Thursday, January 17, 2019

Taking a Model of Doom at Face Value

The implications of this model are so utterly horrifying that I am only going to allow access to it for subscribers.

For those who still like Patreon.

For those who are ready to try something new and different.

1 comment:

LunarApprentice said...

Hello Dmitri and all. This is my first comment for your blog.

This forecast appears consistent with a scenario in which an energy-precipitated financial crisis gets the ball rolling, then it is assumed that the economic-political system fails to mount an adequate response, basically leading to die-off and/or mass migration.

It well known that fracking represents the scraping of the absolute bottom of the energy barrel, to be done only when new “conventional” oil, including even deep water wells, cannot be brought online. Of course these fracked wells have ferocious decline rates, like 80% in 2 years, so you have the Red Queen syndrome from hell. The amount of capital borrowed to drill these fracked wells is on the order of $250 billion, IIRC, and the banks never knew, or understood the implications of, fracked well decline rates. This was all known in 2014 (at least to peak-oil cogniscenti) when the forecast was generated, so it wouldn’t have been a stretch to forecast a banking/financial crisis in the 2018-2024 timeframe: So net production from fracked wells falls off the cliff, precipitating a physical fuel shortage in the US, which cannot be remedied with increased imports, and the consequences of that, along with bankruptcy of the fracking industry, lead to an energy/financial/economic crisis of epic scale. This crisis may reasonably be anticipated to lead to a severe decline in imports to the US, with no major oil exporters willing to accept dollars.

Once fracked wells are out of the picture, US production drops from 12 million bpd to 5 or 6 million bpd. With no compensating oil imports, that would be a catastrophic hit indeed; the famed oil shortages of the 1970s, with gas lines and rationing, resulted from only a 5% decline in supplies.

Now their forecast likely makes the assumption that the US gov. does not rise to the crisis, leading to the population crash. I’ll bet the forecasters made some pessimistic assumptions that are not realistic: They probably assumed “the market” would be allowed to allocate fuel supplies, and that a 50%+ shortage would be more than the market could handle, hence the doomsday numbers. The forecasters were probably unaware of the response of the US to its entry into WWII, when the War Production Board assumed control of the economy, instituting rationing, and really instituting a command economy. The economic responses/adaptations, in WWII, of the USSR and even Nazi Germany, were even more dramatic, and effective in rising to the economic challenges imposed by the war; neither economy collapsed. If the US had only 5 million bpd day to work with, those available supplies could be reserved for agriculture and essential transport. Fertilizer is made from natural gas. Diesel is the mainstay fuel of industrial agriculture, rail transport and commercial road transport, and available supplies could probably could be made to cover that. Gasoline for personal use would be practically unavailable. So a response equivalent to the War Production Board should leave the US population pretty much intact, albeit in an epic depression.

What I find salient about their forecast is that it suggests the economy will hit a brick wall in 2021 +/- 3 years, and assumptions that could lead to such a forecast seem more than plausible.