaggerated. Long-term thinking would not have gotten us into the mess we are into today with Iraq. I think every action we've taken in regard to the Middle East, the Cold War, and damn near every event in history, has been a best guess. Some guesses turned out to be the right ones, others the wrong ones.

There are very valid (IMO) arguments on both sides about the cultural/societal ability or inability of the US to sacrifice today for long term gain. My point (not that these others were any less valid) is that the US political time horizon of 2, MAYBE 4 years to show a return on action is structurally preventing our representative government from being as effective as they could be. It's a trade-off. Dictatorships are much better (in many cases) about taking prudent long term actions that may not be the most popular today. That doesn't make dictatorships good, or better, but it does speak to the ability of the US to take long-term oriented actions compared to the ability of the (arguably) more dictatorial Chinese system of government.

Actually, the dynastic system is prone to discontinuities so that the best laid plans get discarded. Bad ideas can also go on rather long without correction. The Great Leap Forward is one example. For the US, a couple of election cycles and we are out of a bad situation, and while the initiatives on energy of the Carter administration were not as strongly supported by later administrations, they were continued so that now we have some rather plesant options regarding energy choices. The aberration of having the choice of the voters thwarted now actually suggests that abysmally bad government in the US is not what the people desire. We'll be shut of the problem before too long. With your background, I think you should realize that having a stable institutional framework and a variety of inputs is best for a responsive planning environment.

Chris

It's best for maintaining the status quo, certainly. In our civil-servant/administrative system there is huge institutional inertia. But want something to change radically? Not likely under our system. The Great Leap Forward is evidence, if nothing else, of the ability of China to inflict great "sacrifice" upon it citizenry in the aim of a better, distant future. Didn't work then, but shows that their system is relatively capable of doing so. I guess The New Deal is the closest analog in the US, and is actually an example to the contrary--we're only willing to make big changes when we are already suffering hugely. As long as the average american thinks that things are going fine, we won't make any significant changes... by the time we are suffering to the degree that we did to create an impetus for The New Deal, it will be too late for optimal PO mitigation.

I feel that the Great Leap Forward was in response to a crisis and when it didn't work the One Child Policy was the next response. Now it is a 1920's style boom that is the response. Yes, it is possible to force sacrifice, but it not clear that the sacrifice is to any avail. In a country whose language has seperate words for big and little brother, to destroy the extended family accomplishes what? And now, to come to live in a wholly polluted environment, how does this show a repayment for hard work?

With the great depression, it was not so obvious it was coming. Something had to give because the 1920's were so corrupt but it was not clear that it would be such a large thing. But, with an election, bold, persistant experimentation (with results checking) and a slightly improved Supreme Court things got back on track enough so that by the seventies the environmental movement was getting going (thank you GI Bill). Now the fruits of the environmental movement are going to carry us through an energy crisis.

Chuang Tze has a wonderful story about a butcher whose knife never dulls because he foresees where the joints are. If you want to see our long-term planning, look at the problems we don't have. Calling for sacrifice can make sense, but avoiding the need for it is even better.

Chris

I very much liked your post. As real as the below-ground constraints are, it is abundantly clear to me that the several above-ground factors (the term really being a euphemism for the steadily gathering resource wars), will probably be the limiting thing as to whether we start to pull out of the hole we're in or dig the hole even deeper.

It has long been my contention that those who want to make a major effort toward sustainable energy and those whose concept of 'energy security' is to militarily dominate the Middle East might as well live in parallel universes. The proponents of these two irreconcilable positions remind me of opponents' white and black bishops in chess. Neither can ever interact with the other; neither can even 'see' the other; and neither acknowledges the existence of the other. Yet, as in chess, they can indirectly affect each other via their influence on the contours of the overall 'battle space'.

For me one, thing is certain: as long as the US continues to spend (or more accurately, piss away) almost 2 billion dollars each and every week in Iraq and Afganistan (and maybe soon, Iran), it will never be willing and able to do anything serious in the way of sustainable energy. The US has already 'invested' over half a trillion dollars on Iraq/Afganistan and has absolutely
nothing to show for it. And it's beginning to look like we're going to make another 'investment' in Iran.

I will become maybe halfway optimistic about the situation only when the rulers of the US abandon the notion of oil and better living through empire. However, I am not holding my breath.

jeff

The US has "shut-in" most of the rocky mountains, 85% of its offshore - including offshore California, Florida, much of the Gulf Coast, all of the East Coast; plus almost all of Alaska, etc. But, the Chinese will think of shutting in production first, since no one in the US thinks long term? The US is buying 2/3 of its oil supply off the open market. Looks like the US is currently doing what you "actually do buy in some instances."

If you think that the US is producing "balls to the wall" as they used to say, well, I do not.

"much of the Gulf Coast" (?)

I am reminded of M. King Hubbert's original projection for the Lower 48, i.e., a one-third increase in estimated URR extended the estimated peak date by five years.

The question is whether the areas off limits to drilling in the US have had a material effect on production, I would argue no, but reasonable people can disagree.

What is interesting are the Texas and North Sea case histories--virtually no limits on drilling locations, developed by private companies, best available technology, resulting in 4% and 4.5% per year respective decline rates.

I'm not arguing that we will not be able to find new fields and to make money--I'm doing it in Texas--but I would question whether it will have any material impact.

I agree that the US has much potential currently shut-in, but that is 100% a reflection of environmental concerns, and 0% a reflection of the ability to hold reserves for use in an energy-scarce future (at least to my knowledge).

However, the shut-in in the Rockies is being reversed quickly (though Salazar is winning currently in the uphill battle to prevent gas drilling on the Roan plateau). Environmentally shut-in places in Alaska, California, and Florida do/may have economically significant reserves, but probably not geopolitically/peak-oil significant levels of reserves.

This requires discipline and long-term thinking, so it seems more likely a strategy of the Chinese than of the US.

Why? Superficial evidence says that the US is using environmental arguments to keep much possible production off the table. Wouldn't it be nice if there were a nationalist force just using the current leadership and it's puppet masters as puppets?

Talk about the laugh of a lifetime and Black Swan's, eh?

Damn, and then the alarm clock went off.

Excellent outline of connection between "peak oil" and geopolitical events.

We have a positive feedback: As demand for energy grows--and price rises and the spigots shrink--political clashes will worsen, which in turn will shrink spigots, raise prices.

Postive feedback? Maybe a negative feedback. Sounds like a form of global warming, with its feedback loops.

I certainly agree with your main point: downslope will radically differ from upslope, and they will differ because of geopolitics.

You sort of cover it under mercantilism -- I call it hoarding and virtual peak. Unlike the peaking of one region (e.g. the US), global peak cannot be compensated for by imports from elsewhere. So hoarding ensues as does hoard-busting. Oil in the ground becomes ever more valuable just sitting there. But sitting there under whose control? So all hell breaks loose and IS breaking loose, and this is just for starters.

Of course upslope and downslope also differ because the upslope could be gradual, taking 100+ years, with population and accelerated resource consumption accompanying it -- but this alone augurs a much sharper and violently erratic downslope.

Speaking of the geopolitical loops, jeffvail says,
"Critically, these loops are not separable from the geological events—they are part of the broader “system” of Peak Oil."

Of course, I assme anyone still familiar with the original peak oil theory knows that is a complete redefinition of the original ideas as put forth by M. King Hubbert. The central idea of "Peak Oil" was that it is a geological event, non reversable, when it's done it's done. The same cannot be said of the geopolitical "loops" which the pioneers of the geopolitical theory saw as nothing more than a pizz in the sea.

Including the geopolitical events is probably a more realistic picture, but of course muddies the waters of what is and is not "peak" per se to a greater degree than ever, and makes any type of reliable forecasting almost nothing more than guesswork.

Peak oil has for sometime faced a definitional crisis. First the issue of exactly what is and is not counted as oil (light sweet crude, C and C, all liquids, and what is and is not by definition 'peak" (geological, geopolitical, logistical peak, etc.)

You will pardon some of they hav grave doubts about the ability to "plan for peak" in such a convoluted environment, and are even more reluctant to replan their lives around a "peak now" scenario.

RC

Jeff never once claimed to redefine peak oil. Those are your words placed in his mouth so you can make another useless (and fundamentally incorrect) point.

Rather, what Jeff Vail said is that wrapped around the geologic event of peak oil is an entire system of positive feedbacks. These feedbacks exist precisely because we use and depend upon petroleum. And of course they are inseparable precisely because we are dependent on petroleum. If we were not, the feedbacks would not exist and wouldn't be very inseparable then, would they?

So I am left wondering exactly what point you are trying to make here, Roger. Care to elaborate?

"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone

Jeff said,

"It is quite common to hear experts explain that the current tight oil markets are due to “above-ground factors,” and not a result of a global peaking in oil production. In reality, geological peaking is driving the geopolitical events that constitute the most significant “above-ground factors” such as the chaos in Iraq and Nigeria, the nationalization in Venezuela and Bolivia, etc. Geological peaking spawns positive feedback loops within the geopolitical system. Critically, these loops are not separable from the geological events—they are part of the broader “system” of Peak Oil.

GreyZone said,
"Rather, what Jeff Vail said is that wrapped around the geologic event of peak oil is an entire system of positive feedbacks. These feedbacks exist precisely because we use and depend upon petroleum.

Both of these premises base themselves on the assured knowledge that peak oil is here now. But what if a person still finds that premise as arguable, i.e., not yet decided?

Jeff then uses as evidence such currents issues as Nationalism, Mercentilism, Return on Investment issues, etc. But all of these have been around since there has been a petroleum issue. How can any of the current unrest be atributed to peak oil with any certainty?

Why does this matter, except as an academic argument. Because it easy to mistake "logistical peak" as caused by above ground factors into what Jeff Vail calls "the peak oil sytems" and geological peak, which would be a one time deal, no reversal. Westexas describes a true geological peak in his recording of the Texas situation, in which no amount of "above ground" factors were able to restore Texas oil production to it's old levels, no matter the stability, the technology, the money that could be brought to bear. That is geological peak. How many nations do we know for a fact are at true geological peak, that is to say that with all the money, technolgy, logisticals and stability that could be brought to that nation, would still not regain oil production to their old peak levels?

Would you be willing to bet your retirement fund and your life savings on the nations you name? Remember, that Britain was at peak in the 1960's before the North Sea oil fields were discovered and developed. That's how fast it can change. Would you bet every dollar you have that Saudi Arabia cannot up production by 5%, 10%, 20%. Ever? Remember, it's your money.

I knew people in the 1970's who bet everything that we would never see lower oil prices again. Based on "the geopolitical feedback loops".

Point: We are running completely blind.

RC

"Both of these premises base themselves on the assured knowledge that peak oil is here now."

On the contrary: Both of these premises show that it doesn't matter when Peak Oil is. The effects are there: The underlying System (not systemS) is once again (like it did in the 1970s, like you love to point out) coming to the observable surface.

Betting on one particular outcome of the workings of "THE SYSTEM", as those people you knew in the 1970s did, is either foolish or brilliant - depending on whether you were right.

Will we have hyperinflation or deflation - with falling oil prices - because of PO? These are the types of bets which you are rightly calling daring.

We are running completely blind

has little to do with the geology which you are harping on. It has to do with the fact that we are groping to understand the effects of it ABOVE GROUND. System analysis, as Jeff is attempting, will help you answer a lot of questions a lot better than topical analysis, which is what you are arguing (geology, economics, technology, etc..).
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Just remember the Golden Years, all you at the top!

Point: We are running completely blind.

Point: ThatsItImout is running completely blind.

There’s no way in the world you can make such a statement. There is a degree of uncertainty, without a doubt. We can’t yet be certain if the production peaks in 2005 and 2006 actually represent the one true peak of Peak Oil. We also cannot be entirely sure any exploration effort won’t reveal a new super giant field. We also cannot be entirely sure new techniques in recovery won’t come to the fore and allow not only production to resist declines but also to enable more oil in place to be recovered. I agree, absolutely.

Having said all that, I do wonder about the 2005 and 2006 production peaks. These are not the observation of a blind man running. What about discovery? While the possibility of a one or more super giants surely exists why are they remaining so elusive? As for both greater production and greater utilisation of oil in place, why does it seem we’re unable to produce more and extract more than we have in the past?

We’re not running blind. You’re running stupid. As long as production remains below the levels set in 2005 and 2006 we’re not getting further from peak we’re getting closer. The rear view mirror effect I suspect. As long as new discoveries fail to identify new super giants, or even giants, we’re getting nearer the peak rather than further from it. As long as improved recovery techniques fail to increase production or fail to increase recovery percentages, we’re getting closer to the peak, not further from it.

You’re unrelenting insistence that we’re running completely blind is a fabrication. The facts and figures are certainly subject to a degree of uncertainty. That degree will depend on the position one has adopted regarding Peak Oil. The essence of Peak Oil seems no longer to be in doubt. Even if abiotic oil exists the rate of replenishment is far to slow to be of use, at least insofar as the oil producing regions we are relying on are concerned. Production increases as a result of improved technology may very well be working at 110%, it’s just they seem to bring nothing more to the table than we’ve had already. As for discovery, well I’ll let you work that one out. Let me, and the rest of the globe, know when you’ve found a new field capable of producing more than a million barrels per day.

Stop perpetuating the lie “we’re running completely blind.” Within reasonable degrees of certainty we do know. Until we begin finding new sources of light sweet crude to not only replace the sources now in apparent production decline but capable of meeting new demand, then we’re not really running completely blind. No doubt, you sure seem to be. But, there’s a much bigger group of folk looking at the data, looking at the behaviour of the producers, analysing the responses of governments, that are concluding if peak isn’t now it isn’t very far away.

Stop sticking your dick into a light socket with the switch on and pretending the result isn’t shocking. It is. It is unavoidably shocking. On the other hand, maybe the switch isn’t on. In which case, maybe the oil you seem to think is there isn’t really.

goritsas said,
"Until we begin finding new sources of light sweet crude to not only replace the sources now in apparent production decline but capable of meeting new demand, then we’re not really running completely blind. No doubt, you sure seem to be. But, there’s a much bigger group of folk looking at the data, looking at the behaviour of the producers, analysing the responses of governments, that are concluding if peak isn’t now it isn’t very far away."

I have no doubt that peak will come. I have no doubt that in a historical sense, it is probably relatively close.

"Isn't very far away"? How many years? As is often pointed out, how many years means little in the "big" historical picture. But it means everything in the "I bet my azz I know not only WHAT will happen but WHEN it will happen" investment picture. If you mis guess even a small amount it could cost your lifestyle even before Peak Oil gets a shot at.

RC

Tell me something, Roger. I already adressed this:

Will we have hyperinflation or deflation - with falling oil prices - because of PO? These are the types of bets which you are rightly calling daring.

Please answer this:

Will we have hyperinflation or deflation once PO is causing 2-5% less production per year?

Well?

That's the way "betting" you ass on the market works. You can be completely right - but lose all your money anyway.

You can also bet your ass on a new silver bullet. And lose completely because it was the wrong Microsoft: right idea but wrong connections.

What ARE you willing to bet your ass on?

If you completely knew that next year this time world oil production were exactly 4.32% less than today. EXACTLY WHERE WOULD YOU PUT YOUR FRIGGN MONEY? Will oil prices be higher because of it ---- or LOWER because of recession!?=!?

Please don't sidestep this one with your "We don't know" wining.
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Just remember the Golden Years, all you at the top!

$$$$$ One other potential feedback that hasn't been mentioned is the stated intention of Al Qaeda to establish a Caliphate in Iraq. If that actually were to happen, what do you think would be the upshot in terms of US access to Gulf oil let alone Iraqi oil. Could this be related to KSA's hiring of 35,000 guards and the pipeline going straight south bypassing the straits of Hormuz.

Or are we to totally discounting this possibility.

A Caliphate established by Al Qaeda in Iraq would have serious difficulties with Farsi speaking people to the east of Iraq. I think it is not a possibility about which US need worry itself.

A rump Sunni statelet in the Anbar province is pretty much assured - failed right out of the gate with no oil and four neighbors that will want to hold it under the water until the bubbles stop.

The Shi'ia Iraqis and their coreligionist Persian neighbors will be delighted by this ... and delighted to shoot anyone who wanders over to cause trouble in their territory. Everyone knows the top judge in Iran is Iraqi ... and top leaders in Iraq can be Iranians.

The Kurds will be equally thrilled but they have the benefit of ethnics differences making it easy to spot outsiders. They're pretty much already established that nonsense is not allowed in Kurdistan (only four U.S. troops killed there total) and a Wazirstan style statelet won't change that.

The Syrian leadership is primarily Alawite and doctrinally closer to the Shi'ia ... and they're also sick of refugees from next door. No love coming from that quarter ...

The Saudis share the Sunni Islam beliefs of al Queda but their avowed intent to bring down the House of Saud does not make them popular.

So ... al Queda might talk Caliphate but it'll get about 2cm further than the dreams of a pan-Caucasus Caliphate that the Russians ground into dust in the nineties ... at least in the current environment.

Once peak oil truly kicks in hard the chances for KSA to tip to an extremist view go up quite a bit - starving people do many strange things before someone gets around to publishing a cookbook containing recipes for long pig. But by the time this comes to pass we'll be well past WTSHTF and perhaps al Queda will topple the House of Saud ... always in motion is the future.

Here is a nice little map. I know not from where I stole it, but I keep it handy for discussions like this ...

Iraqi ethnic and religious groups

All five positive feedbacks seem quite likely. And it seems quite likely that they, and others, will lead to serious social and political turmoil, similar in scale to the decline of the Roman Empire. But this will surely not lead to a sudden stop of oil production. And the continued oil production will be at a very low level and will last a very long time (because it is at a low rate). So why say there will not be a long tail? I say after a sudden, dramatic decline in rate there will be a very long tail in a world that looks very different from the world of today.

If I'm understanding your point correctly, then I agree that an enhanced cliff in production (if only with a regional view) in the near term will actually increase the size of the eventual "long tail" under some scenarios. As in, a huge drop in production from region X now due to purely geopolitical factors MAY actually preserve more resources in the ground for later extraction. I think that it is the sudden cliff in the "base" (higher production zone, as in the 2020-2030 region in ASPO graphs and the like) of the long tail that will really bite...

This whole thing is so immense even if you can get your head around part of it other important bits slip away. Assuming we get Alan's rail electrification stuff rolling in a timely fashion we could drive our oil consumption below our domestic production ...

I have a different view of economics than most here. Everyone says "No one will invest because they wouldn't get their money back". In small town America there is always a craft store or some such thing ... and they never pay rent. The city fathers, or perhaps the building owner, prefer a cheery basket and candle shop to a blank facade that says "failing". I think the rest of the country, if not faced with L.A. riot style behavior, will likely take up this rural mindset, putting people and spaces back to work as best they can. Oh, no corporatists allowed, but that is a good thing.

But even if we get through the massive psychic shock of losing a cushy lifestyle along with our place as the world's superpower there is still a small matter of 383 ppm CO2 on the loose ...

Its just too much at midnight on a Wednesday ... perhaps it'll be more clear tomorrow.

But even if we get through the massive psychic shock of losing a cushy lifestyle along with our place as the world's superpower there is still a small matter of 383 ppm CO2 on the loose ...

And that's why I say specialization must give way to generalization.

"What Nassim Nicholas Taleb does so well in this book is to offer up an intellectual map of our risk-filled world (an a-Platonic map) that is more accurate and realistic than the pedantic view of chance that routinely misses the black swans. In The Black Swan, Taleb embraces the emerging scientific field of complexity theory -- especially the fractal mathematics of Benoit Mandelbrot. Power law-Zipf-Mandelbrot-Pareto-Levy-whatever one wants to call it probability distributions, self-similarity / self-affinity, scale-free structures, undefined (or infinite) statistical moments, and 'wild,' fractal randomness, are what Taleb calls "Grey Swans of Extremistan," and they serve as viable alternatives to the Platonic models when it comes to understanding the high impact, almost unpredictable nature of extreme and catastrophic Black Swan events."

http://econophysics.blogspot.com/2007/05/black-swan-well-thats-life.html

The Black Swan is missed because we try everything to
keep from seeing it.

Arkansaw of Samuel L Clemens

Anyone see Senator Peterson's (?) presentation to Congress on the 2007 "No Energy" Program? It was on CSPAN. Interestingly, he's from Titusville, PA where crude oil was first discovered in the US.

Finally, here was a politician who actually gets how screwed we are and is trying to get something going. He was saying things like we're not exploring wind and solar enough, we've got no plan, and congress is "asleep", how it's not discussed in the media, in business, the government, the white house. He said we've got the pedal to the metal and we're going to have a serious energy crisis. I was like, "wow", I didn't think anyone out there was awake anymore except for this site and a few others. It was a pretty good presentation, albeit with some flaws, but it was something else. Then I turned on CNN and they were showing Britney Spears. Un-fvcking-beleivable.

Great article Jeff. Sometimes it's good to read an explanation of something you felt was the case, but couldn't quite explain.

As the demand rises against supply, the competition for it increases, and the price rises. A greater proportion of the price of energy is required to secure it's transit to market. Because much - increasingly expensive - energy is used in securing transit, maintaining infrastructure and mollifying populations, it would seem most profitable to move the markets for energy closer to the sources of that energy.

This way of looking at it would also point to exports declining more quickly than production, as supply lines contract.

Thanks Jeff I like the way you explore ideas.

One thing I think is missing from your post and hinted at in the comments with the talk of gray and black swans is correlations. Feedback loops start when to normally uncorrelated events become correlated.

And example would be a diesel tanker loaded with gasoline waiting at a gas station thats out of diesel. And lets say the
tanker trying to load with diesel for the first station is say waiting on gasoline for a emergency pump to load diesel.

A bit contrived and not factual but you get the point. These correlations reverberate through the system and act like a force causing more correlations and driving feedback loops.

You can think of the cracking of a steel beam the fine cracks in the beam act in a sense like lenses allowing stress to be concentrated or focused or correlated then feed ack causes the failure.

So called black swans are not outliers its just that the correlations and feedback loops that actually cause them can be strange but they become almost certain when a system is stressed.

Back to the steel beam the chance of it breaking with no load is effectively nil but the same beam which may not change much under visual inspection becomes for more susceptible to failure as more and more stress is applied.

Sorry for the mechanical engineering examples but these mysterious events are so common in mechanical engineering that they are not treated as strange yet when we consider economics the concept of catastrophic failure of a stressed system seems novel.
To my knowledge all stressed systems fail catastrophically.
Its difficult to actually conceive of one that does not yet this concept of a "soft landing" seems rampant in economics.

So black swans are actually the norm outside of economics.
People like to focus on the actual crack that failed i.e the myopic views of the great depression and refuse to consider that the system was stressed and thus would fail some way.

Right now around the world your starting to see attempts to keep the system from failing but because of the high stress that in the global economy today we are certain collapse.

Now with that said how can you save yourself well if you think about it the proposals for electric rail and ELP etc are really suggestions that we execute a controlled collapse
just like you would do a building demolition. The building will be in ruins once your done but you minimize collateral damage. So we either pull it down ourselves or the hands of fate and black swans etc will pull it down.

To my knowledge all stressed systems fail catastrophically.

Then probably not a good idea to rely on your knowledge.

If you mean all systems that experience stress beyond their maximum capacity to absorb that stress, then maybe you'd be correct. It is also possible for a system to fail without such failure being catastrophic, whatever that means to you.

We know that to be true, at least insofar as contemporary economics is concerned, with the reflations in both Europe and the US following the recessions in 1990 and 2000. Despite the "stress" of both these events, neither the economies of Europe nor the US failed, let alone catastrophically.

Whether this will be true for the current conditions facing Europe and the US remains to be seen. If the failure is indeed catastrophic, then better pull out the history books and read once again the conditions of the thirties and the onset of the wars in Europe and in the Pacific.

So black swans are actually the norm outside of economics.

By the definition, black swans are outside the norm, full stop. They'd be something other than black swans otherwise. Regardless of discipline.

Ahh its economics so lets mince words.

The the exact mode of failure of a steel beam is unknown and the concept of overstressed is a average not a exact amount.

So you need not bring up the concept of overstressed since parts can fail at stress levels far lower than typical or normal. The black swan concept focuses on the chain of events that lead to failure since its generally tied to human interaction we can often follow and relate to the events.

See the poem "For lack of a Nail" the point is this whole concept of Black Swans is a bunch of bull they happen all the time in the "real world" and they are handled with the concept of mean time to failure and preventative maintenance. And even with this Sh%$* happens. Only in economics does it become a "magical event".

What you need to think about is mean time to failure. With a complex system under ANY stress the chance of failure is non-zero. If the system is driven and has undamped oscillation's then it fails. Preventative maintenance is simple a refurbishing of the system to ensure that correlations etc in the aged system might be removed.

Our society is based on infinite growth when this concept is no longer viable even in the abstract then it will fail.

What this means in economics is we should have been stabilizing our "mature" economies as population growth slowed and resources became scarce. This means that instead of wasting resources using economies of scale to build similar items we should have instead focused increasingly on high value goods and quality and craftsmanship. Japan during the long period it was isolated took many concepts and rarefied them to a fine art. So you can either take steel and create a bunch of ginzu knives or create a rare handcrafted blade. The sheer loss of culture over the last decades and flood of cheap goods in a sense prevents us from converting to a stable culture centered on craftsmanship.

Back to mean time to failure etc. Craftsmanship in a sense is the personal assurance that the good or service will not fail. So a society based on craftsmanship and limited resources in a sense trades wasting energy rebuilding and expanding for refined low stress long term stability.

All the proposal for coping with peak oil boil down to moving to a society of craftsman exchanging high quality goods and only trading for specialty items.

… Black Swans is a bunch of bull they happen all the time in the "real world" and they are handled with the concept of mean time to failure and preventative maintenance.

Whatever else Black Swans may be, they have nothing to do with “mean time to failure” or “preventative maintenance,” at least as far as defined by Taleb. If you’ve got the time, read his book. If your too cheap to take the time then try John Robb’s blog. Maybe then you’ll be able to talk about Black Swans without having to redefine them within a framework of your own making. Black Swans have a definition. Mean time between failures and preventative maintenance are not incorporated within that definition. As an engineer, you will probably appreciate the importance of both defined terms and the need to adhere to those definitions when using them.

And even with this Sh%$* happens.

Oops. Maybe you do understand Black Swans, only you’ve been blinded by your own area of expertise. Who knows, eh? Seems to me you’ve hit the nail on the head, more or less. And all without resorting to mean time between failures or preventative maintenance.

What you need to think about is mean time to failure. With a complex system under ANY stress the chance of failure is non-zero. If the system is driven and has undamped oscillation's then it fails. Preventative maintenance is simple a refurbishing of the system to ensure that correlations etc in the aged system might be removed.

Man, are you desperate to make a point. Only, I have no idea as to the point. Maybe you could explain it like I was a six year old? I just don’t think I can keep up with either the Steinbeck-nature of your prose or the Einstein-nature of your line of thought. Simple words, no more than two syllables please, I beg you. Even then I’ll be waiting till my mum and dad get home for a bit of help. I’ll just tell them it’s part of my homework.

Craftsmanship in a sense is the personal assurance that the good or service will not fail. So a society based on craftsmanship and limited resources in a sense trades wasting energy rebuilding and expanding for refined low stress long term stability.

Well, I think I’ve got that. First off, don’t make useless crap. Remember, I need it explained like I’m a six year old. Second, if it’s going to be made, make it real good. Like good enough to last forever after surviving two earthquakes, four tornados, and at least one ice age. Third, whoever makes it stands behind it personally. So if it fucks up not only do you know who you need to see but they’ll be there and be able to make it all better. Lastly, such an approach is far more likely to help if peak oil and peak whatever is real as we slide down the back end of Hubbert’s peak, as well as any other peaks we may be sliding down the back of. Did I get that any where near your intention?

Ahh its economics so lets mince words.

Well, I have to say, I didn’t think I minced my words, to be sure. As recession set in the early nineties monetary policy was “relaxed” in order to get things going again. Never mind “relaxed” monetary policy was part of the problem in the first place. Guess we’ll never learn. As the recession bit deeper central banks everywhere rallied to the cause. The Fed in particular did a great job, not only with monetary policy but also through the modification of fractional reserve lending policies that further encouraged banks to take on more risk and provide more lending. This helped to arrest the bust that once again turned into the boom. Of course, that boom led to the next bust as the dot com bubble burst. Undeterred, central banks and policy makers led the rescue yet again and continued to “relax” monetary policy leading to the “boom” in property prices (Everywhere except in Japan. Although, they’re not completely blameless. Japan’s policies led directly to the carry trade and should that go tits up we’re likely to see all kinds of spectacle.). Now, we’re left to wonder where the next boom lies. Maybe tulips? After all, we haven’t done tulips for a good long time.

So no, I don’t think I minced my words. I hope I’ve made it a bit more clear as to my meaning. At some point in the proceedings, the estimated 400 to 600 trillion USD worth of global credit is going to have to be reconciled. Compared to the global GDP of around 50 trillion USD, I think it’ll be painful. Probably not if one’s poor already. But, for a whole heap of us in the West, when the pigeon comes home to roost, we may not like what it brings with it.


the estimated 400 to 600 trillion USD worth of global credit is going to have to be reconciled.



The issue will be addressed through the issue of another 400 to 600 trillion USD worth of credit. Why put an end to a good thing?


Of course, 600 trillion here, 600 trillion there, and before you know it you are starting to talk "real money."

And if 1,200 trillion is real money, then 2,400 trillion must be real, "real money". If 2,400 trillion is good then 4,800 trillion must be even better! Money from air! That's where the alchemists went wrong. They were trying to make gold from lead. If only they'd know it's was easier to make money from air we'd have solved every economic conundrum centuries ago. :)

Okay lets keep it simple complex systems have this nasty tendency to go through abrupt transitions when put under stress. It true across a wide swath of scientific disciplines from extinction events to simple mechanical failure to the formation of black holes. Only in economics is this considered a special event. And the only reason I bring this up is because we get ourselves into situations like your describing simply because generally the only way to prevent an abrupt change is to aggressively and preemptively relieve the conditions that are causing the problem. If you consider a black swan event as abnormal instead of a normal consequence then you will never take steps to keep your economics systems well within the bounds of labor/goods/services etc you don't run them to maximize profit.

Look at it this way if money was really a store of value and if everyone followed prudent economic practice and population control and constraint within a few generations everyone would be a multi-millionaire. So you would probably have a rule if you don't work you don't breed.

Now back to black swans.

In Nassim Nicholas Taleb's definition, a black swan is a large-impact, hard-to-predict, and rare event beyond the realm of normal expectations. Much of scientific discoveries for him are black swans—"undirected" and unpredicted. An event often referred to as a "black swan" is the September 11, 2001 attacks.[1]

I assert that black swans events are actually normal and expected. For example by this definition most serial killers are black swans yet they occur with depressing regularity.

In a sense if we accepted that potential serial killers must always exist maybe we would develop advanced methods to ensure that they don't express their condition. By treating them as Black Swans we have no hope of ever intervening before they do damage.

The Black Swan concept is bunk and bad science at best. And the reason its bunk is this concept of normal expectations is bogus in the first place their is no such thing.

Normal people are drug users serial killers rapists etc that s normal humanity. Only by attempting to exclude the known range of humanity can you even create the concept of black swans. So they exist only because you take a delusional or at best rosy view of the world.

Sorry to rant but the fact that economics ignores its equivalent of the serial killer is why we are so screwed up in the first place. Treating them as outliers is wrong.

"It is quite common to hear experts explain that the current tight oil markets are due to “above-ground factors,” and not a result of a global peaking in oil production..."

I was thinking maybe its the other way around.. that is : "Above ground factors" explanations by "experts" is a symptom of denial that is deep seated and these "explanations" are just a way to hide their denial?
Just a passing thought.

"It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change" : Charles Darwin