King Trump The Irrelevant

Santa came early this year, he left presents for all the children … whether they wanted them or not!

Hard to say what Santa will offer next year, Christmas may be cancelled … or Stukas might be dive-bombing Poland. In the twilight of ‘More’ anything is possible except ‘more’.

Anguish being felt across the country after Trump election, (LA Times):

Americans who voted against Trump are feeling unprecedented dread and despair.

I have never seen anything quite like the grief being felt by the majority of American voters who did not vote for Donald Trump.

Back in 1980, there was disappointment among Democrats when Ronald Reagan won. In 2000, after the long Florida recount and the intrusion of the Supreme Court into the decision, there were plenty of upset people who thought Al Gore, not George W. Bush, deserved to be president. But the losing voters in those elections were not despondent. They were not breaking out in tears weeks later. They were not waking up each morning with feelings of dread about what was to come.

This time it is different … (David Frum):

“Construction of the apparatus of revenge and repression will begin opportunistically and haphazardly,” Frum wrote. “It will accelerate methodically.”

Do you mean the apparatus of revenge and repression aimed at Chelsea Manning, or the citizens of Boston? How about other ‘Brand X’ whistle blowers? (Justice Integrity Project):

OpEd News (OEN) Publisher Rob Kall, another speaker, has a different view. “Since Obama has taken office,” Kall reported in ‘RoughTime for Whistleblowers’, “most whistleblowers say his administration and his DOJ treat whistleblowers worse than any previous president.”

Kall quoted GAP Homeland Security and Human Rights Director Jesselyn Radack, a well-credential ethics advisor in 2001 at the Bush Department of Justice. It promptly ousted her from her job and tried to inflict harsh reprisals in her later career after she provided to superiors her opinion that FBI personnel committed an ethics violation in questioning American John Walker Lindh after he was caught with the Taliban in Afghanistan. “Obama,” she told Kall, “has brought more prosecutions against whistleblowers under the Espionage Act than any previous president and all presidents combined.”

Thank you sir, may we please have another! Everyone knows Trump is a Fuhrer who is making lists and identifying enemies, (WaPo):

Obama administration tries to shut down visitor registry program before Trump takes office

The Obama administration on Thursday took the unprecedented step of creating obstacles to a widely-anticipated but poorly understood plan by President-elect Donald Trump to establish a Muslim ban or registry — by dismantling the registry system that already exists.

In fact, almost every ‘crime’ the oafish Trump is being accused of in advance has been committed already by preceding administrations including Obama’s, starting illegal wars, snooping on citizens, raping the environment, cozying up to bankers, bankers, bankers and more bankers.

Don’t forget Obama’s ‘drone war’, suspension of habeas corpus, arbitrary imprisonment and torture in secret prisons. These programs took form under Bush but Obama did nothing to end them or much to rein them in.

Erratic, bullying, Nazi, paranoid … all are unpleasant to contemplate, but are hardly new. The issues that defines our new (gauche) president are matters of form rather than substance. The conflicts of interest, the ‘massive self-enrichment’ by office holders and ‘retaliation by means fair and foul’ are as entrenched in Washington as traffic jams. Our small-d democracy isn’t threatened, it vanished a long time ago, after people decided to let ‘experts’ tend to their affairs and for corporate marketing and PR to do everyone’s thinking for them.

Remember this?

Comparing Combatants in Syria – Iraq Theater

USA Arms sales. To destabilize region to import consumption Operational expenses & loss of influence Transient tactical advantage for no one in particular Corporate plutocracy / None Capital destruction – consumption / Ponzi finance

“Corporate Plutocracy / None” … that’s us!
So is Capital destruction – consumption / Ponzi finance!


This generated blind fury across the mediasphere; the suggestion is Trump is a nuclear madman.

Obama’s Russian Rationale for $1 Trillion Nuke Plan Signals New Arms Race

February 23 2016

The Obama administration has historically insisted that its massive $1 trillion nuclear weapons modernization program does not represent a return to Cold War-era nuclear rivalry between Russia and the United States.

The hugely expensive undertaking, which calls for a slew of new cruise missiles, ICBMs, nuclear submarines, and long-range bombers over the next three decades, has been widely panned by critics as “wasteful,” “unsustainable,” “unaffordable,” and “a fantasy.”

It’s okay as long as ‘our guy’ does it: it wasn’t Trump who ringed Russia with military bases, missiles and combat formations, it wasn’t Trump who sent spies and provocateurs to destabilize Ukraine or attack Russian clients Syria and Libya from the air. It wasn’t Trump who is engaged in questionable wars in multiple countries across the globe all aimed at driving energy- and resource consumption to the world’s largest energy hog. It isn’t Trump who made al-Qaeda into a defacto ally of the Pentagon and the CIA, who gave the militants arms and training, who enabled the rise of Turkish neo-Ottoman ambition alongside Saudi Salafism and state terror. It was Obama who did all these things and more, following in the footsteps of American presidents going back to Truman.

Or was it? Whoever is president doesn’t matter, he is irrelevant. Our managers (including Trump) are actors reading from scripts, performing at the direction of shadowy back-door men, employed strictly by how they conform to the public expectations created by corporate marketing. Conforming includes how they look, dress, speak, where certified and whom they ‘know’; where they live and work and how they travel. Trump himself acknowledges this reality by selecting as footmen those who are possessed of a certain je ne sais quoi, that is, they have the appropriate outward appearance. Activities that require labor, skill, difficulty or do not present a marketing opportunity are penalized with diminished status. There are no grimy proletarians, mechanics or farmers in the current administration or those set to come; nor in Congress or the Courts. Instead, there are neatly coiffed thievish mandarins. Because our Ponzi- economy is divorced from reality the scam managers are expected to be incompetent, they have to be even as they are fashionable. There is no penalty for stupidity in America.

Competence is unacceptable except where it allows for the proper internal functioning of the enterprise. Our ostensible Ponzi- masters are grasping buffoons while those tending the boilers (Goldman-Sachs) must know what they are about.

The conflict in America is not between ‘left’ and ‘right’, ‘liberal vs. conservative’ but between logic and illogic, between reality and denial. The establishment’s factions are parties to malfeasance and mis-communication. To tell the truth is to acknowledge that business as usual is bankrupt regardless of who is in charge, (Brooking Institute):

Another Clinton-Trump divide: High-output America vs low-output America

Last week, as my colleague Sifan Liu and I were gnawing on some questions asked by Jim Tankersley of The Washington Post, we happened upon a revealing aspect of the election outcome. While looking at number of influences on the presidential vote outcome, we found that in a year of massive divides, one particular economic split stands out.

Our observation: The less-than-500 counties that Hillary Clinton carried nationwide encompassed a massive 64 percent of America’s economic activity as measured by total output in 2015. By contrast, the more-than-2,600 counties that Donald Trump won generated just 36 percent of the country’s output—just a little more than one-third of the nation’s economic activity.
Candidates’ counties won and share of GDP in 2000 and 2016

Figure 1: US counties voting preference, (Brookings Intitute, click for big).

Here you can see very clearly that with the exceptions of the Phoenix and Fort Worth areas and a big chunk of Long Island Clinton won every large-sized county economy in the country. Her base of 493 counties was heavily metropolitan. By contrast, Trumpland consists of hundreds and hundreds of tiny low-output locations that comprise the non-metropolitan hinterland of America, along with some suburban and exurban metro counties, as Indeed Chief Economist Jed Kolko pointed out in a tweet …

The foundation of Brooking’s argument is breathtakingly false, yet is so fashionably rendered anyone looking at it uncritically would take the authors’ premise at face value: that the metropolitan areas who fell to Clinton ‘produced’ greater ‘output’ than the backwards redneck promised lands that supported Trump. By way of Brookings’ logic, the consumption that takes place in cities is ‘productive’ because the various banks magically output ‘money’ to pay for it.

Cities are sinks not sources, their actual output is little or nothing but waste. The backwaters of America don’t ‘produce’ either, they extract our nation’s wealth — our non-renewable resource capital — and speed it to its death. Soil fertility, water, oil, gas, coal, metallic ores along with the lumpishly unfashionable activities that require labor, skill, difficulty … all these and more are sucked out of our towns making stops at Hillary Clinton’s capital-annihilating colonias on their way to the landfill. Retail sales and speculation are measured as production by Brookings’ economists and the banks which fund the process, lending abstract ‘wealth’ into existence using the wasting processes as collateral. Given four- hundred-plus years of mechanized pillaging the flyover counties have been emptied out with the extractive returns captured by well-positioned rentiers. The locals cry, “where’s our cut?” The fact of the question itself reveals the answer …

Establishment whines about ‘fake news’; what is fake is denial of the onrushing consequences of resource squander and how these are making themselves manifest.

Figure 2: Fed Funds by FRED, (click for big). Immediately before president-elect Obama took office in ’09, Santa gave the children negative real interest rates, that is, yields below the rate of inflation. Bargain basement borrowing costs were the incentive for firms to borrow astronomical sums, to fund carry trades of all kinds, to become larger and more concentrated, to buy out competition, to overpay for the firms’ own shares. Tycoons borrowed to buy luxury real estate, yachts and fine art. This offered the impression of a recovery from the ’08 crash, everyone looked like geniuses for a little while including Obama, for whom it can be said it is better to be lucky than good …

Even without the Fed, rates would have been low. Because of the Great Recession, there was a ‘flight to safety’ and the bidding up Treasuries in the absence of real, non-financial returns elsewhere. Added was systemic moral hazard and the eagerness of banks to lend back-and-forth to each other. The outcome was dollar carry trades speeding US inflation around the world; ‘Lucky Obama’ able to enjoy interest rate tailwinds every single year throughout his term in office.

Figure 3: Chart by estimable Doug Short, (Click for big). Obama is jumping ship before the storm breaks: 10-year Treasury rates are galloping upward due to dollar preference which pressurizes foreign exchange and unwinds dollar carry trades. The ‘official narrative’ is future US inflation but the decline in bonds is the re-pricing of repayment risk and the forex depreciation that is certain to come. In developing countries, borrowers with cavitating currencies cannot repay their dollar debts. The incoming president promises (more) tax relief for overburdened tycoons, those expected to pick up the tab are the same developing countries already tapped to service and retire prior rounds of credit expansion.

Remember dollar preference? Don’t pick up that economics textbook, you won’t find it there! Just because Marshall or Keynes didn’t write about it doesn’t mean it isn’t real. Dollar preference is what it sounds like: given the choice between accepting a dollar as payment or one- or more foreign currencies; between holding the dollar or spending it for shit or between holding the dollar or non-cash assets, people will choose the dollar. At issue is what determines the dollar’s worth. Conventional Lucas/Friedman economics suggests ‘efficiencies’ going forward discount future money: this and time preference ‘discovers’ present monies’ worth. The conventional narrative supports the rate-setting role of central banks and centrality of monetary policy. Debtonomics insists dollars and other currencies are priced by their exchange on demand for petroleum, something that takes place millions of times every day at gas stations around the world. Question for Donald Trump: millions of motorists vs. a handful of central bankers and corrupt politicians, who wins? The worth of the dollar is the fuel price bargain each one represents relative to other currencies, also what future dollars will be worth in a fuel constrained world. In this narrative, dollars are a proxy for fuel as dollars and other currencies were proxies for gold was during the periods of the gold standard. As such the dollar is a hard currency now becoming harder, to be hoarded out of circulation for the value it represents.

Put another way, dollar preference is the convergence between the value of the oil capital and the dollars that are exchanged for it. Fuel by itself is worth more than the real-world enterprises that make use of it regardless of what means are used to ‘adjust’ the price. By this way of reasoning, fuel in the ground in North Dakota is worth more than fuel wasted in a car stuck in traffic on an LA Freeway. Business (wasting) enterprises earn nothing on their own and are essentially worthless. They exist solely to borrow, gaining- and making use of credit is their primary product: other goods and services are intended to justify credit issuance in ever-increasing amounts. Part of this stream becomes the property of well-positioned ‘entrepreneurs’: enormous unearned borrowed profits are what drives the system. When debt = wealth, there is an incentive to take on as much debt as possible, keep what you can for yourself and to shift the retirement- and servicing burdens onto others.

Our economy as nothing more than a vast cost-shifting regime, our ongoing crisis is the shortage of ‘others’ able to bear the burdens of rapidly increased surplus-related costs.

Figure 3: Emerging market currency ETF: carry trades have been unwinding since 2011 as the dollar becomes stronger. A dollar carry is a way to sell the dollar short; investors borrow in the US at low rates then ‘sell’ dollars for higher-yielding assets in another currency. Decline of dollar becomes profits to those holding the overseas assets. When the dollar strengthens as it is doing now, the deal is a bust. Any asset appreciation in an overseas currency is more than offset by foreign exchange losses. What this means is costs are more difficult to shift, that dollar debts held overseas cannot be retired. The export of dollars and the shifting of costs that have been the mainsprings of globalization; that and the petroleum trade. Resource depletion and dollar preference are undoing all three …

Figure 4: Polygon of Doom: since 2008, price peaks in oil markets are followed by sharp declines, the amplitude of peaks diminish as the world’s customers go broke, chart by TFC Charts (click for big). Unraveling of carry trades, currency depreciation, runs out of forex and generalized credit contraction ruins millions of customers at a time. This in turn strands oil drillers who cannot extract the cheap petroleum as our economy requires. In our over-financialized world, fuel shortages don’t manifest themselves as gas lines or odd-even days. Rationing takes place through the credit transmission channel. When oil price rises high enough credit vanishes and customers cannot buy. How high is too high? Last year $65/barrel turned out to be pricey enough to torpedo China’s currency; the diminution of Chinese consumption crushed the price of crude. The current barrel price of $55 appears to be too high with another predictable banking- and credit crisis unfolding in Europe.

Energy deflation occurs when shortages cause prices to fall instead of rise. This is another something not found in your macro textbooks, it’s real nevertheless and unfolding under @realDonaldTrump’s nose. Because shortages can’t make customers richer, they are unable to borrow in order to bid up the price. The drillers are stranded because they don’t have customers to sell products to. Ruined customers is the reason why oil prices have declined 60% since 2014, broke customers are why the entire oil extraction industry is insolvent.

Oil prices can only decline as there are diminished returns on each energy dollar invested … diminished GDP, diminished credit availability, diminished ability to meet ever-higher real extraction costs. Going forward, real energy costs will increase relative to the ability to meet them … even as nominal costs decline. The result is a net-energy death spiral or ‘energy deflation’ similar to Irving Fisher’s Debt Deflation. Whatever the fuel price happens to be at any given time it is too high. The price falls to meet the market, but fuel is removed from the market because of the drop in price, the ongoing shortage reduces the ability of customers to meet the price which is still too high … in a vicious cycle.

Energy deflation and dollar preference are large forces beyond the control of politicians, generals or central bankers. They are driving countries and events toward involuntary conservation. America’s new president is the product of economic failure; the inability of the economists to make correct analysis, a long grinding recession disguised as recovery; media falsehoods and the unwillingness of Americans and others to face reality, government policy failures and the headwinds of resource depletion. Trump and his cretinous gang of thieves represents the last gasp of a defunct industrial system that is sinking under the weight of its own costs.

Keep in mind, oil producing states like the US tend to be autocratic. The US, Canada, Mexico and others are on their way to becoming single-party police states like Saudi Arabia or Iran. Because of autocrats promise of access to energy, they gain ascendancy with their populations’ eager consent. What is at stake for Americans and the West is democracy itself: a choice between the right to have a say in our own affairs versus the false-promises of energy-driven ‘prosperity’ offered by autocrats … the choice between the (vague) promise of convenience or having a functioning republic.

109 thoughts on “King Trump The Irrelevant

  1. Volvo740...

    So in 2020 oil will be $13 according to ETP. (Ponziworld says $10 in 2017 by the way).

    At that price I guess an industry that is not profitable today would not be operating at all. Gas stations closed. Lights out. Everywhere. I’m not saying this couldn’t happen. But I don’t know. Can a couple of empirical parameters in a handful of equations adequately describe how the world works?

    –Insert Niels Bohr quote here–

    We don’t have to wait that long to find out whether the ETP model is right. That’s the good news. If the ETP model is right, I don’t have a job in 2020 either, and God only knows if I’m even alive.

    But I’ll put away 5 gal of gas now so I can take my Volvo out for a spin then and check it out for myself! If I spray some fogging oil in the cylinders now and fill it with a jug of 2017 engine oil (still available for $15) it should start then – if I still have a battery that’s charged. That in itself will be a major challenge.

    Good luck to everyone!

  2. Creedon

    Ken the shale fields are providing some families with a living. As an energy producer, according to Shortonoil they are a wash; energy produced equals energy consumed. They are environmentally destructive. This is also where I disagree with Steve because I can not for the life of me believe that the investment banks are issuing this money and actually thinking they will get it back. I think they are writing it off to just keep their other investments on line a little while longer.

  3. Tagio

    Any answer to your question re: how much the energy industry or investment bankers understand the implications of the ETP model would just be speculation on my part. I don’t work/move in those circles and can only infer what they understand from their actions, like nearly everyone else. FWIW, I don’t see any real evidence that people in high positions of power know about or understand the implications of that model.

  4. Volvo740...

    With an oil price at $13 in 2020 (ETP model prediction) my guess is that fuel won’t be widely available.

    Unavailability of fuel would lower the value of all kinds of equipment that is powered by it. Eventually the same could happen to housing when the fuel that is needed to heat them in the winter isn’t there. Both forces are massive and very deflationary. In the limit very little has any value without some kind of energy powering it.

    But, while I don’t question the direction of collapse, can a handful of equations accurately model the world? Surely a large scale war or extreme measures (rationing) by governments would have an impact on the price of oil?

  5. Creedon

    A large scale war would lower the price of oil at least long term. If the Hills group is correct about the 2020 price of oil, I don’t believe that the dollar as world reserve currency could any longer be in effect. Anyway you look at it control of oil will have to become more nationalistic and local and it would appear that some crises is going to to have to erupt before than. I am predicting 2018. The only way around this is for the world’s debt system to operate much better than one would think it would. I think that once the price of oil gets down to about 20 dollars a barrel, wallstreet is going to run for the hills. That will be the moment that the world begins to wake up and say, “Houston, we have a problem.” Whats amazing to me is, it’s impossible to tell people this right now.

    1. steve from virginia Post author

      What you have to keep in mind about the ETP model is it describes the extraction side using a kind of expense account analysis. It’s a variation on the theme of M. King Hubbert’s model. Because it looks at the industry in the aggregate there is room for quibbles. Not all plays are the same, critics cherry pick this- or that bit of data. This does not invalidate the overall approach.

      It is likely every oil company executive is familiar with Hill’s thesis in some way or another. The term I’ve heard is the companies’ ‘reserve replacement problem’. Other takes include Ugo Bardi’s ‘Seneca Curve’, where resource availability falls over quickly, Web Hubble’s quantitative analysis, also Steve Kopits’ money shortage vs. oil shortage approach both of which imply much the same thing. John Michael Greer disagrees, his perspective is historical: empires — such as Rome’s — are not unbuilt in a day. For me, the weakness in the oil business is the non-return on consumption: the problems sit at the end of everyone’s driveway.

      Hill’s thesis implies customer insolvency leading to lower prices for fuel: I agree. Customers are dependent upon marginal productivity of credit with the drillers completely dependent upon the customer, maybe not all the time but ultimately. With less available fuel the customer cannot become ‘wealthy’ enough to afford the increasingly costly drillers. The internal cash/energy exchanges of- and by the drillers in aggregate can be modeled: how- and how fast the customers go broke and where they do so first is something else entirely. Basically, analysts are stuck with accepting that they — the customers — are and the process is well underway.

      From 1998 onward, the productivity of each dollar invested in crude production over time has continually declined. This is the basis for the Undertow argument that Peak Oil occurred in 1998: that the baleful economic effects predicted to occur after Peak Oil started to be felt in 2000. Go one step further — the peak- or maximum output of oil cheap enough to be affordable to our waste-based automobile economy occurred in 1998, this fact is indisputable. All one has to do is look at oil prices.

      Since 2000, each incremental dollar (euro, yen or other currency) produces less crude than the dollar before. That is, today’s dollar produces less crude than yesterday’s dollar, tomorrow’s dollar will produce less crude than today’s. What is important is the relationship between the real cost of gaining fuel relative to the ability of the customers to meet this cost. This relationship is driven by the need of the driller to spend more in order to return less: this is net energy, it is currently declining, at some point net energy will become negative, that is, the use of energy will not provide returns, in the form of credit, sufficient to bring new energy supplies to the market.

      To gain more crude oil drillers are required to add more wells, each well is more costly than the last, each well offers less crude oil than previous wells: the effect of this effort is felt by oil consumers who have to compete with the drillers for each dollar of credit.

      Borrowing by customers returns less GDP, borrowing by drillers returns less crude. When drillers borrow alongside their customers, they cannot keep pace because demand is easier to create than supply: automobiles are more easily had than new oil fields. Attempting to add to GDP (borrowing by customers) increases demand for crude which exhausts inexpensive fields faster, this in turn adds to the credit requirements of the drillers, returns diminish and borrowing costs pyramid. The outcome is the same as when nobody borrows at all; there is no economy, everyone is bankrupted by costs.

      Unlike finance, petroleum is a bottom up business. At the end of the day every drop of oil/refined product has to be bought by a customer. Because there is so little return on what he does with the product he must borrow to pay for his purchase. He borrows, his boss borrows, his government borrows, his nation borrows other countries’ money (borrow by way of foreign exchange). Our economies are nothing more than interconnected daisy-chains of loans. Over time these chains have grown to amount to hundreds of trillions of dollars. As debt piles up it can only be serviced and retired by taking on even more loans.

      Even as the US makes less in the way of physical goods like clothing, shoes, washing machines or table radios, its Wall Street firms manufacture the bulk of the world’s credit; this is needed to substitute for absent monetary returns for all these other things. Driving a car does not pay for the car (times- 1 billion cars), nor does it pay for the fuel, the roads, the massive governments including costly military endeavors, nor does driving pay for the ordinary costs of finance … risk premia and interest carry, which have ballooned exponentially. Other than for the smallest handful of customers — transit, construction, farming, delivery, emergency/first responder — customer use of fossil fuels and other capital is non-remunerative waste, for pleasure-fun, convenience, status, etc. The fashionable wasting processes — including fuel extraction industries — are collateral for more and more loans.

      The simplest of models is all that is required to see where this ends up: subtract the increasing costs of petroleum extraction from the small use that provides an actual return. This difference is the price that the economy can actually afford to pay without the use of credit. With extraction costs rising — which cannot be denied by anyone — and with actual returns being very small, the output of the model looks to be a negative number. What that implies is the price of fuel will fall all the way to zero with nothing to be done in the way of ‘administrative adjustments’ to alter this outcome = energy deflation.

      1. Volvo740...

        Very nice!

        At some point all the curves will be trending downward, but many are being obfuscated. Such as unemployment and share prices via buybacks. Airlines now claim that 3 or sometimes 4 airlines are all ‘sharing’ the same flight. That gives the impression of many flights, but in reality delta may only have bought 1/4 of the seats. So it feel like a lot of entities are in on trying to cover up.

        Some stats will prove more challenging however. Boeing reported orders down significantly. (Stock up..) But it makes sense that we need less planes. At some point soon we need no new planes.

        Same for cars. At some point the decline in fuel will be off set by the natural decline in the car fleet. The only hope for the industry is to make a crappier product that wears out even fast than the current ones. Apple is leading the way on that one. Tesla is doing a good job also of turning 100K into 10K in 8 years.

        Giving up your car is easy. (Save those with a long commute, no bus options, and not affording to live close to work.) You might even be happier biking and not going on a stressful vacation via planes and taxis. Giving up food and shelter is not. Not having energy come to your house in any form is unthinkable for most – but reality for all of those out of luck.

        Eventually this sets up Europe v.s. USA in competition over fuel. It sets up many other conflicts also. How countries like Sweden that don’t have any energy sources and are cold in winter are going to ‘make it’ is beyond me.

        An interesting company to watch is Uber. Their drivers put up their own cars and time to drive for minimum wage. There is probably no way that this revenue stream can pay for the car. It probably only works because they have the car already.

  6. Creedon

    With the dollar as reserve currency breaking down in 2020, that would I think bring about what Steve is expecting. Rising interest rates and probably rampant currency devaluation. The specter of chaos will be riding his horse with whip in hand. If people still have jobs they will start to worry, will there be fuel.

  7. ellenanderson

    @Creedon “Whats amazing to me is, it’s impossible to tell people this right now.” Yes, talking about this is harder than ever. I have recently lost a couple more friends by forgetting to keep my mouth shut. We shouldn’t be surprised for we know that people defend their religious beliefs with fury. King T may be irrelevant in the long run but to the faithful believers in ‘progress’ he represents the devil. Everyone needs to get on a bus and go somewhere. I think crusades were more meaningful when one had to walk. More fun too, I’ll bet.

  8. Elmar

    Everybody who is talking about “the sword of damocles about our heads” is treated like an outlaw. Same story on all boards and blogs.

    “Two things are infinite: the universe and human stupidity; and I’m not sure about the universe.”

    Albert Einstein

  9. Ken Barrows

    Don’t “efficiency” advocates, in a conclusory sort of way, contend that the newer wells are less expensive than the previous ones and, by implication, giving us more net energy than before? I do admit that they don’t make much of a case but rather state that it is so.

    1. steve from virginia Post author

      There is a lot of (comforting) talk but facts speak for themselves.

      Prudhoe Bay field = 1,114 wells with 12 billion barrels extracted from about 16 billion barrels recoverable.

      Bakken-Three Forks play = 13,458 wells with 3 billion barrels extracted from a hard- to- determine number of barrels recoverable. There could be 4 – 7 billion recoverable, also natural gas from both plays.

      The Saudis have pulled about 85 billion barrels from Ghawar super-giant oil field w/ 3,000 injection and extraction wells.

      Geology and location determine how efficiently the extraction will be, regardless of hand-waving. There may indeed be 20+ billion barrels of oil sitting under the Arctic Ocean but it might be too remote to access. In the Bakken formation, the total discovery dwarfs the amounts that are recoverable: 1% or less with current technology.

  10. ellenanderson

    Steve says: “The internal cash/energy exchanges of- and by the drillers in aggregate can be modeled: how- and how fast the customers go broke and where they do so first is something else entirely. Basically, analysts are stuck with accepting that they — the customers — are and the process is well underway.”
    Of course all of us would like to have the specifics – how fast, where and who is first (or maybe last?) Is it going to be like The Wonderful One Horse Shay (“All at once and nothing first, just like bubbles do when they burst.”) Or will it be slow and unpredictable and disguised as something else?

  11. ellenanderson

    Why do you suppose Rex Tillerson wants to be Secretary of State? He is an engineer. He has got to be fully aware. You would think at his age he would head for one of those underground mansions described in the new issue of The New Yorker (a must read!)
    If I were part of this administration I would try to find an excuse to impose resource (gas) rationing on all of the reds and blues, all of the deplorables and snowflakes. I would use an internal national emergency rather than taking a chance on starting a foreign war.
    But then the consumer economy is over. No more moar.

  12. Creedon

    Re: The Etp Model, Q & A

    Unread postby shortonoil » Mon 23 Jan 2017, 16:07:10
    “Short; are you saying that the ETP model predicts a global depression due to the falling price of oil.”

    The price decline is an effect; not the cause. The cause is petroleum’s declining ability to deliver energy to the non petroleum producing sector of the economy. That is presently occurring at a rate of 2.95% per unit per year, and accelerating geometrically. As the remainder of the economy weakens its ability to support the petroleum industry declines, consequently the price goes down. The petroleum industry is selling to an ever weakening consumer. As the industry is now directly, and indirectly the major consumer of their own product that also applies to them.

    The monetary impact is taking the form of a negative feed back loop. As the price of petroleum goes down their cost of production goes down. That is because they must purchase their own product to produce it. As the cost of production goes down the industry’s revenue is going down, thus their ability to acquire their own product is declining. As the final consumer’s ability to purchase the product declines the industry’s ability to produce it declines. When there is no energy being delivered to the general economy the cycle will have been completed. That will occur in no more than thirteen years.

    At that point the velocity of money will have fallen to almost zero, and Wall Street will have long since become irrelevant. This process has been ongoing since the first barrel was extracted; it went unnoticed because production was growing faster than oil’s per unit ability to deliver energy was declining. That is no longer the case. The price is now merely an indicator of that situation, but in a world of a potentially infinite supply of money it is of ever declining significance. The price of oil will most likely follow the world into a depression, but it will not be the reason why it arrived the

    1. Volvo740...

      It seems like the MIL sector is not going to give up its needs/wants unless forced. Neither is police. Does this mean that the rest of the ‘non petroleum producing sector’ would be stripped of supply even faster?

  13. Eeyores enigma

    There are other aspects of “modern industrial civilization” that are experiencing/delivering the same diminishing returns that shortonoil talks about although FF energy is the most important.

  14. Being Frank

    About 1532 Copernicus had basically completed his work on the manuscript of Dē revolutionibus orbium coelestium; but despite urging by his closest friends, he resisted openly publishing his views, not wishing—as he confessed—to risk the scorn “to which he would expose himself on account of the novelty and incomprehensibility of his theses-Wikipedia. From my perspective that just about sums everything up.

  15. Volvo740...

    Interesting ETP discussions over on In particular that World GDP as measured in dollars fell 5.7% last year. This is disputed by other commentators who claimed world GDP grew by 2.3% (estimated).

    Any thoughts?

      1. Volvo740...

        Right. It seems like GDP is gamed in many ways. Debt helps a lot to create GDP. I have a hard time trusting any of the numbers that come out of ‘World Bank’…

  16. Creedon

    Demonstrating just how ideologically alligned with the Obama administration was the entire US State Department, moments ago the WaPo reported that “the entire senior level of management officials resigned Wednesday, part of an ongoing mass exodus of senior foreign service officers who don’t want to stick around for the Trump era.”
    What is Steve’s response?

    1. steve from virginia Post author

      In general, when there is a change in administration, the higher-level appointees in the different departments tender their resignations. The incoming boss then decides whom to keep on.

      I don’t follow this particular subject matter in detail so I don’t know ‘who’s who’, but at least some of these appointees worked with the prior Clinton and Bush administrations. Besides this, what else took place behind closed doors I can’t speculate. As far as I know, none of the persons involved have issued a statement.

      Keep in mind, these are the boiler-tenders, they keep the wheels turning so to speak. They are a-political.

      I suspect there will be more resignations / retirements as the year goes forward. The new regime is erratic a cult. I suspect the greatest likelihood going forward is a breakdown … this fits in with just about everyone’s Peak Oil thesis. At the grassroots level there is anxiety about lifestyle. At the management level there is the lack of leverage. So far = sound and fury (and distractions) but nobody is putting the oil back into the ground, that’s the only thing that matters.

  17. Creedon

    I believe Shortonoil is correct. The break down is first followed by the lowering oil price and eventually shortages and then all the other phenomenon of chaos.

  18. ellenanderson

    Hard to know what to say these days. But I like the following recent quote from Bill Bonner: “The Lion of Queens will lie down with the swamp foxes of the Potomac… and together they will feast on the poor little lambs who elected him.”
    Bonner’s point is that the only action Trump could take to ‘drain the swamp’ would be to end the EZ money and he will never do that. Quite the contrary most likely. He will strengthen the deep state if that is still possible – which I guess is in great doubt among the Undertowers, right?

  19. Creedon

    As Steve says, Trump is erratic. I have never really trusted him. You can’t tell what he is going to do day to day. That is likely what is making wall street nervous presently. Wall street does like a strong deep state and I would disagree with you that Trump will make the deep state stronger. One of the things that I liked about Trump is that he seems to say things against the interests of the deep state, but he says lots of things. The establishment doesn’t especially like him. If there is a theme to his game it may be isolationism. In a way I would be for isolation. Isolation though is a force of collapse. Are we ready for collapse. If collapse were to begin in earnest it would probably make us bite our nails a bit. World wide the trend in Europe is for isolation. China still wants to rule the world and make widgets for us.

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