Saturday, June 20, 2009

Errata

In my previous post, I quoted some numbers from François Cellier. In doing so, I inadvertently used the word "oil" where I should have used the word "energy". As a result, I incorrectly calculated the approximate oil price as percentage of GDP at which the global economy stalls out to be 25% instead of 6%. The specific numbers are irrelevant to the rest of my argument; however, a lot of people (who are apparently comfortable with arithmetic but not much else) have decided that this is a reason to start calling me names. I have a name for them too: I like to call them "the arithmeticians". The rest of you can safely ignore these details and concentrate on what's important: economic recovery -> oil price spike -> economic crash. Repeat as often as it takes to learn the lesson: no more growth is possible.

19 comments:

Kathy said...

Dmitry, all over the Peak Oil blogosphere numbers and charts proliferate. It is just a way for those uncomfortable with reality to comfort themselves or deny reality. Unfortunately for them comfort and denial are not very good preparations for the future we face.

helwen said...

Thanks for the errata, although as you say, it doesn't change the basic message from your lecture.

I should think those details aren't nearly as important as the fact that at some point, given the folks in power and the way things work (or don't) -- and here I mean politicians, administrative and political process, big business, wall street cronies, etc. -- that collapse of the current economy and way of life is most certainly coming, be it in pieces or all-of-a-piece.

Heather G

Dr. Doom said...

Dmitry, congrats and thanks for posting your talk, which I enjoyed reading, even considering its dire subject matter. I agree that one should not get in an exchange with number crunchers, especially if that exchange detracts from the message. However, I disagree with Kathy that those who post charts and discuss numbers are trying to deny reality. King Hubbert used charts and numbers to great effect, for those willing to accept the very unpleasant future reality they foretold. Likewise the Club of Rome. Math, numbers and illustrations of trends are just another way we have to communicate ideas and models of the world we live in.

Dyna Zauber said...

I mused about those figures too. More interesting were the the links you provided in the comments to articles which mentioned the price of oil as a major factor leading to the current economic mess. The FT article was most instructive and led to yet further essays on the subject.
Give 'em hell Dimitri, those turd counters!

Anonymous said...

I just found out that the event in NY is cancelled. A couple of days ago I called Local Energy Solutions to find out why my check was not cashed, and I've got a reply that the event might be postponed or cancelled because there was not enough response.

Now you have all the answers: it is more comforting to hide the head in the sand and pretend that there is no danger, than to face the reality, and maybe get prepared to what is coming, amd maybe have a chance.

When I try to talk about peak oil with my friends and family I usually get a reply: we will drive electric cars. As if the driving a car is the only one and only thing in life.

I gave a gift of two books to them: THE LONG EMERGENCY and REINVENTING COLLAPSE. they say that it is too depressing to read.

The famous "American way of life is not negotiable" is true. Nature does not negotiate. Nature goes her way. An what American way of life will be in the future?..

nina said...

Numbers are merely mental representations and not edible. Your graciousness toward the arithmaticians is reminding me of
Milton Glaser dumping 5 oz. of blue cheese on his salad and being astounded to discover how drastically he'd exceeded his alloted portion when he read the packaging.

Anonymous said...

Your number brouhaha reminds me of lawyers getting worked up over how many angels can dance on the head of a pin.

Attention to detail at the cost of losing sight of the bigger picture is an age old morality play.

Forest for the trees thing.

Is their an expression for this in Russian?

Wind in the Willows

Anonymous said...

Forest for the trees thing.

Yes, we have it in Russian, the exact translation is:

To not see the forest because of the trees

irkone said...

Wow. Only 18 people bought tickets for the talk? I was expecting "sold out" and hundreds of people bustling in an auditorium, not "cancelled".

Perhaps a roundtable discussion in a large living room?

And about numbers. To a skeptic, I once proclaimed "we are spewing 22 billion tons of carbon into the air annually." They responded, "Actually, it's 27 billion tons." Some people just miss the point.

Michael Dawson said...

This puts me in mind of none other than Marx and Engels: "One man thought that he could resist drowning by resisting the idea of gravity."

Austin said...

In my opinion, those apparachiks still at govt teats will be better connected and better positioned.

Besides, even though the collectives might be formed and individualism is encouraged, it is a losing position because the members come from population who are less likely to be reproducing.

The powerful will be more inclined to be reproducing, and they will still have more power so it is likely that the behavior of the oligarchs just after the Soviet collapse would be the winning strategy.

Anonymous said...

Great presentation.

Can't believe the NY event is off !

I'm in Australia and would love the opportunity to hear Dimitri speak.

Peaky Ramone

Anonymous said...

The problem of people who are good at math and not much else infiltrating many businesses where hard to quantify (and operationalize) things like sound judgment, experience, etc. are critical is rife.

It did occur to me that a good way to root out these people is to make a trivial, but obvious mathematical error that is insignificant to the analysis, and post it.... drawing them out.

Those who come out of the wood work and politely point out the error (and note its significance or lack of it thereof), can be placed in one column.

The others.... who just jump on the error... can be placed in another column.

Anonymous said...

Well, pointing out an error in numbers is standard practice. It means that people read carefully. No need for anybody to get steamed up about it unless the number invalidates the argument. In this case, it does not, obviously.

On a more general topic, I think the crash is going to be horrible. The propaganda system (which, as Ellul taught) is what makes the entire system bearable for people, is going full steam ahead with talk of "recovery" and... teaching Iran how not to steal elections. LOL! This is too comical for words. Yesterday, one commentator said that "Obama is the leader of the free world". That goes beyond comical and is downright sinister as well as pathetic. The history of how Britain losts its empire is instructive. The US is on the same path, but in much worse circumstances. The fall will be swift and brutal internally. The colonies will celebrate, though

Keep up the good work, Dmitry. Telling the truth is important, no matter how frustrated one might get in the short term, when apparently nobody wants to listen. It would be worse if nobody were saying anything.

Weaseldog said...

"economic recovery -> oil price spike -> economic crash"

That's a simple equation. I was discussing this with an acquaintance on the train today. He said he needed to get out of the market, but was afraid to. He had already lost a lot if the previous crashes and was still afraid to bail. I mentioned the relationship between rising fuel prices and market crashes and he agreed with me.

Yet, I suspect he'll ride the market down again. Fear of doing the wrong thing, can lead to acting through inaction...

I worked out this relationship from a theoretical level in 1999.

So in January 2001, I saw the writing on the wall and sold all of my stock. I did not intend to lose my gambling winnings through inaction. I told friends and family what I was doing and recommended the same for them. They held for a bigger prize. One friend who had recently inherited from his grand fathers estate went from being a millionaire, to not being a millionaire. What was strange was that he actually called me later and told me that he wished he had listened to me. that was the only time that has ever happened.

I also realized then that in an energy downturn, nations will gravitate to a pure financial welfare state in order to preserve the wealth of the most powerful corporations. they will hollow out industry, because industry can't grow produce ever increasing profits like market bubble speculation can. So when energy supplies are not growing, money will flee industry and seek gains in artificial bubble markets instead.

We are seeing this again, and each cycle nears the theoretical pure state of zero industry, and a 100% finance economy based on a vacuum.

Fuel prices are going up. Bonds are the current bubble, so some say... So when fuel prices crash again, the bond market will be crashing. Cities and states may well go down like dominoes in bankruptcy chain reaction.

The last bubble will be the Fed and Treasury, just printing money out in the open. They are running out of options. They will have no choice, but to become the US economy and print money to make their numbers. I'm sure the talking heads will give us very sage reasons as to why this will be a positive sign for the economy.

“I think there can be some legitimate concerns on the part of private insurers that if any public plan is simply being subsidized by taxpayers endlessly that over time they can’t compete with the government just printing money, so there are going to be some I think legitimate debates to be had about how this private plan takes shape.” - President Obama Discussing Single Payer Healthcare

Kathy said...

Dr. Doom, it is true that some charts and numbers have pointed the way to truth about the future. I should have stated my post more carefully. However the truth about the future can, I believe, be intuited by anyone who is in touch with how the world works. Whereas numbers can deceive. The numbers for instance of how well solar and wind will do as alternatives deceive because no one has yet used only solar and wind to make solar panels and windmills. Instead they use oil. When the oil is gone the solar and wind numbers now so optimistically bandied about will have been shown to be meaningless.

I spent my career as a bookkeeper, intent on using numbers to portray an accurate accounting of the financial situation of a company. Representing what is by numbers is somewhat although not entirely straight forward, but budgeting, ah that is an exercise all to often in hope. You pull whatever numbers out of the air your boss wants to see and present them as truth. Sort of like the ERoEI of ethanol.

Dmitry I believe has the best feel of any peak oil commentator for what is coming and it comes not so much from numbers and charts but from his observation and understanding of how things work in the world and how humans work.

Anonymous said...

Agriculture is is less than 1% of U.S. GDP. Guess we can kill it off an have 99% of economy per the logic of the twits?

The notion of percent of GDP is a static description, does not capture relationships or contribution to the whole. Its complex adaptive systesm. even if oil in the accounting sales accounts for only 5% of GDP it enables another 60% of the economy--chemicals, manufacturing, fertilizer.

All of this apologizing is not necessary orlov as you got sucked in by an incorrect premise from people who mistunderstand what national income accounting gdp categories are for and think these are isolated static stand alone categories.

You should ignore this--you got taken in by a mistake and idiocy dressed up as plausibility.

Anonymous said...

Lets look at this again--the original comment was:

"But wait, does not the majority of our energy come from sources other than oil? Yes, oil is $70 a barrel today, but coal is a small fraction of that price in energy equivalent. Your math presuposes both that oil goes up to $600 but also that coal, nuclear, wind, biomass, and hydroelectric goes up to $600 barrel equivalent, which is absurd.

Looking just at oil, the world consumed 84 million barrels/day in 2008. At $150 per barrel, that comes to $12.6 billion a day, or $4.6 trillion per year. The CIA Factbook 2009 gives world GDP for 2008 as $69.49 trillion. Therefore sustained $150 oil would only account for 4.6/69.49 = 6.6% of world GDP."

Actually (an ecomiist here), the figure here is misleading and incorrect. Thee basic figures ae very often misunderstaood by "civilians". Oil is then converted to many other products that contributes much more to world GDP. Also, transport energy is 90% due to oil and eriviatives (fuel such as diesel and jet fuel). The linkages within sectors are dyanamic and beyond the grasp of lone snark. Consider that agriculture is only 1% of GDP in Eupore and U.S. and lets say ag prices double so per his logic this would "only" now be 2% of GDP and not a problem? Ha! A doubling of agriculture prices would lead to disaster! Or say we half agricutlure production since it is only 1% of GDP to .5%--no big deal correct? He (Lone snark) reads too much into simple descriptieve statistics he does not understand and you sadly got taken in.

Menno said...

Very complex issue indeed. Demand for oil will probably diminish until "absolute" minimum if the oil get's too expensive. By what price? I have seen figures between 150 and 200 dollar in many discussions. I have also seen many bloggers mentioning that by 200 dollars, aviation industry would probably go bankrupt. If that is the case a lot of demand will fall away, not speaking about the gigantic economic crisis that would again cause or enforce... By the way: I took the comments of USSR resilience of your lecture(s) up in my blog. It is funny: we are actually organising excursions to Belarus and Bulgaria to show western european the datcha way of life! This year we start with vodka distilling, you know, the new currency :-)

http://www.rebelfarmer.org/2/post/2009/06/peak-oil-has-happened-former-usrr-best-prepared-join-a-rebelfarmer-excursion.html