The new recession is arriving?
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I still tend to think that the spark of the coming economic conflagration will be in China which has its fingers in all the global pies. Their bubble isn’t growing as fast as before but it is still expanding…but when that bubble bursts the repercussions will show themselves everywhere it has invested and that is in nearly every region. of the world.
But just to say, schekn, this topic was created by me tongue in cheek so I can claim to be the first to predict the recession…by claiming credit for every sign of it as the crisis materializing…
ALB, all you said is true, and I know this, except you are missing one important detail: EROEI (energy returned on energy invested). This is what ultimately determines the ability to extract oil, not price. It can cost millions per barrel, and still no one will get into business of getting the rest of oil if it takes more oil to get it out than what you will receive in the end. Shale oil is marginal in EROEI, and now the whole industry is in the vicious cycle of extracting more and more just to cover borrowed costs, making oil cheaper and cheaper as a result, and shooting itself in the foot. Their own CEOs are saying that there is not that much left in the most productive areas, so the time when the industry goes belly up should be quite soon.
No worries, i’ll just add your concerns to my list and make note of any future reference to shale oil resources
As the Party’s resident Cassandra, i say, Woe, woe and thrice woe…
But just to add, how capitalism is always in flux and rarely can be predicted
“EROEI (energy returned on energy invested). This is what ultimately determines the ability to extract oil, not price. It can cost millions per barrel, and still no one will get into business of getting the rest of oil if it takes more oil to get it out than what you will receive in the end. “
That sounds an interesting concept but I imagine that, like Marx’s labour theory of value which talks about the labour-time value of a commodity being the amount of necessary labour embodied in from start to finish, it is difficult if not impossible to calculate. Obviously, nobody is going to use more actual oil to produce it if they are going to end up with less than they started with (and of course the oil industry doesn’t do this), so we are talking about converting the other materials used in producing oil into “oil” or “energy” equivalents (presumably the amount of oil or energy used in producing them from start to finish (are we?)
I wouldn’t have thought that this would be something a capitalist company would be interested in calculating before deciding whether or not to invest in producing (more) oil. They apply rather MROMI (money return on money invested), i.e. nobody is going to invest money in producing something if they’re not going to get more money back in the end. I suspect that, if at some stage of the EROEI calculation prices are used, then the two might in practice be the same. I don’t know. I’m asking you. How is the oil equivalent of a drilling rig or a nodding donkey calculated?
I don’t think capitalists use EROEI much, I mostly read about it in energy policy or geological research literature, for example here: https://www.sciencedirect.com/science/article/pii/S0301421513006447
Wikipedia article explains the concept quite well, including criticism and problems of calculation, but in any case price shouldn’t be included there, as this is a purely energy-calculating concept. Apparently in the beginning of XX century EROI of oil was close to 100, and since then it has been steadily decreasing, being around 10 now, or even less for shale oil. An important implication is that the effects of this decline seep through into the slowing down of capitalist economy and even lower standards of living for the dispossessed. All of the renewables (or, as one author noted, rebuildables, as PVs and windmills need to be constantly exchanged) have much lower EROEI than most easily accessible fossil fuels. Moreover, even when/if we decide to switch to the rebuildables on a mass scale, it will lead to the so-called “Energy cannibalism”
This would in turn exacerbate the energy crisis of peak oil. About the rationale for the peak oil timing you can read also here: https://oilprice.com/Energy/Energy-General/Permian-Slowdown-Could-Start-In-202021020.html – especially the last paragraph.
Thanks but having looked at the Wikipedia entry on “Energy Return on Energy Invested” I am not that much the wiser as to what exactly it is.
Linguistically, it ought to mean the ratio of the actual direct energy as such used at the last stage of production (e.g. electricity to drive the drill or the nodding donkey) to the amount of material produced useable as energy, But that would be a pretty pointless measure as obviously it will be greater than 1 since such direct energy inputs are only a part of the total inputs to production. At the other extreme, it could be the ratio of all the energy used in producing all the materials used to produce the material, which could possibly be less than 1. But, as the wiki entry, asks:
“How deep should the probing in the supply chain of the tools being used to generate energy go? For example, if steel is being used to drill for oil or construct a nuclear power plant, should the energy input of the steel be taken into account? Should the energy input into building the factory being used to construct the steel be taken into account and amortized? Should the energy input of the roads which are used to ferry the goods be taken into account? What about the energy used to cook the steelworkers’ breakfasts? These are complex questions evading simple answers. ”
Indeed. The entry goes on to say that in practice a simpler method is used:
“However, when comparing two energy sources a standard practice for the supply chain energy input can be adopted. For example, consider the steel, but don’t consider the energy invested in factories deeper than the first level in the supply chain. “
OK, but that would be a quite different measure giving a quite different result.
I suspect that the figure that both you and they cite that “n the beginning of XX century EROI of oil was close to 100, and since then it has been steadily decreasing, being around 10 now, or even less for shale oil” will be a reflection of (a) the rising cost of extracting a mineral like oil as the easiest sources are exhausted and more difficult ones have to be used, and (b) increasing mechanisation, which means more energy used up in the course of making the machines.
This latter is not a problem, but then EROEI would just be another way of measuring what bourgeois academic economists call “increasing capital intensity” and what Marxian economists call “the increasing technical composition of capital”. Normally, this is a good vthing as it means that more can be produced with less human work, though in the case of mineral sources of energy such as coal, oil and gas this is countered by having to work more difficult to extract sources.
At some point, I suppose, it is theoretically possible that the increase of productivity through mechanisation could be wiped out by the fall in productivity through having to use more difficult sources. I wouldn’t have thought, though, that we are anywhere near there as the fact that some goal, oil and gas production is still profitable (on the basis of MROMI).
Going by what the wiki entry says about some theorists using EROEI to explain the fall of the Roman Empire and of ancient civilisations in Mexico and Cambodia, it seems to have been hijacked by doomsters who think we’re currently in or nearing the same position. Even if that were true, fortunately, humans have other sources of energy than mineral ones. Even if there is “peak oil” (which is open to question) there can be no question of “peak energy”.
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I really don’t think cost enters the equation at any point when you calculate EROEI, it should just be energy in whatever you measure it, joules if you want. Of course it may be difficult to measure it precisely, but just intuitively you would agree that in order to get oil which is gushing from a well in 1919, you don’t need nearly as much energy/work as in order to squeeze oil from shale rock using tonnes of water and sand that you have to transport from somewhere else, no?
Here by the way we also have to look at how convenient a source of power is. Not all sources of power are created equal. If oil is liquid and you can directly load it into a car or a truck, solar power is not so. First you have to harvest it using PVs, then charge a huge heavy battery in an EV, and only then you can use it. This is part of the reason creating a heavy duty truck has been such a challenge for EV producers: most of the weight these trucks would have to haul is their own batteries. It would also be quite difficult to make such a truck run on nuclear energy. At the same time, our way of life is heavily dependent on trucks. Just look around you and try to find a single thing that has never in its existence been on a truck. I really recommend this entertaining, short, and highly educational book on the subject:
When Trucks Stop Running: Energy and the Future of TransportationBook by A.J. Friedemann“just intuitively you would agree that in order to get oil which is gushing from a well in 1919, you don’t need nearly as much energy/work as in order to squeeze oil from shale rock using tonnes of water and sand that you have to transport from somewhere else, no?”
Of course. But the real nut to crack to become independent of fossils fuels, as minerals whose extraction becomes more and more difficult quite apart from the effects of burning them rather than using them more rationally, is an efficient system of electrical storage. In his 1962 book Profiles of the Future Arthur C. Clarke saw this as happening towards the end of the 1980s. It didn’t and we are still not there but progress towards it is being made. Once the technology to do this has been mastered, humanity will never have any problem with energy since it will be able to be captured from the Sun’s rays and stored for later use. Of course its rational use depends on a society based on the Earth’s resources having become the common heritage of all humanity and used to produce directly to satisfy people’s needs and not for sale on a market with a view to profit.
The USA fracking industry is at the brink of bankruptcy, that is one of the reason why they want to destroy others competitors . There is not such thing as self sufficient, it is a just a lie
The Dow crashing, Germany on the verge of a technical recession, Asian stock-markets falling…everywhere there is a pessimism.
https://www.theguardian.com/business/2019/aug/14/dow-jones-plunges-800-points-markets-trump
I’m very pessimistic, ALB. I keep seeing the value of my pension falling due to the dropping pound. And it isn’t going to get any better soon, in fact, I predict it will get worse.
When I first moved here I was getting 53 for the pound…now it is 36 and I can see it going down to 30 when no deal Brexit actually transpires.
And, of course, it is not only me. Every ex-pat will be feeling a similar pain.
All I need is some sort of economic crisis here which raises the local inflation rate which is 1%, right now.
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