[Pops]

h/t to Cloud9 for posting the latest feasta paper from Korowicz. This is the latest of the "Tipping Points" flavor of systemic collapse scenarios for the systemically doom oriented.

The overall theme is complexity and how the key "hubs" that keep society grinding along (namely: Money and Energy) are susceptible to negative feedback loops in the context of growing debt and peak oil.

Korowicz again draws heavily on the UK truckers strike in 2000 and also the volcano plume in Iceland, the Japanese earthquake and the Thai floods to point to the fragile nature of JIT, the fiscal web and of course peak oil.

My biggest epiphany reading this paper was that the $100 trillion oil-fueled transport infrastructure not only enables alternative energy such as wind/solar/bio, as well as other primary energy sources like coal, but importantly, it actually drives the demand for other sources of energy...

Think about that,,, oil enables extraction of coal, but more importantly, oil creates the demand for coal.
Why would China be burning all that coal if not for manufacturing the chachkas that the cheap oil surpluses allow us to buy?
Take away the cheap oil, you take away much of the demand for "stuff", so consequently you take away the demand for coal. As the demand for energy deflates, the ability to pay for $80 fracking oil disappears, further forcing the economy down, a negative feedback loop.

So an oil constrained world may attempt to turn to coal as a substitute for oil via CTL or electrical generation but because coal is not a replacement for cheap oil, not only will CTL and PEV fail, the demand for "stuff" will fall and hence energy use overall will fail.

It's long and laborious and full of $10 words and a few equations and not too much in the way of the good prevailing over the zombies or vice versa but it makes a case for the Overnight Armageddon (over-fortnight anyway) that I always pooh-pooh.

Trade-Off
Financial System Supply-Chain Cross-Contagion:
a study in global systemic collapse.
David Korowicz

Another more oil centered from last year:
On the cusp of collapse: complexity, energy, and the globalised economy

[seahorse3]

Haven't read the article yet, but your description sounds like my concern, which is, the new oil is more expensive, requiring about $70-$90 to extract. The recent optimist reports says all this new oil will kill oil prices due to supply gut, but only if we don't have a recession before 2015 (seems highly unlikely to me). I can't imagine we get through 2013 without a recession. If we have a recession stopping the new oil field production, then we are forced to rely on our old conventional fields for oil and they are declining about 6% per year. If this were to happen, it would be a negative feedback loop we couldn't recover from. It would seem to me the economy would have to decline in tandem with oil production, as the economy can't ever grow faster than oil production and thus both would have to decline in tandem.

[Pops]

Exactly.

Reduced energy begets reduced economy (if you subtract increasing debt we are well into that) and a reduced economy begets reduced energy consumption, we are there in the Rich World, the poor world is next?

As you say SH, the first trigger is higher priced/less dense energy, the next trigger could very well be a prolonged period of energy prices at below break even (like nat. gas). In the past that's triggering a rush of new economic activity. But maybe the world's credit card is declined and instead of spuring growth, low energy prices do nothing but lose energy companies capital.

Sound sorta like my "Declining OIl Price" scenario actually. No wonder I like it. Maybe we'll find out the next few months.

[seahorse3]

There was a post in another thread some time ago by Rockdoc that execs in middle sized companies, I believe exploration companies, weren't seeing any stock appreciation despite high prices thus they would do something else. Basically, if you can't make money drilling, go put your time effort somewhere else. So, that may be some evidence of this negative feedback loop, that high prices aren't the panacea to more energy production. Further, we've seen refineries closing in the US bc they aren't making a profit. It is a complicated picture, and I don't want to paint to big a brush, but high prices are not good, and we need high prices to get the newer shale oils out of the ground, as well as deep water.

[Pops]

From the Archdruid

Of course this is not the way the Feasta study is being discussed over much of the peak oil blogosphere. The fascination with sudden collapse—call it the Seneca cliff if you must, though it’s only fair to note that Seneca was talking about morality rather than the survival of civilization, and the civilization to which he himself belonged took centuries to decline and fall—is to the peak oil scene exactly what the fixation on Bakken shale oil and "effectively infinite" natural gas is to the collective imagination of industrial society as a whole: a means of denial. It’s just one more way of pretending that we and our grandchildren’s grandchildren don’t have to endure the long bitter centuries of decline and fall that are waiting for us—a future that, let’s face it, is considerably more frightening than a sudden collapse. Claiming that it’ll all be over in a flash is not that much different, all things considered, from claiming that it won’t happen at all.

[kublikhan]

It would seem to me the economy would have to decline in tandem with oil production, as the economy can't ever grow faster than oil production and thus both would have to decline in tandem.

Not exactly tandem. The economy can achieve low levels of growth with zero or negative growth in oil consumption. But high oil prices do put a drag on economic growth, even pushing it negative if prices go high enough.

the world economy can grow at approximately 2% a year without requiring any increase in oil consumption(when world economic growth rate falls below 2%, it is commonly considered to be a deep global economic recession). This might be called the “breakeven” world economic growth rate for oil consumption purpose. However, beyond 2%, an increase in world economic growth rate by one percentage point needs to be associated with an increase in oil consumption by near 700,000 barrels a day. For example, if the world economy grows at 3.5% a year, the above equation implies that the world daily oil consumption needs to increase by 1.06 million barrels a year.

A regression that only uses the data from 2001 to 2011 finds that The slope on the economic growth rate is now somewhat smaller. But note that the “breakeven” economic growth rate now falls to about 1.6%. Evaluated at 3.5% economic growth rate, the associated annual increase in oil consumption is 1.01 million barrels a day.

The above simple analysis suggests that any economic growth rate above 2% a year (an economic growth rate that would be required to lower unemployment rates in most countries in the world) would require positive growth in oil consumption.

Figure 3 compares the historical world economic growth rates with the share of world oil spending in world GDP. Historically, 4% of world GDP appeared to be a dangerous threshold. Whenever the world oil spending rose above 4% of world GDP for a sustained period of time, global economy had suffered from major instabilities. unless the world oil supply curve becomes flattened in the coming years, the world oil supply does not seem to be able to sustain a global economy expanding at a rate of 3.5% a year or above.

These findings suggest that if the world oil production does peak and start to decline in the near future, it may impose a serious and possibly an insurmountable speed limit on the pace of global economic expansion.

Has the Global Economy Become Less Vulnerable to Oil Price Shocks?

[Pops]

Really, it doesn't matter what oil costs, or anything else for that matter, as long as the credit limit is high enough.
GDP minus debt:



Oops, looks like we hit the limit

[Loki]

I just read Greer's post that Pops' cited above. I'm not sure I've heard anyone make the argument that a fast crash would be better than a slow, grinding decline, only that it's more likely. Seems a bit of a straw man on Greer's part, though I do tend to agree with his long-term view of "collapse."

There is an armageddon meme that runs strong in western culture, I think this probably explains much of the fast crash mentality. Besides, taking the slow train to poverty is just plain boring.

Not that there aren't plenty of historical precedents for fast crashes, the Black Death spurred some pretty rapid changes, and its effects were felt for generations. I imagine those who lived through it would have considered it a fast, hard crash, almost certainly far worse than anything we in the developed world will see in the next few decades.

I see the bulk of the population in the US, Europe, at al. getting significantly poorer in the decades to come, the main questions are how poor and at what rate. I've spent the last ~3 years “collapsing now and avoiding the rush,” so these are somewhat academic questions for me, but if I knew a fast crash was around the corner I'd do some things differently.