[Graeme]

Peak Oil And The Fall Of The Soviet Union: Lessons On The 20th Anniversary Of The Collapse

If we acknowledge that the Soviet Union had a powerful economy, which it did, and acknowledge that its economy was based on the same abundant, high quality energy that the US depended on, oil, then the reason for the fall is clear—peak oil. The fall of the Soviet Union is a peak oil event and if we treat it as such, then we can begin to understand what is in store for our own economy. Indeed, the fall of the Soviet Union is a perfect economic experiment for what will happen to our own world economy as peak oil continues.

According to the Economist (2010), the world is experiencing a rising cost for extracting energy because the energy needed to extract energy is rising, i.e. this is the concept of a falling Energy Return on Energy Investment (EROI). See Cleveland et. al. (1984), Hall et. al. (1986) and Hall (2008). What is more the Economist finally says what so many others, like Hamilton (1983), have been saying for years, that energy costs are affecting the economy. A decreasing EROI is in turn a general way to explain peak oil as it implies you can no longer find high EROI energy, e.g. conventional oil in large reservoirs but are instead finding low EROI oil, such as oil in small reservoirs. The decreasing EROI also implies another problem for the economy because the substitution away from high EROI oil is increasingly inelastic (Reynolds 1999c) and creates a loss of the Entropy Subsidy (Reynolds 1998). In other words, peak oil will cause economic decline. However, if peak oil is affecting the world, than why would it not have affected the Soviet Union too? Clearly it did.

No one has studied closely the Soviet Union’s EROI to see, like our current world economies, if EROI was declining within the Soviet system and therefore affecting the Soviet economy. Nevertheless, one way to analyze the fall of the Soviet Union is to simply analyze its conventional oil use, which has been studied, see Reynolds and Kolodziej (2007 and 2008) and Reynolds (2009, 2001, and 1999a)

businessinsider

[bratticus]

In 1988 falling USSR oil production affected the M2 velocity in the US. Fungible.

(click for full size)

[radon]

There is a discussion regarding this article on the Oil Drum. A number of good points, but as usual, a lot of the discussion focused on the overriding issue of the quality of the wall-painting in the Western Europe compared to that in the Soviet block countries during the Soviet times.

No one there seems to have mentioned this issue though:

Figure 6.4--Population Pyramid: Total Russian Population, 2015

In the first half of the 20th century, Russia passed through a number of social shocks and accompanying demographic crises that left indentations on its age structure (see Figures 6.3 and 6.4). This chain of demographic disasters included: World War I (1914-1917); the Civil War of 1917-1922; the famine of the early 1920s; collectivization of agriculture (1929-1932); the famine of the early 1930s (1932-1933); Stalin's political and military purges in the 1930s; World War II (1941-1945); and the famine of 1947.

Russia's population pyramid for 1989 (Figure 6.3) reveals many bulges and indentations attributable to Soviet history. The direct effects of some disasters have mainly disappeared, but others persist. The three most significant social catastrophes are apparent in this age pyramid (see also Andreev and Darsky, 1991).
...
Post-World War II "Echoes." The fertility declines during World War II have reproduced themselves (or "echoed") twice since the war. The first time was in the 1960s, when cohorts of the 1940s entered their fertile ages. This effect may have been enhanced by the smaller cohorts born during the famine in 1933, who were in their thirties by the 1960s. A real decline in fertility in the 1960s, triggered by intensive rural to urban migration, also contributed to the small size of birth cohorts in the 1960s.
...
Twenty years later, the small birth cohorts of the second half of the 1960s entered into fertile ages and produced a second-order "echo." That echo appears in the 1989 pyramid. The 2015 pyramid (Figure 6.4) also reflects this indentation--a third echo. Hence, the original fertility decline during World War II contributed to the demographic crisis of the 1990s. Moreover, these unfavorable aspects of age structure coincide with a real decline in fertility rates. As a result, the new indentation at the bottom of Russia's age pyramid is even more noticeable than it would be in terms of the World War II effect alone.

It is argued that these demographic dynamics contributed a lot to the causes of the Soviet collapse. These 1960s and 1990s "echos" resulted in absolute reduction in the working force headcounts, since the Soviet labor supply was very rigid as neither immigration nor extension of the working age were among the options available to alleviate the labor shortages. These absolute labor shortages resulted in a reduced output and greater social burden on the state, a trend that became particularly pronounced in 1989 onwards (see the diagram), which coincides with the timing of the Soviet Union collapse.

Cohorts born during the late 1980s to the early 1990s will, in turn, produce a drop in the number of births in the second decade of the 21st century. Part of this future indentation is visible in the 2015 pyramid (Figure 6.4). However, due to the weak ergodicity of human populations (Coale, 1957, 1962; Lopez, 1967), the influence of the distortions made by World War II will gradually disappear.

In 2012, Russia will again experience a precipitous decline in the number of people entering the working force. However, the effects of this third "echo" may arguably be mitigated by increased immigration and extension of the retirement age - many Russian pensioners now continue working upon reaching their age of retirement.

[bratticus]

You should have included figure 6.3.

Russia's population pyramid for 1989 (Figure 6.3) reveals many bulges and indentations attributable to Soviet history. The direct effects of some disasters have mainly disappeared, but others persist. The three most significant social catastrophes are apparent in this age pyramid (see also Andreev and Darsky, 1991).

OMG! They were hit with a shortage of 45-year-olds. How devastating!

[radon]

OMG! They were hit with a shortage of 45-year-olds. How devastating!

A very superficial comment.

I have previously seen graphs illustrating the working age headcount in Russia over time, and they correlated to the post WWII "echos" in line with the population pyramids above: in the years from 1989 onwards that headcount plummeted. I searched the web for such a graph, but did not find one unfortunately. I picked the article because it had a very good and relevant analysis, and its population pyramid graphs focused on the relevant time periods.

Just think a little bit to understand the reason for the close correlation of the population pyramid with the working age headcount. The latter is a moving range aggregate of the former. You can easily infer the working age headcount dynamics from those population pyramids - look at the number of people entering the workforce in 1989 (20-25 age range in your graph).