Sunday, August 24, 2014

Why does anyone even care about the future?

The human community spans not only space but time. Naturally, we include in our community those closest to us--family and friends--and then in concentric circles of affiliation our co-workers; our fellow churchgoers (if we do that kind of thing); members of a civic group, a book club or a sports team to which we belong; the inhabitants of our town or city, of course; and our country. Some people even count themselves as citizens of the world.

And, while we tend to reserve our deepest feelings for those closest to us, worldwide telecommunications makes it possible for nearly everyone around the globe to feel something for those very far away who lead very different lives. Recently, for example, our sympathies have been directed toward those suffering and dying from the Ebola virus.

But, the human community also spans time. We include not only those alive today, but those who've lived before us. They might be departed parents and grandparents. They might have disappeared generations ago and exist now only on a family tree and as an association with an heirloom. We might also remember a whole culture (say, ancient Greece or Rome) now gone and which we know only through its artifacts and writings. We look for guidance from the ancients, from founders of our respective countries and from those considered wisest in our history both through written accounts and now increasingly through audio and video captured while they were alive.

All of this makes perfect sense. What makes less sense is for us humans to include in our community those who are expected to come after us. I am not referring to our children or grandchildren. I mean those who will not even have been born yet when we die, those whom we will never know.

Humans have an exceptional talent for being able to imagine events which have not happened, to run scenarios in their minds and to plan based on those scenarios. The events we imagine are placed in a time zone we call the future. The future is full of potential, but little else. It does not actually exist except as a construct in our minds. And, yet every politician, every businessperson, every human almost without exception is terribly concerned about the future, or at least, says so.

Some say we humans deeply discount the future--which is just a way of claiming that we care less and less about the effect our actions have on the future, the more distant that future is. But I would say that we don't discount the future so much as we continuously reimagine it to suit our purposes (and to soothe our consciences, when necessary). We actually care deeply about the future as we imagine it!

The future of the country is at stake, the politician says. The future of the industry is at stake, says the businessperson. The future of humanity is at stake, says the activist and the moralist.

But what does this mean since the future is really a concept and not a reality? It seems natural for evolutionary reasons that humans are concerned about the survival of their genes. This is instinctual among all living organisms. But there is something more to our human concern about the future.

Humans are not interested merely in the survival of the species, but also with its so-called "advancement." Modern-day humans--unlike, say, ancient Greeks or Romans--typically imagine the future as a place in which humans become more powerful, more creative and more content. Human culture advances. The idea that it might stagnant or worse, decline, brings shreaks of horror from the champions of enlightenment and progress.

So, our concern about the future is in part a worry that it might not be better than today--better usually being defined as bigger (more stuff from the biosphere appropriated for human use); more luxurious with extra features and more fun; and above all, more automated--the world as one big push button.

We are concerned both with continuity and trajectory. And, this is where our thinking gets foggy. The continuity of the human race might require a different trajectory. The current argument over sustainability comes down to this. Those defending the status quo contend that the continuity of humans is assured by our continuous (imagined) upward trajectory. We've lived this long and succeeded against all challenges for 4 million years. And, with the technology at our disposal today, we should be secure for 4 million more. (Those making this argument, of course, are not thinking that our technology threatens our continuity.)

The apologists for our current trajectory by and large do not, as some suggest, care nothing at all about those who come after us. Typically, these apologists are not cynical; they do not secretly believe we face grave risks to the existence of humanity while publicly pretending those risks don't exist. Instead, they imagine a triumphant future that proceeds from a triumphant past.

Those decrying the status quo suggest that the really important trends, the key indices of the health of the biosphere that sustains us, are actually going down: the decline of soil fertility, the destruction of species, the deforestation of vast tracts of wilderness, the overfishing of the oceans, and perhaps most dangerous of all, the changing climate, a change sponsored chiefly by humans. In the end, the biosphere will still be here, but humans may be absent.

It seems our concern with the future comes down to what we imagine in our minds about how these views of the present play out.

The extreme pessimists may imagine all the fruits of civilization vanishing: art, literature, philosophy, science and the technology it spawns, the memory of thousands of years of struggle and inquiry lost in a few decades through a carelessness that leads to a kind of genocide of the greater part of the human race and the destruction of modern civilization.

That is a sad and frightening prospect, and it's easy to see why some people feel so deeply about this imagined future. Most, but not all, pessimists think we should try to prevent this kind of death and destruction or, at least, try to mitigate it.

The optimists dismiss such a dour outcome as more or less impossible and wonder what all the fretting is about given the great things we humans have accomplished so far. Since the future is imagined to offer both continuity AND more of what we call "progress," there's no need for alarm.

And so, to the four cardinal points on the compass, we add the axis of time, both backward and forward. Our human story and our identity would be incomplete without this axis. There is no glory in a culture that is about to vanish. Only the most misanthropic pessimist would take satisfaction in that.

Instead, most optimists and pessimists imagine themselves as part of a culture with a story that continues. What they disagree on is whether that continuity will happen with the current leadership in charge presiding over business-as-usual--or only with drastic changes to make a scaled-down version of our civilization possible before our violation of the limits of nature turns fatal.

Even though all we actually have is the current moment and our memories of the past, it seems that unless we can fill in that blank called "the future," a time that will always be a product of our imaginations, we cannot know who we are because we will not know where we are going. And these days, that seems to be the paramount question for the human community.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, August 17, 2014

I'd be happier if I didn't write this stuff!

Thus happiness depends, as Nature shows,
Less on exterior things than most suppose.

                  --William Cowper

For years my father--who is a really great guy--has been telling me that I'd be a happier person if I didn't write about all the converging threats bearing down on the human race. Turns out he's right!

Here's what a new study said on the matter:

Recent evidence suggests that a state of good mental health is associated with biased processing of information that supports a positively skewed view of the future. Depression, on the other hand, is associated with unbiased processing of such information.

Let me translate: If you fool yourself about what you are really seeing in the world and convince yourself that it will lead to a good future for you and whomever else you care about, you'll maintain good mental health. If, on the other hand, you look reality squarely in the eye, you are more likely to get depressed. Life, as it turns out, isn't a bed of roses.

Now, I would put the "positively skewed" person in the same category as turkeys. You may be familiar with philosopher Bertrand Russell's story of the turkey. A farmer feeds this turkey every morning. Using inductive reasoning, the turkey becomes more and more convinced each day that the morning feedings will extend indefinitely. One day the farmer appears with an ax, demonstrating the weakness of inductive reasoning.

It's easy to see that the turkey is happier up to the point of slaughter NOT knowing what is coming. (I'm assuming the turkey, in this case, would be powerless even with foreknowledge to prevent his own demise.) Not knowing, he is better adjusted to his surroundings, and he's not busily writing columns about the impending turkey slaughter that all turkeys should be aware of. This lack of knowledge certainly prevents stress and stress-related diseases, both mental and physical. One has to admit that the turkey has a good life (for a turkey) up to a certain point.

We should also note that there is no way that examining his past--i.e., previous feedings--would allow the turkey to understand the danger. The slaughter of turkeys is nowhere to be found in the time series of his feedings or his life in general. (The analogy for the human race would be the last 150 years or so in which the notion of perpetual progress has become entrenched in the human psyche.)

We can learn two things from the turkey's story. First, if you are a turkey, it is better to be ignorant of your own demise if you are be unable to do anything about it (even with foreknowledge). Second, information about the nature and timing of your demise may not be available through an examination of your past--though an examination of the past of many turkeys might shed light on the situation.

Let's expand on this. Since I am, in fact, not a turkey, or more particularly the turkey in the story above, it is possible that I might be able to do something to avoid my premature demise if I have information about it. But, of course, anyone who writes about our converging environmental and resource-related threats, isn't really writing about individuals, but about humans as a species.

So, it is possible that one path to relative happiness is to remain ignorant of such challenges so as not to suffer anxiety about them. Then, if society cannot head off these catastrophes, at least you wouldn't suffer anxiety about them prior to their arrival at your doorstep. And, it's possible they may never reach your doorstep during your lifetime. This, however, sounds more like a dereliction of one's civic duty than a path to enlightenment.

That's because if my efforts and the efforts of millions of others around the globe are able to move the needle of society toward sustainability, those uninvolved and untroubled by our problems would be getting a free ride. We sustainability types do all the work and then have to share the benefits.

But, the more people who join in the work of moving society toward sustainability, the more likely it is that this work will succeed. The failure to achieve a sustainable society might be the direct result of too few participants trying to achieve it. The free ride problem just got a lot more deadly.

There is also the problem of the definition of "good mental health" or more speculatively, the meaning of "happiness," and whether these ought to be one's goals in life. Human life, no matter how materially advantaged, is bound to be filled with pain, disappointment and loss. The unpredictability of our lives makes it certain that you cannot plan to have a happy life. You may get what you believe to be a happy existence. But it is likely to be the result of luck more than choice and planning.

And, if the definition of happiness includes all kinds of unhappiness experienced in the pursuit of one's goals--even if those goals are achieved--I would say that such a definition is drained of all intelligibility. It may have some mystical significance that I don't understand. The everyday meaning of happiness, so far as I know, does not include excessive suffering, pain and loss.

But back to my father. He also contends that he is very good at dealing with "reality." And, he is. He's one of those rare people who, when he looks at what he has to do each day, realizes that the task which seems most disagreeable is probably the most important.

I take this as a clue that he has not pursued happiness as his main goal in life. Rather, he saw his highest calling as his duty to others, to his family, to his friends, to his community, to his country, to the people who worked for him while he was running several companies. There is a certain satisfaction in living this way, some might even say a certain joy in the commitment itself. But it is not a path that leads to a persistent state of happiness.

It really should be no surprise to him that "being happy" is not my highest priority, and that his wish for all his children to "be happy" could easily turn into a curse of ignorance. Admittedly, trying to understand the world around us can end up being burdensome, especially if one concentrates on the human prospect in the face of the emerging multiple threats to the stability of our civilization.

But trying to understand our place in the universe and on the Earth can also be exciting and stimulating. And, trying to move society in a more sustainable direction in concert with others can be both rewarding and fun. It turns out that even people who don't put their personal happiness first on their list of priorities can have a good time in this world. And, sometimes they can even be happy!

P.S. Doing something which gives our lives a broader meaning can give us a kind of satisfaction that the "pursuit of happiness" can never provide. I am reminded of Swiss psychologist Carl Jung's story about a meeting with the religious leader of the Taos pueblo. The leader related the following:

"The Americans should stop meddling with our religion, for when it dies and we can no longer help the sun our Father cross the sky, the Americans and the whole world will learn something in ten years' time, for then the sun won't rise any more."*

The leader and his people were not just doing their ceremonies to the sun for themselves. They were doing them for the whole world.

P.P.S. This excellent cartoon nicely summarizes one of the main points of this piece.

*From The Archetypes and the Collective Unconscious, Volume 9,I of The Collected Works of C.G. Jung. p. 22.



Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, August 10, 2014

Ebola and the weak link of public health

It has long been my contention that one of the chief symptoms of the age of constraints we have now entered would be the decline of public health systems globally. This comes at a time when our vulnerability to a worldwide epidemic is increasing because of widespread international travel, the proliferation of densely populated megacities and the general trend toward urban living. Of course, urban environments are ideal for spreading disease because of the proximity of the residents.

The sudden re-emergence of the deadly Ebola virus is testing whether public health systems are adequate to the job of containing such threats. While we know that there is a link between the general health of a population and public health expenditures, it is difficult to find statistics on expenditures worldwide by country to assess the direction of public health spending. We do have evidence that declining health spending in Greece in the aftermath of the financial crisis there was followed by demonstrably worse outcomes. And, the medical community thinks the United States is spending too little on public health, just $251 per person (in 2012). Keep in mind that this is distinct from spending on medical care which totaled $8,086 per person.

So let's be clear; public health refers to the following according the American Heritage Dictionary:

The science and practice of protecting and improving the health of a community, as by preventive medicine, health education, control of communicable diseases, application of sanitary measures, and monitoring of environmental hazards.

Public health measures are at the heart of increased longevity and health outcomes for most societies. It is disease that is prevented--AIDS and other sexually transmitted diseases; diseases associated with improper disposal of human wastes such as cholera and typhoid that are reduced and even eliminated through proper treatment of sewage; diseases for which there are now effective inoculations such as tuberculosis--that makes the most difference in our overall health. Accident prevention is also key: safer automobiles and workplaces are major reasons we are leading longer and healthier lives.

For all its benefits, public health has been shortchanged recently in many countries and localities because the sluggish world economy of the last several years has meant less revenue for the governments financing such expenditures. This slow economy is a puzzle only to those who do not understand that the economy runs on energy and energy, particularly oil, has been much more expensive than in the past. This makes the Greek economic blowup, for example, more of an energy crisis than a financial one. The Greek government and society were fine with all that debt until energy prices vaulted skyward and made it difficult both to service the debt and pay for the energy needed to run the country's homes, factories, commercial establishments and vehicles.

And, Greece wasn't the only country burdened by the double burden of debt and high energy costs. All of Europe has been hit by it to one degree or another. Much of Africa suffers from one or both burdens. And Africa also suffers from a higher degree of social and political chaos that results from weak central governments, governments less able for financial and administrative reasons to deliver adequate public health services to their populations.

This means that public health is consistently underfunded given its huge benefits and given the true threats. This is partly because the most obvious and dangerous threat--a fast-moving and deadly worldwide epidemic--tends to appear episodically at long intervals. The last truly major worldwide epidemic began in 1918 and ended in 1920. It was dubbed the Spanish Flu and killed an estimated 3 to 5 percent of the population. The equivalent death toll today would be 210 to 350 million people based on a world population of 7 billion.

The economic stagnation of Europe has made it difficult for countries such as Greece to maintain public health expenditures. The stress on health systems in the states of the former Soviet Union--the breakup of which still reverberates in many ways through the health systems there--has only been increased by the AIDs epidemic which is partly responsible for a population decline in Russia from the time of the breakup of the Soviet Union to today. But perhaps the most vulnerable areas are many countries of sub-Saharan Africa where governments are weak, economic vitality is low (which limits government revenues) and health infrastructure is limited.

It's not just our poor prevention efforts, however, that are increasing our vulnerability. It turns out that our energy and resource policies are adding to our risk. Climate change, mining and deforestation appear to be playing a role in the latest Ebola outbreak. The very energy system that drives our economic engine using primarily fossil fuels leads to climate change which leads to increased stress on and fragmentation of forests where Ebola hides. Animals, particularly bats which can carry the virus, are seeking places to live among humans when habitat is lost. And, the need for human residents to make a living through exploitation of forest resources including mining drives people further into the African forest where they risk exposure to the virus.

And, of course, war is a perfect activity to engage in if you want to spread disease. In World War I, 44 percent of all active-duty deaths among American service personnel in 1918 were due to influenza. This was, of course, during the time of the Spanish Flu epidemic mentioned above. And, we now have plenty of war in the Middle East, in Libya, in Israel and the Palestinian territories, and in The Ukraine.

Finally, there is the growing problem of antibiotic resistance. Two years ago the head of the World Health Organization warned that overuse of antibiotics in people and in animals is setting us up for a world in which "[t]hings as common as strep throat or a child's scratched knee could once again kill."

The article linked above also stated that "many drug companies see no point in investing to develop better antimicrobial drugs because they will just be rendered ineffective in a few years because of overuse." Our carelessness is moving us back into a pre-antibiotic world.

If the current outbreak of Ebola is not contained, few people will understand it is because of the way our global system is structured and the vulnerabilities it creates: forcing people to seek livelihoods and food ever deeper in the remaining forests; logging those forests relentlessly; the burning of fossil fuels to power almost all our activities and the climate change it creates with its dangerous consequences for the spread of epidemic diseases; easy international travel which has already helped to spread the Ebola virus; densely populated, ever growing cities; and for bacterial diseases (not Ebola) pushing the use of existing antibiotic drugs because it is good for drug company profits (while ignoring the longer-term issue of antibiotic-resistant microbes).

Most people, however, will look at the Ebola outbreak as merely an external force of nature that we humans somehow had the misfortune to encounter. That kind of thinking will prevent us from learning the deeper causes of our public health vulnerabilities and therefore prevent us from addressing them as part of a larger project to create a healthier, more sustainable way of life.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, August 03, 2014

Bubble time: Friends and relatives act as if we've returned to business-as-usual

It is a testament to the psychological power of financial bubbles that people who know and trust me and generally accept the analysis I've put forth in my writings over the last decade are jumping into the stock market again with a pledge that they are in for the long term--no matter what.

Few would ever shop for a car, a house or even groceries the way people today are shopping for stocks--buying after the price has almost tripled. But a market experiencing a dramatic melt-up--26 percent for the S&P 500 last year and another 5 percent so far this year (8 percent when I first wrote this sentence)--has created a psychological contagion that is hard to resist. Who doesn't want to join in the mass euphoria experienced by others who are getting something for nothing?

Now there was a time when investing in the stock market for the long term worked because the businesses that made up that market were supported by unconstrained supplies of energy and other critical resources. The undulations in the economy were due primarily to economic cycles. But as economist James Hamilton has pointed out, 10 of the last 11 recessions were preceded by an oil price spike. That's not definitive proof that the oil price was THE cause of any particular recession. But it would be hard to rule out oil as a major factor in those recessions.

My view is that there is no more long-term in the stock market or any market. The relentless, if zigzag, rise in financial markets for the past 150 years has been sustained by cheap fossil fuels and a benign climate. We cannot count on either from here on out. In fact, oil has been at or near a record average daily price for more than three years. We are paying more for oil on average than we did in 2008, the year of the spike.

Another thing we cannot necessarily count on is the remarkable geopolitical stability that the world experienced for two long stretches during the fossil fuel age. The first one lasted from the end of the Napoleonic Wars in 1815 to the beginning of World War I in 1914 (interrupted only by the brief Franco-Prussian War). The second lasted from the end of World War II in 1945 until now.

Following the withdrawal of U.S. military forces from Iraq, the Middle East has experienced increasing chaos devolving into a civil war in Syria; the rapid success of forces calling themselves the Islamic State of Iraq and Syria which are busily reshaping the borders of those two countries; and now the renewed chaos in Libya. We must add to this the Russian-Ukranian conflict. It is no accident that all of these conflicts are related to oil and natural gas.

With oil and energy, in general, central to the growth of the economy, and economic growth central to the long-term prospects of the stock market, it's hard to see how the exceedingly sluggish worldwide economic growth of the last several years (which coincided with exceedingly sluggish growth in the rate of world oil production) could be the foundation for high stock market returns over this period. Something else must be at work.

I'm not the only one who has noticed that the world's central banks have engineered ultra-low interest rates, huge bond purchases (to lower rates) and gargantuan cash infusions into the banking system since the 2008 financial crash. This has led to round after round of speculative pressures in commodities including gold, in real estate (especially China), in junk bonds, and now in practically every market. The money had a hard time finding a home in a weak real economy which didn't need it (for example, in the form of business loans). And so, much of that money leaked into speculative finance.

To turn James Carville's famous phrase on its head: It's NOT the economy, stupid!

For those who believe that we do not suffer resource constraints in oil and other key commodities (despite the evidence), there are other factors that suggest caution. Various measures of market froth and complacency are reminiscent of 2007: very low market volatility, record issuance of securities, record margin debt (i.e., debt taken on to buy stocks).

But perhaps the most pernicious article of faith is that central banks simply will not tolerate another financial crash. Well, that was what people thought in 2007. What they found out is that central banks are not all-powerful. They cannot, in fact, prevent financial crashes. And, they won't prevent another one from ever happening. Central banks may delay the day when a market decline will occur. But, in doing so, they make it impossible for the financial system to correct excesses in small steps. That means when the correction comes, it tends to be large and to threaten the system as a whole.

Under the circumstances I've described, anyone who is getting into the stock market now or who got in long after the current advance from the 2009 bottom is doing the equivalent of napping on the railroad tracks. Everything is fine until it isn't. And, then it's very, very bad.

What I'm describing is not really a so-called black swan event: a rare, unforeseeable, high-impact occurrence. It's more like a gray swan, obvious to more than a few before it happens. Given that those who perceive such gray swans are usually early, it seems almost inevitable that in the year to come, the S&P 500 will rise another 30 or 40 percent, and people I know who read this piece will be telling me just how wrong I was.

However, my emphasis is on staying out of harm's way. The terminal phase of a financial bubble can surprise everyone with its ferocious advance and its duration. But it ends without warning. And, the only way to actually profit from such a phenomenon is to sell before the crash. Keep in mind that the velocity of the decline also tends to catch people by surprise.

So, if you absolutely must invest your savings in the stock market, why not wait until there's a half-off sale as you might for any other item you are trying to buy? You will get twice as much stock and have far less downside risk.

_______________________________________________

Disclosure: I hold no stocks nor any securities which would benefit from movements up or down in the stock market or in specific stocks.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, July 27, 2014

Why doesn't the 'long emergency' feel like an emergency?

In 2006 when James Howard Kunstler published his breakthrough book The Long Emergency, the next two years seemed to vindicate his warning that the oil age was coming to an end with perilous consequences. Oil soared to $147 a barrel in mid-2008. A few analysts suggested that it was headed for $200; but that was not to be. By autumn the stock market had collapsed and with it the world economy. Oil, too, then collapsed, trading in the mid-$30 range by December as demand for oil fell off a cliff with the economy. It seemed for months that the world was headed for an economic depression.

But extraordinary stimulative spending by governments around the world and emergency measures by central banks reversed the trend and led to a weak, but extended recovery of sorts that lasts to this day (though not for everyone--just ask the Greeks).

Oil prices have rebounded and have remained at or near record levels for more than three years when measured by the average daily price of the world benchmark Brent Crude. That high price (higher on average than the year of the spike) is holding back economic growth. It is creating a seeming puzzle for economic policymakers who don't understand why their extraordinary measures have not led to extraordinary growth. They are blind to the central role of energy and particularly oil in the economy.

Despite the so-called recovery, much of Europe remains mired in low or no growth, lingering on the edge of a deflationary spiral. Germany is the one bright spot; prospects for France continue to darken. In the United States jobs are only now starting to return to previous levels almost five years after a slow and laborious climb off the bottom of the so-called Great Recession.

Today, governments of some of the world's largest nations are still running extraordinarily high deficits, though these have come down as the world has inched its way out of the recession.

What appears to be masking the ongoing emergency is the rise in stock and bond markets (which has disproportionately benefited the rich who hold the most stocks and bonds). The disconnect between the still sluggish economy and the stock market which keeps hitting new highs is one indication that dangers lurk in the world economy.

Retirees and others who are risk-averse have been getting virtually no interest on their money in the bank, interest that many rely on to live. For five years the world's central banks have maintained ultra-low interest rates designed to goose the economy. This policy has forced these risk-averse investors out of their comfort zone and into the stock and bond markets to obtain income and a chance at growth. Such markets, of course, carry far more risk than bank CDs.

The people at the top and those with substantial retirement investments are doing okay again, but do not understand the precariousness of markets which are now totally driven by government and central bank policy--policy that will inevitably shift or, if unchanged, will stoke the world's speculative fever to such a degree that no intervention will be able to prevent a financial crash.

Perhaps another reason that the long emergency we have entered does not seem like one is that some emergency measures have morphed into permanent fixtures of society. The Bank of England has held its key lending rate at 0.5 percent since 2009, the lowest since the opening of the bank in 1694. The projected U.S. federal deficit of $492 billion for 2014--which previously would have provoked sharp public debate about the ruin of government finances--today seems unnoteworthy when compared to the four straight $1 trillion plus deficits from 2009 to 2012. The abnormal is becoming normal.

Analyst Doug Noland at first didn't believe that governments around the world would mortgage the future of their peoples to such an extent to protect and enrich the financial class in the aftermath of the 2008 crisis. Eventually, he dubbed the phenomenon the "government finance bubble." He expects it to be the largest and final bubble of a series occurring in the last 30 years. At the end there will be no Bank of Mars to bail us out when the government finance bubble collapses.

On the energy front, new hydraulic fracturing technology combined with horizontal drilling is being touted as the answer to high oil prices. But oil prices remain stubbornly elevated. And, the technology itself is designed to harvest oil from shale layers thousands of feet below conventional reservoirs, layers which are far more difficult and expensive to exploit. In a way, our extraction of shale-based oil should be considered an emergency measure, one designed to forestall a decline in world oil production and one that would never have been taken if the easy-to-get oil hadn't already been gotten.

Likewise, attempts to exploit oil under the Arctic Ocean (so far unsuccessful) are opening a new front in the era of "extreme oil" and should also be classified as emergency measures.

But the public and policymakers generally do not view these developments in oil exploration with concern. On the contrary such efforts are touted as evidence of humankind's inevitable advance through clever manipulation of the environment using technology. It is just this idea of inevitability which holds the public mind in thrall regarding the economy with a promise that conditions will return to normal sometime soon--normal being defined down to include all sorts of emergency measures.

Meanwhile, the rampage of an itinerant army of vengeful youths in Syria and Iraq intent on building a new caliphate and the suddenly shifting borders of The Ukraine and Russia (accompanied by the downing of a civilian airliner by belligerents) seems to trouble the public elsewhere very little. Regarding the Middle East few are saying out loud that oil and water are among the driving forces of intensified conflict that threatens to make current borders obsolete.

Joining in the mess are Palestinians and Israelis who are once again in a hot war that seems to draw yawns from the rest of the world populace.

As long as we ignore the role of climate change and resource and energy depletion, we can delude ourselves that somehow things will return to the way they used to be--before the long emergency began--that political or ethnic factors are the main problems and that it has ever been thus! So, we tell ourselves not to worry too much since these problems are really local or regional; as long as we can stay out of the way, we think we can safely ignore them.

But, of course, we can't because the world is now one global system dependent on critical resources coming from the very areas affected by conflict--oil, of course, in the Middle East and natural gas from Russia upon which Europe depends.

Is all of this happening too slowly to be considered an emergency? Emergencies generally make obvious the need for immediate and decisive action. Some people do indeed perceive that swift action is needed to address urgent energy and sustainability issues. But, it is also true that we will need decades-long engagement with such issues if we as a species are to navigate the path to a successful transition to a renewable energy economy that also conserves the soil, the water, the climate and ultimately us. Hence, the long emergency.

But in order to embrace such a worldview, most people would have to give up the supposed comfort offered by the financial bubble of the last generation, a bubble made possible by cheap fossil fuels, especially oil. It seemed as if the public might let go of this fossil-fueled fantasy after 2008. But because of the extraordinary financial measures deployed in an attempt to return us to business-as-usual, the global economic and financial system has been revived just enough to allow us to engage in a few more years of fantasizing--until our cumulative debts to nature and to one another catch up with us.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, July 20, 2014

Taking a short break--no post his week

I'm taking a short break. I expect to post again on Sunday, July 27.

Sunday, July 13, 2014

Orwellian Newspeak and the oil industry's fake abundance story

When what you are saying is so obviously at odds with the plain truth, it is useful to choose your words carefully to obscure this fact. This was the strategy of the Ministry of Truth, the propaganda arm of the authoritarian government depicted in George Orwell's novel 1984. The altered language was called Newspeak, a variant of standard English.

The oil industry's fake abundance story is so full of verbal legerdemain that it has become a sort of lexicon of Newspeak for oil. The public relations firms and fake think tanks behind this Newspeak have already achieved a notable goal, one styled as "doublethink" in Orwell's 1984. In an afterword to the edition I have social psychologist Erich Fromm explains the essence of doublethink: "[I]n a successful manipulation of the mind the person is no longer saying the opposite of what he thinks, but he thinks the opposite of what it true."

We now have nearly an entire population in the United States and nearly an entire media establishment that believes that oil is abundant--not because of the objective facts, but because of the oil industry's highly successful public relations campaign, a campaign that is still underway. The reason it is still underway is that it is essential to repeat the fake abundance story again and again in order to drown out any possibility that contrary facts will make their way into the public mind.

Just to assure you that there are contrary facts, let me list two key ones:

  1. Growth in world oil production (defined as crude plus lease condensate) in the eight years from the end of 1997 to the end of 2005 was 10.1 percent according to the U.S. Energy Information Administration (EIA). During the eight-year period from the end of 2005 (an important inflection point) through 2013 that growth was 3.0 percent. The dramatic slowdown in the rate of growth occurred despite the wide deployment of new technology (such as high-volume slickwater hydraulic fracturing), record average daily prices (based on the world benchmark Brent Crude) and record oil industry spending on exploration and development. All of these things would have dramatically increased production if we weren't facing limits on what is cost-effective to extract.


  2. From its secular low of $9.10 per barrel on December 10, 1998, the Brent Crude spot price has leapt to $107.51 as of the close on Friday. That's a 1,081 percent increase in the last 15 years. The average daily spot price of Brent Crude reached two successive records in 2011 ($111.26) and 2012 ($111.63) before dipping slightly in 2013 ($108.56). So far in 2014 through July 7, the average daily price has been $108.95. All this price data (except the Friday close) is available here from the EIA. The price of commodities that are abundant tend to fall, not rise sharply. The sharp rise indicates that buyers are competing vigorously for constrained supplies.

These two facts will give us a start on oil Newspeak. Those of you who have read 1984 will recall that the ruling party in the country depicted in the book has three simple slogans: War is peace, freedom is slavery and ignorance is strength. Appropriately, the Ministry of Peace wages war, the Ministry of Love oversees the internal security forces and conducts torture when necessary, and the Ministry of Truth, mentioned above, rewrites history and journalistic accounts of the past to conform with current positions of the ruling party.

When it comes to oil, however, we won't find the oil publicists saying things so obviously ridiculous as "low growth means plenty" or "high prices spell abundance." Instead, the oil PR machine has deftly ignored worldwide developments to focus only on the United States where oil production has been rising in the last several years. Had it not been rising, world production might well have begun to decline or at least stalled.

This PR machine likes to use the word "abundant" as much as possible. Yet, saying "abundant" won't change the fact that the average U.S. gasoline price for all grades has moved from a secular low of 95 cents per gallon in February 1999 to $3.75 as of July 7. That's an advance of 295 percent. For comparison inflation as calculated by the U.S. Bureau of Labor Statistics during that period was 43 percent.

Another useful oil Newspeak word is "resources." The word has a well-known meaning within the industry, namely, a preliminary estimate based on sketchy data (which, incidentally, is almost meaningless for determining the rate of flow). Outside the industry, however, most people conflate "resources" with "reserves." In this case ignorance is indeed strength, or at least it strengthens the persuasive power of the industry by keeping the public in the dark. (Reserves, by the way, are only the tiny fraction of resources that have been proven to exist by the drill bit and are economical to extract at current prices.)

The industry loves to say that the world's resources of oil are huge. But in recent years its spokespersons have shied away from using the word "reserves" since oil reserves (crude plus condensate) at the major oil companies have been falling in aggregate. And, not surprisingly, so has their so-called liquids production (which includes oil), about 12.4 percent from 2009 to 2013.

This has resulted in a series of oil Newspeak terms designed, so to speak, to put lipstick on a pig. Oil companies now report reserves as "barrels of oil-equivalent" or boe. They calculate the energy content of their natural gas reserves, convert that to its equivalent in oil and then add that number to their oil reserves. If we had to compose a slogan for this in Orwell's 1984 that is consistent with such gems as "war is peace" we might say: A gas is a liquid. But, of course, it's not. And natural gas sells for considerably less per unit of energy than oil. So, the entire picture misleads those investors who don't know how to read between the lines. It's another case where ignorance (on the part of investors) is strength for the company.

But perhaps the most audacious oil Newspeak term ever is now emerging just as the conflating of oil and natural gas reserves fails to spark enthusiasm in investors anymore. "Return on invested capital," not profits, not reserves, is the Newspeak term being marketed to investors as the proper indicator of a shrinking oil company's success. (Of course, the word "shrinking" would never be uttered by oil company representatives with proper Newspeak credentials.)

As the majors cut back on exploration and development expenses, they hope to increase their "return on invested capital." That sounds much better than saying that it has simply gotten too expensive in many places to find and extract oil. The easy stuff is gone; now only the hard-to-get, expensive stuff is left, and no one can make a profit on it or only a very meager one. How much better it sounds to investors who've been told for years that oil reserves are what to watch (and then boe) that companies are now pursuing "return on invested capital."

One bit of oil Newspeak appears almost singlehandedly to be keeping oil supplies growing even though they may not be. "Total oil supply" is being treated as interchangeable with "total liquids supply." To see what I mean, check out this page of oil statistics on the EIA website. Click on the dropdown menu for "product" which by default reads "total oil supply" and see what's actually included.

Beneath the words "total oil supply" (and sometimes "total liquids supply" in other sources) lie substances which simply cannot be sold as oil on the world market, substances such as natural gas plant liquids, condensate, and biofuels. There is also a mysterious liquid called "refinery processing gain" which conjures additional fuel volumes (but no more actual energy) because crude oil inputs expand when separated into their constituent parts during the refining process.

Without these additions to the oil supply statistics, it is a good bet that the trend in worldwide oil production would be reported as nearly flat from about 2005 onward. Despite this (or maybe because of this), both the industry and the government seemingly without embarrassment spout an oil Newspeak phrase that Orwell's Ministry of Truth might have authored: Total liquids supply is total oil supply.

Perhaps the most obviously ridiculous piece of oil Newspeak is "U.S. oil exports." Now, if I have to buy (read: import) 10 steaks from the store and I give three to you, I suppose you could say that I'm exporting my steaks to you. But, once I've eaten my steaks, if I want to replenish my supply, I must go to the store and buy some steaks again and then import those steaks into my freezer (from where I can export them to you once again, perhaps after I grill them for you).This is essentially what those in the industry who are calling for an end to the ban on U.S. oil exports are advocating.*

With just a few mouse clicks, however, any curious person could arrive at the EIA's U.S. oil import and export statistics and see that we are a long way from ever becoming a net exporter of oil. By asking the right questions, such a person might arrive at the most recent projections by the agency which have U.S. oil production peaking and then declining after 2020 at a level far below anything that would allow the country to export more than it imports. In keeping with Orwell, perhaps we could style this as "exports equal freedom." It makes about sense as what the industry is saying.

If you want to corrupt a people, corrupt the language. I'm not sure who said that, maybe me. Once it becomes impossible to say the truth with the language we have, it will ultimately be impossible for us to adapt and survive. That's almost certainly what we risk as we slide down the oil Newspeak slope unable to understand what is actually happening to global society's most critical commodity.

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*There is an argument for lifting the U.S. ban on oil exports that has to do with maximizing market efficiency, getting the right grades of oil to the refineries best suited to refine them (and thus willing to pay more for them) wherever those refineries are in world. But this isn't the argument the industry is making to the public since the effect of allowing such exports would be to raise domestic oil prices and thus lift profits for domestic oil producers, not exactly a winning argument with the American public.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.