Video Interview: The Nation

 

Dmitry Orlov: Peak Oil Lessons From The Soviet Union

[Resumen de la entrevista en español]

The Nation and On The Earth Productions

Dmitry Orlov, engineer and author, warns that the US's reliance on diminishing fuel supplies might be sending it down the same path the Soviet Union took before it collapsed.

In this fifth video in the series “Peak Oil and a Changing Climate” from The Nation and On The Earth Productions, Orlov, who was an eyewitness to the collapse of the Soviet Union, asserts that as oil becomes more expensive and scarcer, the US will no longer be able to finance its oil addiction and the economy will hit a wall.

“Sixty percent of all of our transportation fuels are imported—a lot of that is on credit. A large chunk of the trade deficit is actually in transportation fuels. When those stop arriving because of our inability to borrow more money, then the economy is at a standstill,” he says.

Go here to learn more about “Peak Oil and a Changing Climate,” and to see the other videos in the series.

Transcript

I witnessed the Soviet collapse, and then later on I couldn’t help but notice that something very similar is happening to the United States. So, as a matter of public service, I’ve tried to warn people of what to expect. But I would just like to point out that I’m not any sort of policy wonk, or a wannabe politician or an activist. All of those things are very tangential to what I’m interested in, which is basically to warn people and to equip them for what’s coming up.

The way collapse unfolds is actually very interesting, because a lot of it has to do with people’s faith in the status quo. As long as people think that there’s something in it for them, they will cooperate. As soon as they decide that there is nothing in it for them, they will cease to cooperate and the system starts to crumble, cave in on itself. So what we saw in the Soviet Union was political dysfunction where basically the communist regime was so endemically corrupt, and so out to steal as much as they could at the very end, that they really didn’t even bother paying attention to whether they kept the system going. The system was basically on autopilot until it crashed. Something similar is happening here where we have people in all branches of government, both political parties trying to prop up the financial industry, which has become completely irrelevant to most people in the United States, who don’t have savings and are not creditworthy. They’re basically trying to use up people’s savings and use up people’s retirement to prop up this set of institutions that only help the very rich people, and these very rich people are only rich on paper, they are "long paper," all of them. What they own is pieces of paper with letters and numbers on them, which will turn out to be worthless. So this is all just basically musical chairs, and something very similar was happening in the Soviet Union, and something like that is happening here.

The reason I started talking about this is because I was, frankly, very worried about the United States because I saw the United States as not nearly as well prepared for collapse as the Soviet Union. You see, the Russian people never had a great deal of faith in their government or in the system, so they grew and gathered a lot of their own food, they relied on private, personal connections, there was a very large gray or black economy that provided most of what people needed. So when the system went away, people had something to hold onto, they had their personal relationships. Also the country was set up in a way that was much more stable, with public transportation and with public housing. People were not stranded and people were not dispossessed and put out on the street and evicted. So all of those things allowed the Russians to survive collapse, and all of those things are pretty much missing in this country. Most people in this country would pretty much just be out on the street starving unless they have an income, unless they have credit cards or a bank account. They’re just woefully unprepared.

There’s an element to market economics that is very hard edged, and when it fails it hurts people whether they can afford to pay their way out of it or not. If they can afford to pay their way out of it, it basically hurts their soul because they’re just leaving everybody else behind, and there’s a lot of fear with it because your umbilical is connected to your bank account. Once that goes away you’re just completely lost. Now a lot of the dislocation that went on in the Soviet Union really had to do with people being sort of set adrift in the official economy, and all they could fall back on was people they knew, people they could trust who would help them. The whole mindset of what’s mine and is mine and I get it by paying for it is really not very survival-oriented. One of the shocking things about Americans is that they have this innate faith that the rich people will abide, that there will always be rich people. And the rich people have bought into this dream, this idea that the various symbols that they have that tell them they’re rich—pieces of paper and things—will actually be meaningful moving forward, but it seems like the further you have to fall, the harder you will fall. So I think that the wealthy people in the United States are in for a much ruder awakening than the people who are poor already. Really the most important thing to consider is, who do you know and how will they help you even if you don’t give them any money for it. It’s as basic as that. In the case of the Russians it turned out that money was borderline irrelevant for a lot of things that people needed to survive. That’s what allowed them to survive. That’s not the case here, and its time to get very worried about that.

The five stages of collapse is an essay that I published two and a half years ago when nobody was really talking about a financial collapse, people were talking about a financial crisis. I decided to try to think of how this proceeds in identifiable stages and I thought that basically it’s sort of like the kubler-ross hierarchy relating to grief and here it has to do with something similar which is psychological thresholds that are breached. Various bits of faith that we have in the status quo and in society and the people around us, when they’re invalidated the change can be rather sudden whereas changes in the physical world take time to work out. So the stages were: financial collapse where our assumptions about risk in the future are invalidated and political collapse, which is basically our assumptions that there is a political system that functions and can serve the interest of the people at some level, that is invalidated. Then there is commercial collapse, which is the idea that you can get whatever you need by paying for it is invalidated because your money is worthless or you don’t have any anymore. Then there is social and cultural collapse which I got by reading some cultural anthropology. Basically social collapse is when the social infrastructure that people have be it charities or social organizations or community based groups cease to function because they’re overwhelmed, they run out of resources and people can no longer rely on them. Then cultural collapse, I got the idea from reading Colin Turnbull who described a completely failed African society of dispossessed hunter-gatherers where basically family structure fell apart. Parents no longer brought up their children, they didn’t take care of the old people, families didn’t even share food. They basically got food and ate it by themselves and hid it from each other and that was the level at which humans stopped resembling humans and people no longer recognized each other. At that point you’re almost talking about a different animal. Not what we have evolved as, but something that we might devolve into.

I’m always asked this question, where are we in the collapse scenario, the question is who are we? I know a lot of people who are pretty far along in the collapse scenario. I like to tell people that social and cultural collapse has, in some places in this country, already run its course. Financial collapse, well it depends on whether you’ve been bankrupted or foreclosed yet, it’s a bit of, you could say that for a lot of people collapse has already arrived. It just hasn’t been widely distributed and people don’t actually share stories about it unless they actually know each other personally. So I would say this is something that is proceeding, you could say that the United States is already bankrupt as a country. I don’t think that you could actually get a cogent argument against that from anyone who knows what they’re talking about. It’s just that the aftermath of that hasn’t really completely arrived. We’re not yet completely immersed in the consequences of that. Now, in terms of what could be done to salvage the situation, well a lot of things would have to change rather dramatically. Right now there’s basically a stranglehold on political power in this country by an elite that divides itself into two camps Republicans and Democrats and what have you, maybe even more, but its really the same bunch of people. This same bunch of people is almost militant in refusing to look at reality and it’s almost a question of them at some point being wheeled out of their offices along with the office furniture. Its not like they can be really spoken to without it being one’s complete waste of time. So I see that quite similar to what the old communists went through. Basically they went from being in charge to being crazy, to being insane and being disregarded. I see something very similar happening here.

The question for why there’s so much denial is a really interesting one. Denial is a large question in itself. There are certainly a few aspects to it that are interesting. One is that it makes it possible for people to lead what amounts to a meaningless dead end existence because the moment they realize that its meaningless and its dead-end then they’re forced to do something about it and if they can’t think of anything useful to do about it then they’re stuck, they’re stuck with a mental difficulty. So denial is a way of avoiding mental difficulties. Another part of it is that if you actually have a long-term perspective on the future that makes you very unpopular in any given group of people because the future, as it stands in a market economy, is a faulty product. It cannot be sold for any price. No sane person would pay for it. So if we live in an environment where we sell ourselves by putting things on our resumes and promoting ourselves in various ways and thinking what we’re worth in a market economy, actually being honest about what we’re looking forward to, all of us, makes us less successful as individuals and so this is something that we avoid doing.

I think what’s going to happen is the dissolution of the United States as a political and economic entity. It will more or less fade from the world scene in the same way that the Soviet Union faded from the world scene. Parts of it will later be reborn as something that we might have a lot more trouble imagining because there isn’t something called Russia that part of the Soviet Union. There isn’t something similar to that in the United States. It’s really a bunch of territories, very disjointed territories held together by Washington. So if Washington fails then it’s not clear what is going to hold these territories together.

The reason Washington is likely to fail is really the same reason that Moscow failed which is runaway debt and national bankruptcy. It was not even the level of debt it was the fact that the debt could not be expanded or taken on at an ever-increasing rate with never any reason for anyone to expect that the gap can ever be closed. So what happened in Moscow was that Moscow could no longer finance the periphery and the periphery decided to go its own way. We’re something similar in this country where California could do quite well if they stop paying the federal tax. So if they left the union their finances would be much better and this is what happened in the Soviet Union. This is what we’re witnessing right now in the United States. There are other similarities as well. One of the largest ones is, in the Soviet Union the armed forces more or less took on a life of their own, they ate the national budget, about a quarter of it, and also they couldn’t deliver any results. So it’s a striking similarity that the mighty Soviet army lost in Afghanistan and now the mighty American army is doing exactly the same thing. It amazes me that dying empires shoot straight for Afghanistan to have Afghanis deliver the coup de grace and this is what’s happening to the United States as well.

Well the power vacuum that was left when the Soviet Empire collapsed was not a complete vacuum. There was a lot of black market economics active within the Soviet Union, there was a lot of what would be called corruption, but really they were workable ways of circumventing an unworkable system. There is some of that in this country as well. Strangely enough, the people who are the best positioned to start a full-blown black market economy in the United States are the narco-cartels. So they’re the next aristocracy as far as the Americans are concerned. They will be the ones moving in and replacing the power vacuum. You already see it happening in certain parts of the country close to the Mexican border. You can see that the local police and law enforcement are in no position to oppose them. They’re much better organized and armed. So this is what we can look forward to. A lot of that happened in Russia as well there were a lot of ethnic mafias that moved in. The Chechens controlled a lot of the trade for quite a while, even in produce and things like that. So we can look forward to quite a bit of that here as well.

There was a lot of what you could call “corporatocracy” in the Soviet Union as well. There were a lot of very large state-owned enterprises that went on existing because they didn’t really have a supply chain, they were empires onto themselves. A place like Norilsk Nickel for instance that makes a lot of the nickel in the world was pretty much a company town. That was a standard thing in Russia. It’s not just a factory but also cafeterias and kindergartens, and hospitals, retirement homes, and just about everything else. So these were economic empires onto themselves that continued to function. A lot of them, once there was no workable currency, they resorted to barter trade and they would trade food for something that they made or stock they had accumulated over the years. The American “corporatocracy” is very much into just in time delivery and everything is network based and that makes it extremely fragile and I don’t see that pattern holding. A while ago I thought that some large companies like Google for instance could take a lot of things in house and Google has been making forays into energy and private currencies and all sorts of things. They have money to throw at experiments like that but they’re not about to achieve any sort of sustainability so when the surrounding economy crumbles they will probably cease to function as well.

People look at the short term. Energy availability in the short term. Basically the fact that energy demand shrank because of the recession/depression. That bought us a little bit of time but its more or less inevitable that some kind of economic growth somewhere will resume at some point and then whatever part of the economy that tries to grow will hit a brick wall again and the harder economies try to grow from this point on, the worse they will fail. The more growth dependent and growth addicted they are the worse they will fail. Countries vary along a set of parameters between how well they can absorb lack of economic growth; some can do it pretty well, some not at all. So this is really what we’re looking at now. We could have a scenario where entire parts of the globe suddenly go dark. I think the United States is one of them because 60% of all of the transportation fuels are imported, a lot of that is on credit. A large chunk of the trade deficit is actually transportation fuels, so when those stop arriving because of inability to borrow more and more money then the economy is at a standstill and after a while the lights go out. Now, what that buys the rest of the world is about 1/3 of all the energy consumed in the United States. The United States consumes about a third of the global energy supply. That suddenly becomes available to the rest of the world. So you could theoretically have other countries grow for another decade or more while the United States goes dark and disappears, fades from the world scene much as the Soviet Union did after it collapsed.

The important thing to understand about collapse is that it’s brought on by overreach and overstretch and people being zealous and trying too hard. Its not brought on by people being laid back and doing the absolute minimum. Americans could very easily feed themselves and clothe themselves and have a place to live working maybe a hundred days a year. You know, it’s a rich country in terms of resources there’s really no reason to work maybe more than a third of your time and that’s sort of a standard pattern in the world. But if you want to build a huge empire and have endless economic growth and have the largest number of billionaires on the planet then you have to work over forty hours a week all the time and if you don’t then you’re in danger of going bankrupt. So that’s the predicament that people have ended up in. Now the cure of course is not to do the same thing even harder, so what people have to get used to is the idea that most things aren’t worth doing anyway and things really slow down when the economy goes away. The idea is to do the absolute bare minimum that is essential and just find interesting ways to while away the time because not much is going to be happening. So walking down the road is an all day affair whereas before it was a three-minute drive but now you don’t drive, you have to walk so it’s an all day affair. People just have to learn to slow way down and have a lot more patience, a lot more patience with each other. Those that don’t will probably end up killing each other in due course, that’s probably a period of time that most people will want to sit out, wait until the dust settles. A lot of people just don’t have the right character to deal with collapse. They’ll be running around trying to fix things. That’s the opposite of what they should be doing.

Peak oil is getting to be a really boring subject. Most people don’t realize that yet. It’s something that becomes obvious after the fact, its something that shows up in aggregate production statistics and those statistics tend to be retroactively adjusted as better numbers come in. So now we’re pretty sure that it was in 2005-2006 for conventional oil, that is oil that comes out in oil form out of the ground on dry land, out of conventional oil wells. All liquids, which includes tar sands and coal to liquid conversion and corn based ethanol and just any other muck that you could possibly get liquid fuels from, that peaked in 2008. So it’s all behind us.

The thing that’s worth discussing now is what post peak production looks like. A lot of people look at these charts that have a very smooth decline curve that always looked a little strange to me. So I did a lot of research into trying to figure out what that meant and it turned out that its just sheer nonsense there’s no reality behind it at all. I’ve identified many many factors that combine in various unpredictable ways, its really too complicated to predict, but the chance of this very smooth decline, I would say, is zero. Its going to be a step-wise decline and various parts of the planet will be cut off from transportation fuel permanently at various times. There will be disruptions and then it will be a permanent cut-off from that point on. So what people should be planning on is not slightly more expensive gasoline, or slightly less gasoline or heating oil or diesel fuel, but fuel that you might have for special occasions, so for ambulances you might have it longer than for taxis, things like that. What people should really be planning for is life without fossil fuels at all and that is actually a tall order. It takes a lot of thinking to prepare for that right now.

The whole question of die off produces very strong emotions in people, but to just lay it out in a non-emotional way. We had this thing called the green revolution, which is probably the worst misnomer we have because it was basically the fossil fuel food revolution. It's growing food with fossil fuels that allowed the earth’s population to go to 6 and a half billion and there’s no reason to think that it can be sustained through means other than fossil fuels inputs into industrial agriculture. So the question is what happens to all these people when they can no longer be fed. Now, people think that this is in the future but its not. Russia is back to importing grain after the disastrous harvest of this year. That’s a bad sign right there, Russia used to be a grain exporter until this year and so that is happening in more and more parts of the world. Now, die-offs, people have trouble imagining them. There was a bit of a die off in the Soviet Union after the Soviet Union collapsed. Life expectancy plummeted. The odd thing about it, I was there during that time, and it’s not really noticeable unless you happen to be dropping by the hospitals and the morgues all the time and going to a lot of funerals. You just don’t know that people are going away. Its more that people look at their school photos and realize that half their class is dead. And that’s a bit of a shock, but its more of a shock when you realize it than when its happening because you don’t really realize its happening. In fact human populations can shrink quite dramatically without anyone even within those populations really noticing. People just accept whatever is happening, tune it out, stop paying attention or cope with it some way. With that said, ok we have 6 and a half billion people without fossil fuel inputs into agriculture might sustain one billion but that’s without climate change. Now the reason we have agriculture is because we’ve had ten thousand years of stable climate, which seems to have ended. So that is something to take into consideration as well. As hunter/gatherers as opposed to farmers we would not be one billion without fossil fuel input, we would be a lot smaller population than that even. So this is one of those things that people try not to think about and the question that comes to my mind is why should we even think about it? I mean, whatever happens, happens. We don’t get to decide how many people survive all we get to do is you know, try to survive, and find ways to do it. Thinking about mind numbing billions of people that will no longer be around is not really a productive activity given that there is nothing we can do about it. So I try to limit discussion of that because I just don’t see it going anywhere useful.

Well the whole climate change debate, it almost makes me laugh because people say things and the words, if you look at it what do they mean, they don’t mean anything and the most important question is “what do we do?” I have a problem with defining we and I have a problem with defining “do” just on a semantic level, I think that that particular question is completely meaningless. “We” includes melting tundra we don’t actually tell it what to do it does whatever it wants to. And “do” involves people who are completely beyond our control politically, economically, or otherwise. So it doesn’t really even matter what we decide. People have this inflated picture of what policy can achieve that is not based on what policy has achieved in the past. There is one example of a great policy issue that Al Gore talks about which is limitations on refrigerants that were destroying the ozone layer. Well that was a bit of a success but it only involved a few chemical manufacturers around the planet. So those could be individually talked to and replacements could be found. What they’ve achieved is that the ozone hole is now not growing anymore but its not shrinking either so it’s not really a complete success and that’s really the only success story that they have. In terms of global warming it seems like we’re in for a roller coaster ride. It’s not even that we can predict what’s happen, but we can certainly predict that there will be a lot of upheaval. We don’t need scientists to tell us that. I’ve been living in New England for decades now and I’m used to the ocean being cold. So if in the middle of the summer I jump in the ocean and its body temperature you don’t have to be a scientist to tell me that something is going very strangely here. You know, it’s really quite obvious. People who are a little bit more in tune with the elements, people who have spent a lot of time outdoors, you can talk to them. Very few of them will tell you that, oh this is nothing out of the ordinary, this is the usual thing. So we’re in for a great deal of climate upheaval. I would predict that when the industrial economies around the world start crashing there will be a huge amount of reforestation that will happen. So then we might have a mini ice age because of that and then that might run its course and something else will happen. The kind of goldilocks climate that has allowed human populations to swell to billions of individuals, that period of climatic history seems to have ended already. We’re in a different planet now; we’re in a different world.