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171 comments on The Failure of Networked Systems: The Repercussions of Systematic Risk
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171 comments on The Failure of Networked Systems: The Repercussions of Systematic Risk
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Just a note on the data:
So it's probably not coincidence, but one needs to be careful about assigning causality.
In particular, note that oil production has been increasing for most of 2008. World oil supply is up 1.4Mb/d YTD 2008 vs. 2007 average (also via IEA data). Even with OPEC's just-announced cuts, it's still virtually certain that oil production in 2008 will be a fair amount higher than in 2007; with production data available through Sept, production would need to drop to ~80Mb/d for the final three months of the year to avoid an increase.
Accordingly, these debt defaults have predominantly happened while oil production was increasing. That doesn't mean oil can't be a cause, of course, but it is something that theories need to take into account.
Gross production is almost meaningless now. We care about energy for it's ability to do work. 86 mbpd does not equate to 86 mbpd of last year. It was important while a barrel equaled a barrel. Look at the marginal cost structures now, and disparate items that make up 'oil'. NGPL and ethanol have 60% of BTUs as crude, yet are counted the same. Tar sands get counted the same, yet no subtraction is taken from the natural gas figures, etc. Very little cheap stuff left, and that is what powered the globalization and extreme specialization (import substitution policies).
I can't prove the specifics on net energy (though some should try to), so in that sense it is an unprovable hypothesis, and therefore not science. But connect your own dots - I've been trying to here for 3 years and 99% of people still don't get it. Show me 10-20mbpd of new capacity that costs $10-15 a barrel to replace the 1000:1 EROI of Ghawar and other old depleting fields and I will (happily) change my mind.
Don't forget the relentless increase in population. Outside of major disaters this force is not going to go away. I seriously doubt that the increase in production for 2008 kept pace with world demand from population alone much less if you include any of the secondary issues such as EROEI and Export land etc. I say they are secondary because the primary drivers of the economy are population and resources. Maybe not secondary in magnitude but thats a different issue. No matter what we do we cannot escape from the population issue it will remain.
US population growth is a bit over 1% a year we have to grow our GDP at at least 1% just to stay level. With the changing demographics and baby boomers retiring we probably have to grow and additional 1% at least to provide for the increased elderly population.
Esp given the US medical and insurance system. Medical expenses will become a increasing burden on the system.
Sure everyone can get poorer every year not a problem but that does not stop the pressure from population growth nor its pent up demand.
By any metric available the world is a decidedly poorer place in 2008 vs 2007. Trillions have been lost and the demand has still increased and the amount of available energy per capita has decreased using any sensible accounting for EROEI and energy density.
Why guess? It's easy enough to check:
Population Growth: 1.2%
EIA Oil Supply Growth: 3.5% (July07 to July08) or 1.6% (2007 avg vs. 2008 YTD avg.) or 2.0% (Jan-Jul07 vs. Jan-Jul08).
Any of those are higher than the population growth rate, meaning that the increase in oil supply in the last year has more than kept up with population growth.
Pit I made a vow not to respond to you but in this case I must.
World population grows every year year end and year out. If in any given year the oil supply growth does not exceed the population growth you have a deficit to balance.
These people don't simply disappear in the years that oil production increases did not meet population growth you have to carry them forward.
Given that 2008 is not over yet lets wait till we see the end of the year we have every indication that production is now dropping rapidly.
In any case
http://www.eia.doe.gov/emeu/international/oilproduction.html
2005 84,561.47
2006 84,521.21
2007 84,407.57
I'm happy to just call these flat so lets assume population increased in 2006 and 2007 by 1.2% this means to reach the same amount of oil per capita we need at least a 2.4% increase in oil production vs 2005.
Including the year of the increase we would need to see 3.6%
I stand by my argument I'd be surprised given this post
http://europe.theoildrum.com/node/4676
Its fairly obvious that the year will not end with a 3.6% increase megaprojects for 2009 is not looking promising although or deficit was shrunk this year it was not eliminated.
However if your serious about this you need to do a bit more work and work population vs oil supply back at least say ten years to get a good grasp on the current status of population vs oil supply.
For example 2004 was 83,104.80
So you had a 1.5% grow and thus 0.3% "extra" oil this year.
2000-2001 it went down.
The simple observation that peak production last time was in 2005 and we only finally broke it in 2008 is sufficient to suspect that oil production as not kept up with population growth.
Feel free to to work the problem correctly and get back with me.
Or cherry pick numbers to make your point.
I would not worry too much about year-to-year rises and falls, differences of a percent or two can easily be made up by more efficiency or waste. We have to look at the general trend.
And the general trend is that the amount of oil available per person peaked around 1980. Of course these figures are total oil production, not net available - but nobody's been able to produce net oil figures for the world yet.
The other thing to bear in mind is that the places with the largest population growth have actually seen the least growth in oil consumption. The biggest growth in consumption over the 1950-2005 period has come from the low population growth First World countries.
Yeah this is better but you should also bring in GDP growth each year vs population vs oil.
The problem is of course this conflates efficiency claims esp if you start looking at individual countries.
For example in the US we claim that the US has become much more efficient at using oil since the 1970's but this does not include the export of a lot of basic manufacturing overseas. And worse if you start looking at per person GDP growth or oil usage in the countries where manufacturing was exports the demographics tends to hide the truth.
Per capita oil consumption goes up but given that a lot of this is fueled by manufacturing for exports its not near as large a real growth in general wealth in the exporting countries.
Although the per capita oil usage peaked in 1980 the process was set in motion back in the 1970's with the move to pure fiat curriencies coupled with the peak of US production. It just took a bit for US production to decline and oil imports to increase and fiat currency inflation to become noticeable.
These are some of the underlying reasons we are seeing trends out to 100 years start peaking at the same time. The wheel where set in motion a long time ago. And as you showed the path we have chosen was firmly established by 1980.
A particular reason to look at the last few years however is that a tremendous amount of debt has been created to induce growth. In general the worlds GDP has been inflated by a moved into the financial world. So the GDP itself has been heavily inflated by growth in areas that at the end of the day actually remove money from more productive pursuits.
Whats really interesting is that the world does not even really try to compute what I'd call sustainable wealth. And easy metric would be the amount of personal savings in the bottom half of the worlds wage scale adjusted for inflation.
http://www.morganstanley.com/views/gef/archive/2007/20070604-Mon.html
What this fails to address is that most of this supposed global savings is concentrated int sovereign wealth funds and multi-national corporations.
You can question the real savings rate calculations easily.
http://globaleconomicanalysis.blogspot.com/2008/08/whats-behind-soaring-...
And further you can question the savings rate for third world countries.
http://www.dallasfed.org/research/eclett/2008/el0807.html
Given that most of the population of these third world countries barely participate in the modern banking system how can Morgan-Stanley talk about how much they have saved ?
http://angrybear.blogspot.com/2005/06/international-saving-comparisons.html
One thing I've not found is the actual spread of savings amongst the population in third world countries even though we have tons of information that the wealth is highly concentrated in the top 1%.
http://www.undp.org.cn/downloads/nhdr2005/06chapter2.pdf
http://www.wsws.org/articles/2004/jun2004/rich-j22.shtml
http://www.eurekalert.org/pub_releases/2006-12/unu-pss120106.php
No way we can talk about general GDP, oil usage and net savings without dealing with concentration of wealth. In fact in general it looks like overall all thats happened is that the exporting countries have created more extremely rich individuals.
And last but not least what has allowed this charade to continue ?
Assuming since 1980 the worlds gotten poorer outside of the top 1% whats happened ?
Why did we pull this off ?
http://en.wikipedia.org/wiki/Green_Revolution
Turns out that fertilizer was probably the underlying reason for success.
As the world increased its work force by the billion these billions in general are focused on obtaining enough food. We have been highly successful in providing bread for the masses. Also another incredibly important factor thats overlooked in the time honored Roman tradition is the circus.
Not only did these super poor people get access to bread they where also submerged with American entertainment. Real increases in personal wealth amongst the poor was successfully replaced with dreams of personal wealth as seen on TV.
Often overlooked and ignored the combination of food and the modern remote circus ala TV and music and las the internet has resulted in people willingly playing by the rules expecting to get their SUV and McMansion any day. And although in many countries when people are interviewed they publicly decry the sex and violence they perceive through films in America we should probably assume that the reality is quite different and the flood of effectively porn into the third world has acted as a sedative to the masses encouraging them to dream of making it to the land flowing with sex.
The selling of real food and virtual sex to the world by the wealthy is probably and not unsurprisingly the real reason that the warped financial system has worked.
Nothing more then bread and circus's just like the Romans.
Of course as peoples lives really worsen in the sense that the food supply worsens I suspect they will reevaluate their warped view of the American Dream.
I could, but
(a) GDP is meaningless, and
(2) that would go beyond the scope of a comment on an article on a blog, with both comment and article disappearing into obscurity in a week or so.
The rest about savings and the like I consider not much of an issue. Money's just an abstraction, its twins purposes being to make trade easier and act as a store of value - two purposes which don't have to be in the same thing, but in this case are. But what is the purpose of trading and storing value? To give us better lives.
There are not a lot of measures of quality of life. The UN's HDI (Human Development Index) is made up of,
1/3 GDP per capita
1/3 longevity
1/3 education, which is 2/3 adult literacy and 1/3 tertiary enrolment
so even that measure brings in useless GDP, but the other 2/3 I think are a fair measure - if people in general live a long time and can read and write and have a few well-educated ones around them, then probably a lot of other things are going well for the country.
Most of the "super poor people" who actually benefited from the Green Revolution have never seen a television, so can't get any dreams from it. Rather, what they saw was in their own communities, some well-off individuals in homes with running water and electricity, meat eaten every day, cars and radios and so on.
And most of the countries with very poor people in them have always had these well-off individuals as examples, but they just assumed things had to be that way. But as democracy has spread, one of the things people have done with their free speech is to demand better lives.
K
a guest post on this would be most welcomed...
On what, exactly? Email me and let me know.
Perhaps true, but even C+C alone is up well over 1Mb/d since last year. Can you honestly say that those extra 1.2Mb/d of C+C are "fake"?
The fact that oil production honestly and truly grew in the last year isn't a challenge to the notion of peak oil, but it is a challenge to lazy and alarmist descriptions of it that keep mindlessly repeating the same tired, old "plateau since 2005" line.
Yes, there was a plateau, and this year it was broken; new facts require a new argument.
If that's the case, you might want to take a hard look at the quality of the argument you've been using. I mean that in all honesty - if you believe you have an important point to make and people don't believe you, it's almost always the case that either your argument is bad or your point is.
For example:
Of course they do; we're talking about peak oil, not peak energy. You're conflating two significantly different things, which not only undermines your argument for anyone who realizes that, it muddies the situation and confuses people who might actually agree with you.
It would probably be more effective if you clearly and explicitly separated "declining quantities of liquid fuel" from "declining quantities of available energy" as arguments. You may see them as being inextricably linked, but trying to explain everything at once is rarely the most effective approach.
Memmel's self-imposed ban on responding to you is well regarded within the context of this poor example of supposed facts and logic.
C+C being up 1.2 since last year, when there was a supposedly intentional 1mb/d reduction by the KSA is meaningless. What does it mean to restrict then un-restrict production? Nothing. It means nothing. That does not represent new supply in any way, shape or form. The discussion you are having is about increases in supply, not resumptions of previous production. If you are attempting to claim you don't understand this, then I call foul.
Oil production grew? By how much? A couple hundred thousand barrels over what was possible already in 2006 and 2007? You are claiming this is a considerable and significant change? Earlier this year, when challenged to do so, the best Aramco could do was 300,000/d of production. That's going to save the world how, exactly?
Your claim that the plateau was "broken" indicates you have no understanding of stats, logic, or both. A 1 or 2% range in production over three or four years capped by a rise over previous peak of around 1% is a "break out" from plateau? No. this is a new absolute peak in production. It is likely well behind 2005 peak in terms of BTUs, as pointed out above. It is not a break of the plateau. To claim that, you would need a rise that is statistically close to or over a standard deviation above the previous peak and have it last a number of years. One year of even a statistically meaningful new peak is nothing but a one-time jump if it does not persist. That is, an anomoly, at best.
Your's is a an assertion with no merit.
Cheers
He is not suggesting they are fake. Very clearly Nate has stated that he does not believe that EROEI is the same this year as last year or the year before. Thus 100 barrels extracted at a cost of 10 barrels in 2000 versus 100 barrels extracted at a cost of 11 in 2005 versus 100 barrels extracted at a cost of 12 in 2008 are not the same. (I am just making up numbers to show the form of the argument, not the specifics.)
Pitt
1)yes. More natural gas use would decrease net energy not 'net liquid fuels'
2)I have very much on my plate and should probably post 'comments' less so I can focus on posts.
3)You are correct. I try to put too many subjects in one paragraph/post. It is a fault of mine. There are those who can follow it and those that cannot. No matter how eloquent or articulate I become however, the general person will continue to think of things in dollar terms, hence Peak Oil, broadly construed, is an inflationary event, not one that places hard limits on non-energy discretionary economy and propels us along the net energy cliff. The 2 very real impacts IF a net energy cliff is close are 1)price of oil going up more than price of other things (less ability to buy oil) and 2)more and more production coming offline as producers refuse to lose money. I expect for a while, the government will still 'lose' money as an oil producer, even at EROI breaken, as most energy inputs are non-liquid fuel..
4)do you have an opinion on Dollar/Euro situation? Are people in Ireland concerned?