Saved By Seneca?

The farms of Ohio
had been replaced by shopping malls
and Muzak filled the air
From Seneca to Cuyahoga Falls 

     -The Pretenders

The scheme of a life
Written in the wind

     -Patty Smith  (Seneca)

Greetings

          So, we come to a fork in the road .  On one path, we all get together are start to reduce our high energy life styles voluntarily.  On another, we continue to grow in size and affluence  and burn up everything until there is nothing left to burn.   A third option is that we leave resources in the ground, but only  because of some outside limitation. 

         Could this outside limitation  be a resource limit such as peak oil?    Under that scenario, we would still continue to burn things as long as we could, but that once the fuel supply peaked we would burn less and less.  Ugo Bardi takes a look at this scenario here.   Even assuming a fossil fuel peak in the relatively near future, he finds that if the decline follows the "Hubbert curve", we would still be produce enough CO2 to raise the temperatures to dangerous levels.  He says:

 "In short, even if we follow a "peaking" trajectory in the production of fossil fuels, we are going to emit around twice as much carbon dioxide as what some people (probably optimistically) consider to be the "safe" limit."

            According to Bardi, only a "Seneca curve" could achieve a slowdown in CO2 steep enough to miss 2 degrees.

  "A Seneca shaped production curve would considerably reduce the amount of fossil carbon that can be burned in the future. Tentatively, if the collapse were to start within the next 10 years and it were to cut off more than half of the potential coal production, then, we could remain within the estimates of the 2 deg. C limit, hoping that it could be enough. Hubbert can't save the ecosystem, but Seneca could (maybe). 

  In order for this to happen we would need to see 1) a peak in oil use in the near future, and 2) a steep decline from then on.

      Bardi suggest that a Seneca collapse could occur in the event of a self reinforcing economic disruption.  This theme has been explored by Gail Tverberg in her blog, Our Finitle World.   A good summary of her position is provided here.   She paints a scenario where the price of producing oil continues to rise, while the price the economy can afford does not.   There is no  "Goldilocks" price which which work for both consumers and producers..

          So, what price do producers need?   Here , Tverberg , uses data from Kopits presentations, illustrating that the privately held oil companies,  on average, need a price of $120 / barrel to "break even", where break even means " achieve positive cash flow under current capex and dividend programs"  .   A similar chart shows a " break even " for OPEC countries of $100, where "break even"  "includes tax requirements by parent countries".    (Nice graphic here ) This last phrase is somewhat opaque,but I think it means the taxes paid to support the generous welfare programs in those countries.  

         On the other side, the maximum price that can be charged without reducing demand  is probably around 5% of GDP .  Here Kopits sets that figure at $115.  (see also The First Peak Oil Recession (2009), where Kopits states that historically the US has gone into recession when oil hit 4% - which would mean a price of $92)

          So, we can see the nature of the problem.  The economy can't afford oil above  $92- $115, but on average OPEC members need only $100.  OPEC currently provides about 60% of world oil consumption.   The average IOC only needs needs $120.   Thus, about half of the producers need a price that is higher than the economy can afford.   However, this mismatch between producer and consumer does not guarantee a sharp decline.   Even though the price has slipped below " break even", producers do not immediately turn off the spigot.    This is fairly obvious given the situation during that last 18 months.    OPEC producers have tremendous cash reserves and can afford to not " break even"  for long periods.   Similarly, IOC'S may also be willing to operate at a loss for short periods of time.   It is no secret that many of the shale producers have been in this situation for a while.   They have been able to balance the books with loans, either from bankers or by selling high yield bonds.   

       In this article, Art Berman explores this situation, and suggests that the lenders will continue to participate as long as there is some hope that the price will rise in the near future.   He argues that the price will not rise until a number of producers declare bankruptcy.  At that point the lenders will recognize the risks involved and will cut off further funding.  This will create more bankruptcies, but will also help remove the surplus.  This process may be underway. See here  His judgement is that prices must first go lower, before they can rise.  Others expect the low prices to stimulate demand, which will eat up the surplus. 

       Bardi thinks that a Seneca curve could only be triggered by a world wide depression.   One might argue that the opposite is also true -energy use and economic activity track each other closely.     As for Tverberg, she doesn't rule that out.

"It looks to me as though we are heading into a deflationary depression, because the prices of commodities are falling below the cost of extraction. We need rapidly rising wages and debt if commodity prices are to rise back to 2011 levels or higher. This isn’t happening. Instead, Janet Yellen is talking about raising interest rates later this year, and  we are seeing commodity prices fall further and further. Let me explain some pieces of what is happening."

         Falling commodity prices are triggering concern elsewhere as well.  Commodity prices  have fallen to a ten year low.    Sunday's New York Times reports on the resulting  layoffs in the  US industry.   

 "The fall in prices for a variety of products, including crude oil, iron ore and agricultural crops like corn and soybeans is reminiscent of the collapse of the technology boom in 2000 or the bursting of the housing bubble nearly a decade ago. And behind the pain and anxiety are headwinds blowing from China and other emerging markets, where growth is slowing and demand for the raw materials that drive the global economy has dried up."

  The IMF recently lowered its projection of world growth rates, citing falling commodity prices.    In September, Janet Yellen, head of the US Federal Reserve, cited falling commodity prices as a reason to continue its ultra low interest rate policy.

     “At a press conference following the announcement, Fed chair Janet Yellen listed off a number of reasons why the U.S.’s central bank thinks the economy is still too weak for an interest rate liftoff...... We saw a very substantial downward pressure on oil prices and commodity markets and those developments have had a significant impact on many emerging market economies that are important producers of commodities, as well as more advanced countries including Canada,” Yellen said

    It is probably  worth remembering that even the current anemic growth is being generated by an enormous amount of debt.  Although too much debt was widely seen as a contributor to the 2008 crisis  (along with high oil prices),  debt levels have continued to rise.  See here.   For a guided tour of the cities, counties, states and companies most at risk from debt see here

      To get a feeling for the debt levels of the US government in context of GNP, this chart from the fed, shows the how debt has been used to offset the fact that earning power of average Americans ,which has not increased in 40 years(see here).    Of course, since the 2008 crisis, the debt level has sky rocketed. One interesting question is what will happen when the next crisis hits?   Will the US government "double down"  and increase debts levels further? 

From to 

2015 Q2: 101.33026

Source: Federal Reserve Bank of St. Louis, US. Office of Management and Budget

(Percent of GDP)

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         I don't pretend to understand economics, so I am in no position to evaluate  the likelihood of a significant economic down turn.      This type of event would be unpleasant, and  is hardly to be wished for. .  Bardi notes:

      "But, even if that came to pass, a Seneca collapse is a major disaster in itself for humankind, so there is little to rejoice at the thought that it could save us from runaway climate change. In practice, the only hope to avoid disaster lies in taking a more active role in substituting fossils with renewables. In this way, we can force the production of fossil fuels to go down faster than it would do as an effect of gradual depletion, but without losing the energy supply we need. It is possible - it is a big effort, but we could do it if we were willing to try (see this paperby Sgouridis, Bardi and Csala for a quantitative estimate of the effort needed)"

   

      

All I need is a miracle

Nice Dreams, 

Nice Dreams

      - Radio head

I'll see you

In your wildest dream

   -Reverend Horton Heat

Greetings

          It seems we have a natural tendency to minimize the problem and maximize how well we are doing.  Kevin Anderson has a new piece in line with his earlier one : Real Clothes for the Emperor.   In this one he points out that the IPCC is giving the impression the that 2 degrees can be avoided without serious disruption of our lifestyle and economy.   A closer look at the underlying models, shows assumptions which are somewhat fantastical.  Not only do they assume the invention of new technology to suck the carbon out of the air, some scenarios also have unrealistic assumptions about how quickly we can begin declining - in fact some have the decline starting in the past.  He says:

"...there remains an almost global-scale cognitive dissonance with regards to acknowledging the quantitative implications of the analysis, including by many of those contributing to its development. We simply are not prepared to accept the revolutionary implications of our own findings, and even when we do we are reluctant to voice such thoughts openly. 

see here

             See also, an interesting interview with  Bill Gates who appears to agree with Anderson that we can't really expect to avoid 2 degrees through an evolutionary change, from coal to natural gas, to current renewable technology.   Like his mentor Vaclav Smil, he does not think that we are ready for the renewable revolution, especially based on current technology.   He points out there is a lot of renewenable boosterism that is counter productive, in that it makes the transition look easy.

"They have this statement that the cost of solar photovoltaic is the same as hydrocarbon’s. And that’s one of those misleadingly meaningless statements. What they mean is that at noon in Arizona, the cost of that kilowatt-hour is the same as a hydrocarbon kilowatt-hour. But it doesn’t come at night, it doesn’t come after the sun hasn’t shone, so the fact that in that one moment you reach parity, so what? The reading public, when they see things like that, they underestimate how hard this thing is. So false solutions like divestment or “Oh, it’s easy to do” hurt our ability to fix the problems. Distinguishing a real solution from a false solution is actually very complicated."

         In the end, though, Gates falls back on his own type of optimism. He puts his faith in the development of a new type of energy system.   He recommends a lot of R and D funding to develop the some new form of energy  one that is cheaper than coal, and zero carbon. He does recognize though that it might not work saying:

"I think if we don’t get that in the next 15 years, then as much as people care about this thing, we will at least run the 2-degree experiment. Then there’s the question of “Okay, do we run the 3-degree experiment? Do we run the 4-degree experiment?”

It is interesting that, even though Gates is somewhat more realistic than the average person, he doesn't suggest a "Plan B", a way of solving the problem which doesn't require a miracle.  

         Assuming that a miracle will occur, whether it is a carbon sucking machine, or a new form of energy, is a form of "optimism bias" which is discussed in a recent presentation by Nate Hagens.  He says that it "feels good" to be optimistic, thanks to dopamine flooding the brain.  see more here.  Optimists get invited to more parties.  Optimists even have healthier hearts.   Arguably evolution has pre programmed us to be optimistic.   So, it is only natural that we would expect things to "work out for the best".  Of course, such optimism can also mean that people refuse to consider or plan for anything but the happiest of futures.  see e.g. Unprepared

"We know that a massive earthquake will hit the Pacific Northwest in the future. More specifically, we know there’s a 37 percent chance of it happening in the next 50 years. It will be deadly and devastating and fundamentally change the lives of residents here.

Yet we are massively unprepared, both on an institutional level, and, often, on a personal level. The Federal Emergency Management Agency (FEMA) has found that fewer than half of Americans have a survival kit or communication plan ready for a disaster. And when asked specifically about whether they have enough food or water to survive a disaster, the numbers drop further."

      This type of happy thinking may also account for our  willingness to pat ourselves on the back for apparent  , but somewhat illusory,  achievements.  In an interesting article about "sustainability" (The Macro ecology of Sustainability), one finds this

"Portland, Oregon offers an illuminating example. The city of Portland and surrounding Multnomah County, with a population of 715,000 and a median per capita income of US$51,000, bills itself and is often hailed by the media as “the most sustainable city in America” (e.g., SustainLane.com, 2008). On the one hand, there can be little question that Portland is relatively green and offers its citizens a pleasant, healthy lifestyle, with exemplary bike paths, parks, gardens, farmers' markets, and recycling programs. About 8% of its electricity comes from renewable non-hydroelectric sources (http://apps3.eere.energy.gov/greenpower/​resources/tables/topten.shtml). On the other hand, there also can be no question that Portland is embedded in and completely dependent on environments and economies at regional, national, and global scales (Figure 2). A compilation and quantitative analysis of the flows into and out of the city are informative (see Text S1 for sources and calculations). Each year the Portland metropolitan area consumes at least 1.25 billion liters of gasoline, 28.8 billion megajoules of natural gas, 31.1 billion megajoules of electricity, 136 billion liters of water, and 0.5 million tonnes of food, and the city releases 8.5 million tonnes of carbon as CO2, 99 billion liters of liquid sewage, and 1 million tonnes of solid waste into the environment. Total domestic and international trade amounts to 24 million tonnes of materials annually. With respect to these flows, Portland is not conspicuously “green”; the above figures are about average for a US city of comparable size (e.g., [32]).

   This article also points out that the climate change , and energy  issues need to be placed into a larger context.   CO2 and climate change, is only one aspect of the picture.  Arguably climate change is one symptom of a larger problem - overshoot - one which is also creating other symptoms - destruction of fisheries, mining of topsoil, deforestation,  mining of groundwater, alarming extinction rates, etc

       Carbon sucking machines, and new energy sources will have little effect on those problems.   All these problems arise from our overshooting the what the biosystem is providing on a sustainable basis.  In other words - too many people, and too high a lifestyle.   Perhaps it would make more sense to focus on ideas that would address them as well.   Things like simplicity, degrowth, and localization.

        These approaches would have the added benefit of providing  appropriate small scale systems which will be needed as we deal with the end of growth.

         Richard Heinberg gave an interesting presentation last month to a group philanthropists, that addresses these issues.   He said

Permit me to make two broad suggestions. First: Think systemically. Symptoms of environmental, social, and financial breakdown abound, and must be dealt with one by one as they arise. But in terms of helping society adapt to limits, the most bang for the buck will probably be gained from efforts that seek to fundamentally redesign systems—transport systems, food systems, communications systems, health care systems, financial systems, indeed the economy itself. These systems arose in their current forms during a century when the increasing availability of cheap, concentrated, and portable energy sources drove innovations in manufacturing and transport, and led to the creation of debt-based money systems and the consumer economy. As our global energy regime changes, and as growth wanes, these systems will come under worsening stress and will have to adapt. It is in the guiding of that adaptation that the greatest opportunities may lie, both for the proliferation of benefits and the prevention of harm.