Thursday, December 31, 2015

Gaël Giraud, du CNRS : « Le vrai rôle de l’énergie va obliger les économistes à changer de dogme »

Croissance mondiale de l'économie, de la consommation d'énergie et de pétrole.

19 avril 2014, par Matthieu Auzanneau

Contrairement à ce qui est écrit dans tous les manuels d'économie, l'énergie (et non le capital, sans elle inerte) se révèle être LE facteur essentiel de la croissance, selon Gaël Giraud, 44 ans, directeur de recherche au CNRS et jésuite. Economistes, perpétuez-vous depuis deux siècles la même bourde fatidique ?

Quels sont d'après vous les indices d'un lien intime entre consommation d'énergie et croissance de l'économie ?

Depuis deux siècles, depuis les travaux d'Adam Smith et de David Ricardo par exemple, la plupart des économistes expliquent que l'accumulation du capital est le secret de la croissance économique inédite que connaissent les sociétés occidentales, puis une partie du reste du monde. Marx était, lui aussi, convaincu de cette apparente évidence. Or, historiquement, l'accumulation du capital (au sens moderne) n'a pas commencé au 18ème siècle avec le début de la révolution industrielle, mais au moins deux cents ans plus tôt. Inversement, la première “révolution marchande” des 12ème et 13ème siècles, qui permit à l'Europe de sortir de la féodalité rurale, coïncide avec la généralisation des moulins à eau et à vent. Une nouvelle source énergétique, en plus de la photosynthèse (agriculture) et de la force animale, devenait disponible. De même, qui peut nier que la découverte des applications industrielles du charbon, puis du gaz et du pétrole (et, plus récemment, de l'atome) a joué un rôle décisif dans la révolution industrielle, et partant, comme moteur de la croissance ? De 1945 à 1975, les “trente glorieuses” ont été une période de croissance accélérée et aussi de consommation inédite d'hydrocarbures. Depuis lors, la planète n'a jamais retrouvé la vitesse de consommation d'énergies fossiles qui fut la sienne après guerre. C'est une bonne nouvelle pour le climat. Mais cela n'est pas étranger au fait que nous n'avons jamais retrouvé non plus les taux de croissance du PIB des trente glorieuses.


Wednesday, August 5, 2015

Nine Reasons Why Low Oil Prices May “Morph” Into Something Much Worse

Figure 6. Figure by Steve Kopits of Westwood Douglas showing trends in world oil exploration and production costs per barrel. CAGR is “Compound Annual Growth Rate.”

by Gail Tverberg
Posted on July 22, 2015   

Why are commodity prices, including oil prices, lagging? Ultimately, the question comes back to, “Why isn’t the world economy making very many of the end products that use these commodities?” If workers were getting rich enough to buy new homes and cars, demand for these products would be raising the prices of commodities used to build and operate cars, including the price of oil. If governments were rich enough to build an increasing number of roads and more public housing, there would be demand for the commodities used to build roads and public housing.

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.

Read more @ Our Finite World.

Sunday, February 15, 2015

A new theory of energy and the economy

By Gail Tverberg
Posted on January 21, 2015

– Part 1 – Generating economic growth


What if oil prices are artificially low, on a temporary basis? The catch is that not all costs of oil producing companies can be paid at such low prices. Perhaps the cost of operating oil fields still in existence will be fine, and the day-to-day expenses of extracting Middle Eastern oil can be covered. The parts of the chain that get squeezed first seem to be least essential on a day to day basis–taxes to governments, funds for new exploration, funds for debt repayments, and funds for dividends to policyholders.

Unfortunately, we cannot run the oil business on such a partial system. Businesses need to cover both their direct and indirect costs. Low oil prices create a system ready to crash, as oil production drops and the ability to leverage human labor with cheaper sources of energy decreases. Raising oil prices back to the full required level is likely to be a problem in the future, because oil companies require debt to finance new oil production. (This new production is required to offset declines in existing fields.) With low oil prices–or even with highly variable oil prices–the amount that can be borrowed drops and interest costs rise. This combination makes new investment impossible.

If the rising cost of energy products, due to diminishing returns, tends to eliminate economic growth, how do we work around the problem? In order to produce economic growth, it is necessary to produce goods in such a way that goods become cheaper and cheaper over time, relative to wages. Clearly this has not been happening recently.

The temptation businesses face in trying to produce this effect is to eliminate workers completely–just automate the process. This doesn’t work, because it is workers who need to be able to buy the products. Governments need to become huge, to manage transfer payments to all of the unemployed workers. And who will pay all of these taxes?

The popular answer to our diminishing returns problem is more efficiency, but efficiency rarely adds more than 1% to 2% to economic growth. We have been working hard on efficiency in recent years, but overall economic growth results have not been very good in the US, Europe, and Japan.

Read more at Our Finite World.
Part 2
Part 3

Wednesday, October 29, 2014

Daze of Peak Oil…or at least Peak Oil Production

2014, Oct 15
By Chris Hamilton

Production of crude oil has nearly stalled despite a near quadrupling in the price since ’01 and it seems likely the world has entered the Peak Oil phase and the governments nor central banks (try as they may) can paper this over. Without the growing supply of adequate cheap energy, there isn’t adequate GDP growth, and without the GDP growth, there is no way to outgrow, pay off, or service the huge debts incurred but by interest rate suppression. The dual occurrence of peak oil with ZIRP (zero interest rate policy) is a truly unfortunate state of affairs. But whether or not they happened in tandem, both were inevitable. Still, governments and central banks are attempting to maintain the pre-peak oil system and avoid the pain of free market corrections to supply, production, and price. It is in this light that the centralization and “intervention” of stock, bond, and real estate markets and the manipulation of commodities growing in scale and frequency since ‘09 should not be shocking. Free markets are the enemy of fraud, the punisher of bad fiscal and economic behavior and thus free markets will not be allowed to facilitate true price discovery (i.e., REALITY).

The story of energy, particularly cheap and plentiful crude oil, has been the foundation of rapid economic global growth since WWII. The Global story of crude oil is integral to understanding the world of 2014. Crude oil matters so much because there is no readily available replacement for its energy and chemical uses and any likely eventual replacement will be at significantly higher costs. Ever higher costs of energy are negatively impacting GDP growth the world over and absent GDP growth there is no way to service or grow our way out from the great debts that have been incurred.



In 2010, the hole left behind by fracking was only $18 billion. During each of the last three years (’11-’13), the gap was over $100 billion/yr. This is the chart of an industry with apparently steep and permanent negative free cash-flows: This is the huge problem with Fracking shale oil and gas.  Due to the extremely high annual decline rates of the typical shale oil or gas well, companies must continue to spend a great deal of capital expenditures to replace what was lost.  It’s known as the DRILLING TREADMILL…. once you start, you can’t get off.

In one year the top 127 oil and gas companies spent $110 billion more on capital expenditures than they received from operations.  So, they acquired $106 billion in additional debt (a large percentage through the Junk Bond Market) and sold assets to make up the difference.

This is not a sustainable business model, just like the same nonsense taking place in the broader stock markets as corporations buy back massive amounts of their stock to give the ILLUSION that everything is fine and BAU- Business As Usual will continue.

Not only are many of these oil and gas companies hiding the fact that their balance sheets are hemorrhaging debt, they also have a cozy situation with the Federal Government.  Basically, the Fed’s allowed them to defer more than half of their tax bill… and it’s a lot of money. In a nutshell, the top 20 oil and gas companies still owe $16.5 billion (more than 50%) to Uncle Sam in tax revenue.

See more at: Biderman's Money Blog

Tuesday, January 7, 2014

Mark Anthony debunks the oil/gas fracking rush

Financial State Of The Natural Gas Industry

It puzzles me how the US NG industry manage to fund development of shale gas for these years, if the adventure is deeply unprofitable?

The True Economy Of Bakken Shale Oil

I have written repeatedly on SA to warn people that the shale oil and gas developers tend to use unreliable production models to project unrealistically high EURs (Estimated Ultimate Recovery) of their shale wells. They then use the over-estimated EURs to under-calculate the amortization costs of the capital spending, in order to report "profits", despite of the fact that they have to keep borrowing more money to keep drilling new wells, and that capital spending routinely out pace revenue stream by several times.

When the capital costs are fairly amortized, most shale oil and gas development projects are deeply non-profitable. Even the Bakken shale oil, regarded as the most profitable shale play under current pricing environment, is not profitable. Let me use real data from Whiting Petroleum (WLL), the second largest Bakken shale oil developer, to demonstrate the real economy in Bakken shale.

Mark Anthony's instablog

Saturday, December 15, 2012

Peeking at Peak Oil

Peeking at Peak Oil
Kjell Aleklett

Amazon: Peeking at Peak Oil, 2012 [hardcover]

The term “Peak Oil” was born in January 2001 when Colin Campbell formed the Association for the Study of Peak Oil & Gas (ASPO). Now, Peak Oil is used thousands of times a  day by journalists, politicians, industry leaders, economists, scientists and countless others around the globe. Peak Oil is not the end of oil but it tells us the end is in sight. Anyone interested in food production, economic growth, climate change or global security needs to understand this new reality. In Peeking at Peak Oil Professor Kjell Aleklett, President of ASPO International and head of the world’s leading research group on Peak Oil, describes the decade-long journey of Peak Oil from extremist fringe theory to today’s accepted fact: Global oil production is entering terminal decline. He explains everything you need to know about Peak Oil and its world-changing consequences from an insider’s perspective. In simple steps, Kjell tells us how oil is formed, discovered and produced. He uses science to reveal the errors and deceit of national and international oil authorities, companies and governments  too terrified to admit the truth. He describes his personal involvement in the intrigues of the past decade. What happens when a handful of giant oil fields containing two thirds of our planet’s oil become depleted? Will major oil consumers such as the EU and US face rationing within a decade? Will oil producing nations conserve their own oil when they realize that no one can export oil to them in the future? Does Peak Oil mean Peak Economic Growth? If you want to know the real story about energy today and what the future has in store, then you need to be “Peeking at Peak Oil”.

Very Important Work September 1, 2012
By keith renick
Format:Hardcover|Amazon Verified Purchase

This book, Peeking at Peak Oil is a very important work. This work is based on science. It's sound in it's findings. Again, it's science that's based on very sound research methods. It's not pie-in-the sky or doomsday is here. It's sound scientific research that can't be overlooked. Looking at the facts, readers can draw their own conclusions as to how peak oil will play out. Peak Oil is real and it has arrived. Peak Oil is most often misunderstood by economists and the general public. Modern economics is flawed because it never had a reason it include net energy in it's economic models of growth. Economist are obsessed with total labor productivity. The world is consuming more and more energy and getting less and less growth, less bang for their buck. Along with "Peak Oil" we will have water problems as many places that produce oil will require huge amounts of water for water injection to get the remaining oil out of the ground. What's never addressed is the growing car and light truck population of the earth. When my granddaddy Crump was born in 1889 there were maybe 3 cars in the USA. When I was born there was less than 70 million cars in the USA. Today, there are over 250,000,000 cars and light trucks in the USA and growing. Today the global car and light truck population more than 800 million and racing to a billion worldwide. At some point, it doesn't matter how much oil is in the ground or how many miles per gallon your car gets. What matters will be the total number of cars and light trucks in the world, all of them, more than a billion, wanting their gas tanks topped off. But the average person doesn't want to hear that there are limits. Tap water and gasoline will always be there in abundance and will always be affordable. Many believe everyone who can afford a car should have one and the earth can support one billion cars, one and a half billion cars, 2 billion cars or more. The total number of cars and light trucks in the world has never crossed their minds. How can it be expected that China and India will stop making cars? They won't and the demand for oil will overtake production forever. At some point, the question might not be how much oil is left in the world but rather how are we going to use the oil that is left? Only about 2 thirds of a barrel of oil is used to make gasoline, diesel and jet fuel. This is the term "peak oil" refers to most often is that it's a liquid fuel transportation problem. This statement is true. However, I am very concerned about the remaining one third that's used in manufacturing thousands of products that we use everyday. Now we call everything oil. Heavy sour, tar and NGL. I was very honored several years ago when Dr. Colin Campbell emailed me some of his field-by-field estimates for Saudi Arabia. I believe the author of this book and Dr. Colin Campbell are the 2 most informed experts on the subject of "peak oil." The quality of their research is unquestionable. While I do not share the authors belief that we can feed a future world of 9 billion people, the authors knowledge and effort that went into "Peeking at Peak OIl," is truly remarkable. Keith Renick, Saudi Aramco Oil Retired

The Decline and Fall of the Roman Empire

The History Of The Decline And Fall Of The Roman Empire
Edward Gibbon

Complete HTML edition

The History Guide

The Enlightenment found many of its virtues ready-made in the world of ancient Rome: economic abundance, and international political structure and a common language for many people. Of course, the greatness of Rome also led to its eventual collapse and fall, and this singular fact has exercised the mind of the historian ever since. Gibbon was perhaps the first to make such a sustained investigation of this kind of event. The following selection is from Chapter XXXVIII: General Observations on the Fall of the Roman Empire in the West. A brief list of resources follows the excerpt.

Wikipedia: The History of the Decline and Fall of the Roman Empire

Intellectus journal of the Hong Kong Institute of Economic Science: Edward Gibbon, Historian of the Roman Empire [Part I]; [Part II]
by Eugene Y. C. Ho, Hong Kong

What led first to Rome's decline and ultimately to her fall? Gibbon discovers many causes, which he discusses in various parts of his work. For instance, the long period of peace and the uniform government of the Romans gradually extinguished the industry and creativeness of the people, as well as the military discipline and valour of the soldiers (Chs. 2 and 7); the indulgence in luxury, which originally remained confined to the nobles and residents of the Imperial Court, was later extended to the troops, totally corrupting their morals (Ch. 17); the enrolment of mercenary barbarians in the armies, which served to excuse the Roman themselves from military responsibilities, at the same time encouraged the barbarians within the Empire to grow in power and influence (Ch. 17); the multiplication of oppressive taxes was countered and evaded by the rich, who shifted the burden to the poor, who in turn also dodged them and fled to the woods and mountains to become Rome's rebels and robbers (Ch. 35).

Notwithstanding the importance of these many contributing causes, Gibbon considers another two to be the most important and decisive: (1) the invasion of the barbarians, and (2) the growth of Christianity within the Empire. "I have described the triumph of barbarism and religion," he writes in the concluding chapter of his History. Every student of ancient Roman history would be familiar with the foreign enemies of the Roman Empire, most of whom were barbarians: the Goths, Lombards, Vandals, Alemannis, Huns, Persians, Turks, etc. As they had invaded Rome at one time or another, it is easy to appreciate their respective role in her fall. However, it is less easy to understand the role Christianity played as an accomplice. How was it possible that a religion whose humble founder preached love and peace and who later found himself gruesomely nailed to a cross contributed to Rome's collapse? Let us analyze this position of Gibbon in more detail.

In Gibbon's view, Christianity made for the decline and fall of Rome by sapping the faith of the people in the official (pagan) religion, thereby undermining the state which that religion supported and blessed. To be sure, Gibbon is not blind to the fact that other cults and sects within the Empire were also competing with one another in their attempt to attract believers. As he admits, "Rome, the capital of a great monarchy, was incessantly filled with subjects and strangers from every part of the world, who all introduced and enjoyed the favourite superstitions of their native country" (Ibid., Ch. 2). However, Christianity was to be distinguished from the other flourishing sects in its claim to exclusivity, or in other words, in its claim that it alone held the key to "Truth" and to Heaven, and that all its competitors were vicious and damned. Moreover, as the early Christians believed in the imminent end of this world, they all put their thoughts in the "next" world. This other-worldly attitude proved most disastrous to the Empire during the barbarian invasions, since the Christians, instead of bearing arms to serve the state and the public good, diverted men from useful employments and encouraged them to concentrate on heavenly and private salvation. Needless to say, Gibbon's anti-Christian position aroused the fury of his Christian contemporaries.